1. Fraud – The Ethical Dilemma

2. Plante Moran Forensics
FVS team member’s credentials include:
Certified Public Accountant (CPA)
Certified Fraud Examiner (CFE)
Certified in Financial Forensics (CFF)
Certified Management Accountant (CMA)
Juris Doctor (JD)
A One-Firm Firm:
Over 2,000 industry experts to partner with when specific industry knowledge is needed during investigations
Professionally trained in both interviewing and interrogation

3. Presenter Michelle D. McHale-Adams, CPA/CFF, CFE | Partner
Michelle has over 20 years of experience in forensic accounting and is Plante Moran’s Forensic Accounting Practice Leader.
She has conducted numerous interviews, located and reviewed key documents, analyzed numerous financial records, traced assets, and quantified the financial losses for many clients in different industries. She has assisted counsel in discovery matters and has testified at trial regarding forensic accounting findings. She has helped organizations prepare economic loss claims that are filed with insurance companies for a variety of claims.
Michelle has also provided financial consulting services for many large and small entities related to performing numerous Fraud Risk Assessments whereby vulnerable areas of the controls over cash are identified. These services have spanned many different industries, including the government sector. Michelle is the former Chair of the Michigan Association of Accountants’ Fraud Task Force and is a frequent presenter on the topics of forensic accounting and internal controls. or

4. Presenter Ian Mills, CPA | Audit Staff
Ian is a graduate of Michigan State University and has over four years of experience in the audit practice at Plante Moran’s East Lansing office.
He focuses on auditing higher education (including grant audits), manufacturing and distribution, and service industries. He has worked on clients ranging in all sizes and has experienced a vast array of internal control structures.

5. Agenda Reimbursement Scheme Recent Trends – Report to the Nations
Invoice/Billing Scheme
New Analytics
Expense Report Scheme
Family matters
The Abrupt Departure
The Affair
Senior Living Theft

8. Reimbursement Scheme Tuition reimbursement program
HR contacts institution when employee first applies. They get official transcript to verify enrollment.
Employee travels frequently
Manager approves expense reports
AP agrees submitted receipts to expense reports
Red flags
Support constantly submitted late
Employee in financial trouble

10. Talk about sloppiness and alignment

12. What if it’s done well? >$40,000 Loss

13. Ethical Dilemma Pregnant employee Not-for-profit client
Should the client report the fraud to the authorities?
Should the client inform donors?
How could this have been caught sooner?

14. Reimbursement Scheme Organization credit card statements
Verify documentation/amounts provided by employees to other sources
Organization credit card statements
Third party travel agency
Online bank activity (for bank statements)
Random periodic calls to third parties

16. ACFE Report to the Nations
2010
2012
2014
2016
Annual Revenues lost to Fraud 5%
Median Loss per incident
$160,000
$140,000
$145,000
$150,000
Primary factor of loss
Lack of internal controls
Typical scheme time duration
18 months
Clean employment histories
85%
87%
95%
Typical occurrences of fraud
Asset misappropriation
Percentage of Asset Misappropriation
90%
83%

17. Size of Loss by Industry

18. Asset Misappropriation Methods

19. Anatomy of a “Fraudster”
Male – 56% of reported US occurrences
Median loss:
Male - $187,000
Female - $100,000 (previously $83,000)
Between 31 and 45 years old - 55%
First time offender
Long-term employees = larger frauds

20. Invoice/Billing Scheme
What’s wrong?

21. Ethical Dilemma Grant receiving entity High profile investors
Should the client file a police report?
Should the client amend prior grant filings?
Get money back?

22. GEO-Coding 22

23. Distance Analytics 23

24. Investigative Research

25. Investigative Research25

26. Investigative Research
Vendor
Vendor
Employee
Vendor

27. Investigative Research

28. Analytics 28

29. Analytics 29

30. The Abrupt Departure Limited internal controls at new Mexico facility
CFO frequently traveled to Mexico facility
CFO abruptly quits via and leaves
Client caught off guard by CFO departure

31. The Abrupt Departure
Client requested a review of s and disbursements/vendors

32. The Abrupt Departure

33. What is wrong?

34. The Abrupt Departure

35. The Abrupt Departure

36. Ethical Dilemma US Company reports to Headquarters in Asia
Should the US Company report loss to Headquarters?
Should the facility press charges?
Should they file a civil suit and/or a criminal action?

37. The Abrupt Departure $1.7 Million Loss
Sent money to Mexican bank account
Purchased lakefront property
Caught by Mexican authorities, sent back to the US, and now in prison

38. Expense Report Scheme

39. Expense Report Scheme

40. Expense Report Scheme

41. Expense Report Scheme

42. Ethical Dilemma -Professional Service firm
-Clients were invoiced for some of the fraud
Should the firm report attorney to State Licensing?
Should the firm report to the police?
Does the firm report it to their clients?

43. Disbursement Issue 43

44. Ethical Dilemma Family business Large client to firm Non-audit client
Do you inform the CEO that the CFO may be a thief?
What is your next step?

45. Family Matters

46. The Allegations
Two current employees are alleging that management misused federal funds.
They’ve hired an attorney to represent them.
No lawsuit filed yet.
Attorney alluded in a telephone conversation with client/attorney that one of the two employees is having an affair with the President
Did not disclose which one
President is not informed of this

47. Our Assignment Interview the employees making the allegations.
To determine if any of the allegations are true.

48. Ethical Dilemma
Do we ask either employee if they are having an affair with the President?
Do we ask the President?

49. Senior Living Theft Business manager at senior living facility
Discovered inappropriate activity in the Resident Trust Account
Over $100,000 stolen from over 70 residents
Checks written from RTA to the employee’s grandmother, husband, and sister

50. Senior Living Theft
Cash withdrawal signatures are inconsistent, especially among large withdrawals >> forged resident signatures

51. Ethical Dilemma Bad publicity for senior living facility
Pregnant employee
How does the facility inform the residents’ families about the loss?
Should the facility press charges?

52. Fraud Test

53. Fraud Test

54. Remember…
Trust is not an internal control.
Trust but Verify.

55. Thank You!

56. Contact Information
Michelle McHale-Adams, CPA/CFF, CFE Southfield Grand Rapids Ian Mills, CPA East Lansing