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By Darren W. Welker, CPA, CIA
Managing Partner
Stambaugh Ness Risk Advisory Group

HEDGE YOUR BETS - FIGHT FRAUD WITH YOUR OWN "WATCH GROUP"

Darren will speak about this topic at a Sept. 25 mixer sponsored by the Manufacturers' Association of South Central Pennsylvania.

The event is set from 4 to 6 p.m. at Penn National Off Track Wagering, 351 Loucks Rd., York.

Register online at: www.mascpa.org or call 717-854-9445.
Fraud is an estimated $994 billion industry, according to the Association of Certified Fraud Examiners (ACFE) in its 2008 Report to the Nation on Occupational Fraud & Abuse.

The ACFE report, published in July, is issued every two years. The report is used to advance the ACFE's mission to educate the public and anti-fraud professionals about the serious threat posed by occupational fraud.

In this fifth edition of the report, it is evident that trends continue, in spite of increased focus and efforts to prevent and detect fraudulent activities. Or maybe it is the focus and effort that is driving the trends. Experts have contended over the years that many instances of occupational fraud have gone completely undetected. Either way, the evidence is compelling that there is value to be derived in managing fraud risk. Following is a summary of some key points from the report:

Who is impacted?

  • Everyone – public and private companies, governmental entities and not-for-profit organizations
  • Banks and financial service companies account for 15% of fraud cases reported, followed by government (12%) and healthcare (8%)
  • Organizations in manufacturing, banking and insurance industries experience the largest median losses. 

Who are the perpetrators?

  • Accounting staff (29%) and upper management (18%) are most likely to commit fraud. 
  • Most people who commit fraud are first-time offenders.

How much is lost?

  • Overall, the median loss is $175,000.
  • More than one-fourth of losses are greater than $1MM.
  • Fraud by executives results in a median loss of $855,000.

How is it detected?

  • No. 1 – Tips (46%)... mostly from employees
  • No. 2 – Internal controls (23%)
  • No. 3 – By accident (20%)
  • No. 4 – Internal audit (19%)
  • No. 5 – External audit (9%)

What can YOU do?

  • Internal controls will not ensure your safety, however, lack of adequate controls is the leading contributing factor to fraud.
  • Organizations that have implemented anti-fraud controls detect the activity more quickly and have significantly lower losses.

Contact us to explore what types of controls could benefit your organization. A little prevention can go a long way to providing you security and peace of mind.

Darren Welker is Managing Partner of the Risk Advisory Services practice at Stambaugh Ness, PC, an accounting and business consulting firm based in South Central Pennsylvania. You can reach him at (717) 757-6999 or (800) 745-8233. You may also view our Risk Advisory Services at the Stambaugh Ness website and email Darren by using the box below.
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