Top Fraud Predictions for 2015

Jill S. G. Palmeter, CPA, Partner (Jan, 2015)

Not a day goes by without receiving an email notification that some form of fraud was perpetrated within a not-for-profit organization.  These stories from not-for-profit and philanthropy periodicals usually relate to significant-sized frauds spanning over a number of years.  Funds are frequently indirectly diverted to a top official of the organization’s management or governance teams.  Whether it is a hospital, school, local food pantry, sports booster club or PTO, the tone at the top continues to play an important role in the honest and successful operation of any organization.  That tone and its applicable standards should parlay into a set of internal controls helping to deter, detect and prevent fraudulent activity.  Specific internal controls will differ from organization to organization, but the fundamental premise of checks and balances is at the core of all effective internal control systems.

On a more global level, the experts from the Association of Certified Fraud Examiners (ACFE) have predicted that in 2015:

  1. Technology will be a double-edged sword, both helping fraudsters in the sophistication of their schemes as well as leveraging the ability of the professionals trying to catch them.
  2. More massive data breaches, like the ones affecting Target, Home Depot, and other large retailers over the past two years, are likely to occur in 2015.  An increasing need for information security has been clearly demonstrated.
  3. Whistleblower protection for individuals who step forward to report fraud is expected to increase, and several programs have begun implementation in the U.S. to financially incentivize whistleblowing regarding bribery, tax evasion and corporate accounting fraud.
  4. Financial statement fraud is also expected to increase, as these major frauds that involved Enron, WorldCom, Tyco and others more than ten years ago is starting to fade from the public’s consciousness.
  5. Credit card security features will continue to evolve, as the U.S. migrates closer to smart cards with a security microchip.  In the interim, several variations are beings offered until a single standard is adopted.

We, at Dermody, Burke & Brown, encourage every organization to be as educated as possible regarding their system of internal controls.  Accounting fraud and the different ways to combat it remain a challenging element of all organizations.  Contact your audit and certified fraud team at DB&B with any questions or concerns.

 

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