FRAUD & THE CONTROLLER – PART III

Hope all of you survived Thanksgiving & Black Friday.  Today is cyber-Monday.  I am trying to resist.

I hope you had the chance to read last week’s blog about ‘The Spy’ at the EPA.  If you haven’t, I urge you to take time to read it.  The level of incompetence of those responsible for our taxpayer dollars at the EPA is almost incomprehensible.

Why do people commit fraud against their employers?  According to the ACFE’s 2012 Report to the Nation on Fraud, here are a few of them:

  • Financial pressures
  • Need to live beyond their means (social pressure)
  • Addictions
  • Marital instability

After reading the Wall Street Journal article, I think we can add one more – delusions of grandiosity.  I’ve met a few people in my career that suffered from this particular malady.  They can be very dangerous in some organizations.

Here are some frauds I have encountered during my career:

  • Plant manager buying an engine for a race car he was building
  • Retail manager buying groceries and building supplies on his company checkbook
  • Secretary endorsing over and depositing to her account a vendor refund check made out to the company
  • Salesman collecting cash from customers for invoice payments and failing to turn it in
  • Salesman turned in hand written tickets for gasoline purchases he never made
  • Traffic manager taking kickbacks from a vendor

The most frightening statistic in the report reflects that approximately 5% of all business revenue is lost to fraud.  What are we as controllers and cfo’s and consultants going to do about this?

I subscribe to the Wall Street Journal in order to stay on top of business trends and developments.  It’s never boring.  There is hardly a day that goes by that there is not a report of fraud by individuals or an organization.  I’ve lived in a third world country where the citizens were just resigned to fraud and waste.  I do not want to see that happen to the United States.

I’m going to give you a link to the ACFE report.  On page 70 & 71 is a “Fraud Prevention Checklist’.  Print it, review it and then grade yourself and your organization

Next week we will delve into the Checklist.

ACFE 2012 Report to the Nation

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