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CBIZ & MHM Executive Education Series™
Preventing Fraud in the Workplace John E. Mulvaney, Jr., CPA, CFE Sept. 20 & 22, 2016
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About Us
• Together, CBIZ & MHM are a Top Ten accounting provider • Offices in most major markets • Tax, audit and attest and advisory services • Over 2,900 professionals nationwide
A member of Kreston International A global network of independent
accounting firms
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that provides audit, review and attest services, and works closely with CBIZ, a business consulting, tax and financial services provider. CBIZ and MHM are members of Kreston International Limited, a global network of independent accounting firms.
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Before We Get Started…
• To view this webinar in full screen mode, click on view options in the upper right hand corner.
• Click the Support tab for technical assistance.
• If you have a question during the presentation, please use the Q&A feature at the bottom of your screen.
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CPE Credit
This webinar is eligible for CPE credit. To receive credit, you will need to answer periodic participation markers throughout the webinar. External participants will receive their CPE certificate via email immediately following the webinar.
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Disclaimer
The information in this Executive Education Series course is a brief summary and may not include all
the details relevant to your situation.
Please contact your service provider to further discuss the impact on your business.
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Presenter
John is the Practice Leader of the Forensic, Litigation, and Valuation
Services Group in our New England office. He specializes in government
and internal investigations, as well as complex civil and criminal
matters. John has more than 30 years of experience as special agent
with the Federal Bureau of Investigation (FBI) and the Special Inspector
General’s Office for the Troubled Asset Relief Program (SIGTARP) where
he oversaw SIGTARP’s national criminal and civil investigative program
related to the $700 billion US government bailout program. John has
significant experience investigating and managing significant complex
investigations involving accounting fraud, securities fraud, insider
trading, bank fraud, bankruptcy fraud, bribery, money laundering, RICO
violations, health care fraud and public corruption. John has
considerable experience testifying in federal and state proceedings.
617.761.0569 • [email protected]
John E. Mulvaney, Jr. CPA, CFE
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Agenda
Fraud Statistics and Trends
02
01
03
04
Case Studies
Steps Your Organization Can Take
Questions
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FRAUD STATISTICS & TRENDS
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ACFE 2014 Global Fraud Study ― Executive Summary
• Estimated loss each year o5% oGlobally- $3.7 trillion
• Median loss of $145,000
o 22% of cases reported involved losses of $1 million or more.
• Duration
• Types of Fraud o Asset Misappropriation o Corruption o Financial Statement Fraud
• Corruption and billing schemes
o Pose greatest risk o 50% of all reported cases
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ACFE 2014 Global Fraud Study ― Executive Summary
• Who? o Owners/executives- $500K o Middle management- $130K o Employees- $75K
• Length of employment = amount of loss
• Red Flags
o Present in 92% of reported cases
• Types o Living beyond means (36%) o Financial difficulties (27%) o Unusually close association with vendors or customers (19%) o Excessive control issues (18%)
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ACFE 2014 Global Fraud Study ― Executive Summary
• Trusted and longtime employees of the organization.
• Longer term of employment / higher amount of loss.
• A member of senior or middle management.
• Dominant or controlling personalities.
• Refusal to delegate work.
• Maintain inadequate accounting records.
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ACFE 2014 Global Fraud Study ― Executive Summary
• Tips are the most common detection method. • 40% of all reported frauds • Twice the level of any other detection method
• Hotlines highly effective • Rate of loss 41% less • Detected 50% sooner
• External audits are one of least effective methods - 3%
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ACFE 2014 Global Fraud Study ― Executive Summary
• Fraud is costly • Reputations • Internal Investigations • Media • Effect on employees
• Failure to recover • Anti-fraud controls and training
• Direct correlation with decrease in cost and duration of fraud schemes
• Proactive measures to prevent and detect fraud are critical.
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ACFE 2014 Global Fraud Study ― Executive Summary
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ACFE 2014 Global Fraud Study ― Executive Summary
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Case Studies
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Case Studies
Leo Villani • Analyst at UMass Medical School
• Inherited money • Automobiles, paintings, homes, travel
• “Games the system” • Quietly siphons off nearly $3.4 million
• “He was the kind of person you could never forget, and every thought of him put a smile on my face.”
• “It was an appalling scam by a guy who was committed to defrauding an organization. It’s unbelievable. The level of it, the depth of it, was staggering.”
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Case Studies
Metropolitan Council on Jewish Poverty • Well-respected nonprofit social service agencies in the
New York metropolitan area • Aid received each year from city, state, and federal
exceeded $11 million • Long-running scheme
• $9 – $56 million estimated loss • Missing records
• Exec Director and other execs implicated • Collusion • Campaign contributions
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Case Studies
American Legacy Foundation • Washington Post expose on NFPs
• Tobacco settlements • Funded vital research • Little or no internal controls • Deen Sanwoola, computer specialist, put in charge of
building IT department • “Everyone loved Deen.” • “We’re not innocent in this,” said Legacy chief
executive Cheryl Healton.“We are horrified it happened on our watch…The truth hurts - we screwed up.”
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Case Studies
Merrimack College • Financial Aid Director • Perkins loan program • 15+ year scheme / $6 million plus fraud • Scholarships for loans • No internal controls, segregation of duties, etc. • Department employees aware of scheme
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Case Studies
American Honda Investigation • Largest commercial bribery case in DOJ history • 23 executives convicted • $30 million in kickbacks • Allegations covered 20-year period • No tone from top • Lackluster effort to investigate claims of corruption
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What Can You Do?
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Steps to Minimize Your Organization’s Exposure to Fraud
• Ensure a strong commitment from senior management • Develop culture of transparency, honesty, and loyalty • Know what you don’t know • Implement strong internal controls • Written policy concerning fraud and ethics • Ensure proper oversight and continued monitoring • Create a comprehensive vendor and expense
reimbursement policy • Require annual training • Establish a hotline and Whistleblower programs
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? QUESTIONS
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If You Enjoyed This Webinar…
Upcoming Courses: • 10/19: Third Quarter Accounting and Financial Reporting Issues Update
• 10/25: The 2016 Election – Key Races and the Expected Impact on the Construction Industry
• 10/27 & 11/2: Eye on Washington – Quarterly Business Tax Update
Recent Publications: • Final Regulations Clarify Definition of Real Property for REITs
• Lay of the Accounting Landscape: Quarter 3
• Changes to Warranties, Returns and Other Ways Manufacturers Can Prepare for Revenue Recognition
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