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Fraud It Can Happen To You CMTA Conference Presented by Joe Aguilar Vavrinek Trine Day & Co., LLP.

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Presentation on theme: "Fraud It Can Happen To You CMTA Conference Presented by Joe Aguilar Vavrinek Trine Day & Co., LLP."— Presentation transcript:

1 Fraud It Can Happen To You CMTA Conference Presented by Joe Aguilar Vavrinek Trine Day & Co., LLP

2 Credibility Is the Greatest Loss Loss of Credibility with Elected Officials Monetary losses Dismissal of Employees Staff Time for Investigations Respect from subordinates

3 Fraud Breakdowns – Median Loss Cashiering $18,000 Payroll $90,000 Expense reimbursements $92,000 Check tampering $155,000

4 How Do You Catch Fraud You catch fraud by looking for it 60% of incidents uncovered by accident or by tip Next largest method of uncovering fraud was internal audit at 24%

5 Profiling of a Fraudster 83% of perpetrators had no criminal history 46% of perpetrators had tenure of 6 years or more with employer The more educated a person is, the more they will steal from you Nice Shoes

6 Three Goals For Handling Fraud Obtain Restitution Fire the Employee Prosecute the Employee

7 How About That Computer Interface Employee in charge of downloading timesheets added their own overtime No One checking the overtime report Caught by accident Lesson Learned: Trust but Verify

8 Lesson Learned, Case #1 Think through your interface procedures Payroll needs to check overtime authorizations Knowledgeable manager needs to check overtime reports Do not use signature stamps

9 Finance Director Skims Cash Finance Director wore all the hats Records in disarray Director re-wrote the deposit slips What about that tow truck money? Management letter warned the City Lesson Learned: Separate the duties Track the daily deposits

10 Lesson Learned, Case #2 Have an action plan for your management letter findings Keep bank deposits together for bank delivery You must have rules for the delivery of cash Someone independent needs to verify daily deposits If you cant separate the duties, then outsource your work

11 Good Systems Dont Stop Fraud Good Management Does City had top notch registration system Recreation Manager stole money anyway Perpetrator worked outside the system No Fee Class became a gold mine Sting operation caught the perpetrator Lesson learned: Dont assume it cant happen Standardize your cash collection Train all of your staff

12 Lesson Learned, Case #3 Most difficult situation to prevent Collusion with another manager hid situations Follow your instincts: Where there is smoke, theres usually fire Act quickly and deliberately Sometimes a sting operation is the best option Whistle Blower system is the last defense

13 A Few More Exposures Ghost employees at a school district Cashier borrows money overnight Easement payments hand delivered Finance director used old bank account Bank stops a wire transfer The salvaging employee

14 Things to Check Up On Cash Registers and Z out tapes Bank Reconciliations & Proofs of Cash Count the cash drawers Once a year, have people pick up their paychecks Audit one payroll per year Anybody holding checks?

15 Slackers Rule the Fraud Race Lack of management oversight Lack of separation of duties Lack of independent checkpoints Lack of procedures Lack of training Lack of authorizations Lack of documentation for transactions Accounting system in disarray

16 General Exposures to Fraud Large amounts of cash on hand Poor physical safeguards Proliferation of credit cards Hand written receipts Ease of conversion of assets

17 Tools to Reduce Fraud Start with a Integrity Policy Internal audits Outsource Functions Manage By Wandering Around Involve policy makers in controls Operational & Management Audits External Audits

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