Fraud Fears

Tuesday was a busy day as it began with a learning opportunity. Hunter Hagan & Company, Ltd, CPAs sponsored an Avoiding Fraud seminar at First Western Trust Bank in Scottsdale that was packed with great advise, statistics and lessons learned. Lamar Harner and Julie Cauich from Harner Evans PLC who specialize in forensic and construction investigations were the speakers. Based upon the presentation I must say that we all should assume we have the potential for fraud, and we may actually be contributing to our fraud problems.

The statistics were grim where 6 to 8 percent of all revenues are lost to fraud, 35% of all frauds involve collusion and the average scheme continues 18 months prior to detection. Putting a Fraud Risk Management Program in place is paramount to avoiding fraud. Just as important is hearing and seeing business leadership’s words and actions, which can encourage or discourage ethical behavior. Downsizing has also put stress into the mix with many firms combining two positions into one. Have we unintentionally shot a hole in our checks and balances by doing so? What should construction companies do? Recognize where fraud happens, use tools and technology to minimize the risk and get started yesterday. Here are a few tools gleened from this seminar and a few other sources…

Most banks offer a service called Positive Pay, which verifys your check register against checks being processed. It’s a small fee to provide peace of mind.
Outsourcing payroll services or using Electronic ACH for payroll is highly recommended. According to the Association of Certified Fraud Examiners check tampering goes undetected for a median avarage of 30 months (page 17).
Your insurance agent may suggest you have all your accounting staff bonded to reduce the risk of hiring someone with past problems.
Since the construction industry carries a high risk for inventory theft, It’s time for IT to tackle surveillance systems, barcode scanning tools, and inventory management (perhaps future blog topics).
And IT has to worrry about data theft, data files contain employee social security numbers etc., so we need Data Loss Protection in place. Don’t forget that when disposing of used equipment to seek out companies that specialize in green technology recycling like Green Tech Assets. Firms like GTA can provide services including drive degaussing, drive shredding, and DOD 3 Pass erasure. There are a plethora of places that address electronic waste from cell phones to old modems. Check them out under the exchange heading of electronic waste on Wikipedia