John O’Connell/Capital Press
FORT HALL, Idaho — Certified public accountant Ryan Mathews has developed a profile of the typical Eastern Idaho employee who commits fraud against his or her company.
Mathews, with Cooper Norman in Pocatello, explained the region’s typical perpetrator of fraud is likely married, active in a church, educated beyond high school, has no arrest record, is in his or her 40s, conforms to social norms, has been employed by the company from one to 20 years and acts alone 70 percent of the time.
Mathews offered steps for businesses to avoid fraud while speaking during a recent meeting of the Idaho Grower-Shippers Association. He said most business owners tell him his criminal profile could aptly describe the person they have overseeing their own books.
“The bottom line is given the right pressures, opportunities and rationalizations, many people are capable of committing crime,” Mathews said, adding business owners in Eastern Idaho tend to be trusting and often don’t have adequate preventive controls in place.
Mathews believes fraud is on the rise regionally. His company investigates about 10 to 20 fraud cases per year in Eastern Idaho, dealing mostly in the Idaho Falls area. He said common reasons for workers committing fraud include gambling or drug habits, debt or poor credit, a significant financial loss and pressure to succeed.
Mathews offered statistics from a recent Association of Certified Fraud Examiners report. According to the report, the typical organization loses 5 percent of its revenue to fraud annually, and poor internal controls are the greatest contributor to losses. The report found 55.7 percent of U.S. fraud cases involved males, and the greatest losses came from workers with the most access and knowledge of internal procedures. The median loss was $573,000 by owners and executives, $180,000 by managers and $60,000 by general employees.
Mathews said records reviewed by tax preparers seldom include the level of detail needed to detect fraud. Fraud is discovered based on a tip roughly 40 percent of the time, so Mathews advises companies to establish internal hot lines for accepting anonymous tips. He said companies should also cross-train workers to do multiple jobs and strive for a separation of duties to prevent a single employee from having too much control over managing money. He advises business owners to make certain workers use vacation, and that they don’t continue working remotely on their laptops while they’re off.
“A lot of times we’ll meet a person who says, ‘Nobody can do my accounting job like I can,’” Mathews said. “We call that red flag behavior if they’re not willing to take vacation or let anyone else look at the books.”
Mathews said working odd hours can also be a sign of fraud.
IGSA President Shawn Boyle advised his members to look into insurance policies to protect against fraud.
Mathews said managers should also make certain to communicate regularly with employees about acceptable practices within the workplace, and to have clear policies to prevent employees from rationalizing illegal behavior.
“We’ll often ask a question: Do you have a fraud policy? And 95 percent of the time, the answer is no,” Mathews said.