Fraud Prevention for Utility Offices Presented By Daniel

Fraud Prevention for Utility Offices Presented By: Daniel Dundon, CFE

Agenda • What is fraud? • Types of fraud. • What causes people to commit fraud? • Preventing fraud. • Common fraud schemes. • Red flags to watch for.

Introduction • Fraud involves taking something from someone else through deception or concealment. • Embezzlement is theft of assets by a person who was entrusted to mange or hold those assets. • Occupational frauds are those committed in connection with the fraudster’s occupation.

Examples of Occupational Fraud • Stealing money or inventory • Claiming overtime for hours not worked • Filing fraudulent expense reports • Giving friends or relatives unauthorized discounts on company merchandise or services • Adding ghost employees to the payroll

Copyright 2018 Association of Certified Fraud Examiners – Report to the Nations

Corruption: fraud schemes in which a fraudster wrongfully uses their influence in a business transaction for the purpose of obtaining a personal benefit or a benefit for another person • Conflicts of interest • Illegal gratuities • Bribery

Financial Statement Fraud Financial statement: fraud schemes involving the intentional misreporting of an organization’s financial information with the intent to mislead others • Creating fictitious revenues • Concealing liabilities or revenues • Does not include accounting mistakes.

Asset Misappropriation Asset misappropriation: fraud schemes in which an employee steals or misuses an organization’s assets • Skimming cash receipts • Falsifying voids and refunds • Tampering with checks and electronic payments • Overstating expenses

What causes people to commit fraud? Copyright 2018 Association of Certified Fraud Examiners –

What causes people to commit fraud? 1. Pressure • A gambling or drug habit • Personal debt or poor credit • A significant financial loss • Peer or family pressure to succeed

What causes people to commit fraud? 2. Opportunity • Lack of supervision • Poor internal controls • Poor recordkeeping • Extreme trust in a single individual • Lack of disciplinary action for previous frauds

What causes people to commit fraud? 3. Rationalization • I was only “borrowing” the money and planned to repay it. • The company won’t even realize this amount is gone; it’s not that much. • My boss does it all the time. • They don’t pay me enough anyway.

Catching Fraudsters Copyright 2018 Association of Certified Fraud Examiners – Report to the Nations

*Management Review*

*External Audit (auditor change)*

Red Flags of Fraud • Living beyond means. • Financial difficulties. • Serious addiction to drugs, alcohol, or gambling. • Divorce or family problems.

Other Warning Signs of Fraud • Unwillingness to share duties • A refusal to take vacations • A close personal relationship with vendors or customers • Complaints about low pay • Excessive pressure within the company • Rule breakers

*Employee Tip*

Action Points for Managers • Have a reporting mechanism. • Regularly review operations, inventory, vendors, payroll, books, etc. • Review internal controls and rotate approvals. • Identify the risk, concentrate your effort there. • Surprise reviews/audits • Evaluate your internal and external audits. • Create an anti-fraud policy with regular training. • Stay alert to behavioral red flags and fraud triangle.

Thank you. Daniel Dundon, CFE Ampstun Corporation 1001 Gibson Bay Dr. Ste 203 Richmond, KY 40475 859 -309 -4295 ddundon@ampstun. com