Reporting the Red Flags of Fraud

By Jason Thompson, CPA/ABV, ASA, CFE, CFF
Partner and Director of Valuation and Litigation Services
jthompson@sponselcpagroup.com

Occupational fraud continues to be an all-too-common threat across a wide spectrum of industries. Perpetrators range from entry-level employees to C-suite executives. Small businesses with under 100 employees are particularly vulnerable to fraud, experiencing a median loss of $200,000. This is one of the many insights presented in the 2018 Report to the Nations from the Association of Certified Fraud Examiners (ACFE).

Among other things, this report identifies the employees and departments that pose the greatest threat to organizations when it comes to occupational fraud.

According to this study, fraud is most often committed by perpetrators who fall within the following demographics. Keep in mind that these demographics are not indicative of employees who will definitely commit occupational fraud; they are merely common demographics among occupational fraud perpetrators.

Gender — In the United States, men accounted for 58% of all occupational fraud cases. Even when taking authority level into consideration, men still tend to cause larger losses than women in managerial and owner/executive positions.

Age — According to the study, the largest median losses were caused by fraudsters aged 56 and older.

Education — Approximately 60% of perpetrators have a college degree or higher.

Position of perpetrator — Occupational fraud is committed most frequently by low-level personnel, but fraud committed by managers/executives results in much higher median losses.
o Employee — 44% of cases; median loss of $50,000
o Manager — 34% of cases; median loss of $150,000
o Owner/Executive — 19% of cases; median loss of $850,000
o Other — 3% of cases; median loss of $189,000

Perpetrator’s tenure with the business — Fraud losses significantly increase based on how long the fraudster worked for the company.
o Less than 1 year — 9% of cases; median loss of $40,000
o 1-5 years — 44% of cases; median loss of $100,000
o 6-10 years — 23% of cases; median loss of $173,000
o More than 10 years — 24% of cases; median loss of $241,000

Department within organization — Employees in the accounting department generated the highest number of occupational fraud cases, followed closely by operations and executive/upper management.

Prior criminal background or negative employment history — Most occupational fraudsters are first-time offenders. ACFE’s 2018 study found that only 4% of fraud perpetrators had previously been convicted of a fraud-related offense.

Fraud losses tend to be much lower in organizations with telephone hotlines or some other kind of anonymous reporting mechanism. Random audits and forensic data monitoring also rank among the most effective tools for detecting occupational fraud.

If you are concerned about occupational fraud in your organization, please call Jason Thompson at (317) 608-6693 or email jthompson@sponselcpagroup.com.

Does Your Enterprise Need to Pivot?

By Mike Bedel, CPA, MBA, CGMA
Partner, Director of Audit & Assurance Services
mbedel@sponselcpagroup.com

As the old adage goes, the definition of insanity is doing the same thing over and over again and expecting different results. People are hesitant to jump out of their comfort zones — especially when it comes to turning a profit — but pivoting in a different direction is sometimes the best way to improve your business.

Could your company use a boost? Let’s dive in and explore how you can switch things up and turn toward success!

Expand your market. Do you have a target audience in mind but can’t seem to reach it no matter how hard you try? Don’t get hung up on the same region or demographic. Broaden your horizons! Make your product or service available to a wider geographic area. Launch a virtual store on your website or try selling through different e-commerce channels. Now, in this digital age, there are countless ways to reach your audience. The sky is the limit!

Turn failure into success. One of the most compelling comeback stories in the history of business is the origin of Post-It Notes. This product, which became a staple of offices across the world, started as an accident. Spencer Silver, a researcher at 3M, was trying to create a form of permanent adhesive for airplanes, but he ended up producing a much weaker glue that easily peeled off. Silver’s determination to turn this failure into a success eventually led to the substance being used on those colorful pieces of paper we all love sticking to our desks and bulletin boards.

The lesson here is that if something doesn’t turn out as you intended or expected, don’t give up! Think of ways you can adapt your products or services to meet other demands, which leads to our third point …

Innovate, innovate, innovate! Don’t be afraid to reinvent your business. Whether you change your product line, delivery methods, messaging or the way you approach and interact with your customers and vendors, giving your company a makeover can make a massive impact in the marketplace. If you’re not hitting your stride, wipe the slate clean and make a fresh start. Get back to the drawing board and develop a new product or service. Don’t let setbacks get you down — think of them as opportunities for a comeback. Just get back up on the horse and ride toward a new frontier!

If we can assist you with achieving success in your business or personal affairs, please contact Mike Bedel at (317) 613-7852 or email mbedel@sponselcpagroup.com.

What Can Business Owners Learn from the Electoral Process?

By Jason Thompson, CPA/ABV, ASA, CFE, CFF
Partner and Director of Valuation and Litigation Services
jthompson@sponselcpagroup.com

Last Tuesday, voters cast their ballots in a round of primary elections for federal, state and local offices. In the business world, people vote every day, selecting products and services based on how effectively companies tailor their campaign to customers.

If you want to breathe new life into your business, put on your campaign hat and start running it like a political race! Here are some things to consider and ways to win your customers’ vote!

Build a campaign staff. Surround yourself with people who will represent your company in the best possible light. Just as politicians need fans waving signs of support, business owners need a team of folks who firmly believe in their company, spreading the good word about how it can benefit customers.

Keep your campaign promises. Business owners are like politicians in the sense that they set high expectations and build a buzz around themselves. They present a grand vision for the public to rally behind. Once you’ve won over your audience and gained their support, don’t lose sight of that vision. Always remember what you’ve promised and evaluate whether you’re living up to the portrait you’ve painted of your company.

Learn from your opponents. Think of your competitors as fellow candidates in the race and see what you can do to distinguish yourself from them. Do you need to change your brand image, your messaging, the way you interact with customers? What is the public’s perception of your company at the moment? Is it time to improve your reputation? These are just a few of the questions that should be rattling around in your head as you hike up the campaign trail.

When you go into work every morning, your first thought should always be: How many votes am I going to win today? In your world, every day is Election Day!

If you have questions about the value of a business or the valuation process, please call Jason Thompson at (317) 608-6693 or email jthompson@sponselcpagroup.com.

Employee Spotlight — Dalton Mudd

Dalton Mudd started at Sponsel as an intern in the midst of tax season last year. He joined the tax services staff as a full-time member this January. His duties include preparing tax returns for individuals, businesses and not-for-profits, as well as advising and performing research for clients about any tax related questions they may have.

Dalton earned his bachelor’s degree in accounting and finance from Marian University, where he also played for the men’s soccer team, the Knights.

Outside of work, Dalton enjoys adventures in the great outdoors — hiking, kayaking, rock climbing — as well as nightlife here in Indy, taking in new restaurants and local theater productions with his girlfriend, Lexi.

Engage with Your Employees

By Lisa Purichia
Partner, Director of Entrepreneurial Services & Employee Benefit Services
lpurichia@sponselcpagroup.com

The job market in Indiana has been remarkably healthy. The state’s unemployment rate recently dropped to 3.2 percent and has remained below the national rate for more than four years. As a result, valued employees are very hard to attract and retain! We can honestly state that maintaining a capable workforce is the #1 problem for most of our clients. As more and more people enter the workforce, the demands of growth make it mandatory to focus in a very specific manner on how to keep employees committed for years to come.

Embrace the idea of engagement. There are several ways to keep your employees committed to your workplace in their specific assigned tasks and eager to help grow the company! One key way is to help them understand how their day-to-day tasks contribute to the company’s larger overall mission. Let them know they’re an important part of the big picture and how their specific task creates a more valuable product or service when coupled with the efforts of the whole team.

Always keep employees in the loop: Communicate, Communicate, Communicate. Sharing the latest operating results, challenges met and overcome, new businesses signed, short-term goals, as well as the long-term vision for the company will make them feel like they are closely connected to the team and working toward a common purpose. Managers may have to sometimes bridge the understanding between the short-term efforts and how they are stepping stones to the BIGGER long-term goals and measures of success.

Ask employees about their own goals. Are they carving out a specific career path? Talk to them about their plans and how you can help them achieve personal success in their work life and in their personal affairs. Many may have never considered a “Career Path” or a “Personal Improvement Plan.” Taking an interest in their hopes and aspirations will keep them motivated to give their best. Encouragement is crucial — as is coaching and mentoring! You must make your employees feel like you’re always rooting for them to excel. You must be sincere and genuine in your efforts to help them achieve their goals.

The more they know you care about them, the more they will care about their tasks. Engagement occurs when the employees are in sync and working together in a seamless fashion to accomplish the goals of success! For more advice on how to engage your employees and grow your organization, please contact Lisa Purichia at (317) 608-6693 or email lpurichia@sponselcpagroup.com.

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