SAFEGUARDING YOUR ASSETS AND PREVENTING FRAUD Internal Controls Segregation of duties Audit, Review or Compilation Preparation of bank reconciliation Proper approval of vendor invoices/original copies Training/cross-training Senior Mgmt & Employees Screening & background checks of new hires Rotation of personnel in clerical positions Mandatory vacation Observe employee behavior Periodic review of procedures Warning Signs No vacation taken; first to arrive, last to leave Employee lifestyle Employee protection of their work Lack of internal controls No sharing info between Senior Mgmt or employees Bank statements not reconciled promptly Check stock in open areas and not secured New vendors added without proper controls Promotions/transfers declined by employee Fire drill mentality to complete a report Vendors call re: lack of payment/service change Frequent bank calls for transaction verification Preventative Measures Engage outside professional to test controls Engage outside accounting firm for audit Hire management company Separate bank accounts Bank products-positive pay, alert technology Security features on checks and documents More than one Senior Mgmt involved Proper control to add new vendors Review insurance for Fidelity, Crime, Cyber Protection of computer hardware & software Update and review procedures Cyber Security Protect computer hardware & software Dedicated PC-no personal use/open (WiFi) areas Back-up files/Controls to limit access Proper use of passwords, token authentication Use of firewalls, spyware & virus programs Monitor internet activity Update software promptly/ Unload unused software Scan PC regularly for spyware & viruses Use audit trail in bank programs Use separate user accounts Create continuity/recovery plan

SAFEGUARDING YOUR ASSETS AND PREVENTING FRAUD Steps to Take if a Fraud Occurs Quick & rapid response necessary Engage a forensic accountant Seek legal counsel Contact insurance company or broker/agent Contact banker IT personnel should not try to find problem Maintain integrity of data Close bank accounts/open new accounts Call law enforcement (if advised by legal counsel) Implement new controls/prevent more losses Cancel credit cards, if necessary Maintain the integrity of documents Secure computers used by the perpetrator Implement continuity/recovery plan, if needed Cancel personnel who can approve EFT’s Take action/perpetrator has consequences Communicate with employees at proper time Send Form 1099 to the perpetrator Tips to Remember Fraud is a crime of opportunity Fraud can make anyone a victim. Fraud occurs for many reasons-be aware Something sounds too good to be true, it probably is Perpetrators take the path of least resistance Anyone can be a perpetrator-be aware Don’t become complacent Be proactive. Reaction is too late Behavior is a key point-be cognizant of it Read all monthly reports Research other parties in transactions Never let your guard down Be aware of emails from unknown senders Create a positive work environment Train your employees Don’t be lazy-investigate all incidents Be sure there are checks and balances Tone at the top-lead by example