hotline

Article Dean Dorton

Over the course of the past nine months, many of our clients’ business processes were shaken up, employees shifted to working in isolation, and internal controls became dismembered.

Monitoring an organization’s pulse can be a challenge, but during these unprecedented times it can feel almost impossible. Unfortunately, sitting back and just hoping for the best is not the right response; there are serious money and reputational issues at play, no matter the size of your organization.

Although we live in an ever-changing world, there are three concrete things you can do to protect your organization from potential fraud:

1. Internally communicate

Remote work has the potential to make our teams feel disconnected and isolated. This can lead to various motivations and opportunities for fraud, especially if conditions persist for an extended period of time.

Now is the right time to establish an ongoing culture of communication within your organization. Start with planning out weekly team meetings with time for open conversations about what is and isn’t working well. The more receptive you can be to honest responses, the more trust you will build inside your company.

2. Re-establish internal control processes

Many of our business functions have permanently changed and responsibilities have shifted around. Now is the perfect time to map out your current control processes in writing (this exercise is sometimes easier said than done). Then, assess each process to see if proper segregation of duties, approvals, and information access are in place for each function.

3. Launch a whistleblower hotline

No matter the size or structure of your organization, implementing an ethics or whistleblower hotline can be one of the best investments you can make to protect your organization against fraud.

The Association of Certified Fraud Examiners found that 43% of detected fraud was uncovered due to a tip. Additionally, fraud losses at companies with a hotline were nearly half the amount of losses experienced by companies without a hotline; a $100,000 median loss compared to $198,000.

Tip hotlines have also had a positive impact on reducing the length of frauds, helping organizations detect fraud an average of six months faster.

In this unpredictable landscape, organizations should make it easy for their employees to report suspected fraudulent activity/theft, misconduct, or unethical behavior, and to remain completely anonymous throughout the entire reporting process. This is one of the most effective and inexpensive improvements you can make to your company.

The Dean Dorton team has streamlined our Whistleblower Hotline service to be an affordable plug and play option for a wide range of organizations. If you haven’t implemented a hotline yet, we would love to talk with you about your options.

Learn More about Dean Dorton’s Whistle Blower Hotline

Dean Dorton is here for you as your organization navigates through these unprecedented times. Contact us if you have questions about adapting and changing to this new landscape.

Nick Lynch, CPA/CFF, CFE
Consulting Associate Director
nlynch@deandorton.com • 859.425.7635

Article Dean Dorton

In today’s regulatory environment, companies must be proactive in addressing environmental and safety concerns. A third-party hotline encourages disclosure of critical issues and protects both the company and its employees.

Voluntary Protection Program Act

OSHAOSHA’s Voluntary Protection Program Act is garnering support from both political parties. Introduced on April 28, the proposed legislation would signify a long-term commitment to OSHA’s program recognizing exceptional worksite in terms of safety and health performance. Worksites that successfully participate in VPP are exempt from certain OSHA inspections.

Sens. Michael Bennett (D-CO) Mike Enzi (R-WY) are partnering in introducing the legislation. Enzi said in a press release: “It is important that Congress cement this successful program to help ensure that it persists, as well as to ensure that it can grow to include more of America’s small businesses.” Bennett said “Our bill ensures that OSHA can continue to use this successful and cost-effective program to ensure the health and safety of Colorado workers.”

Since its 1982 inception, over 2,200 worksites have participated in VPP; the VPP Act would codify the program and secure funding against Congress. At this writing the bill is still before the Senate’s Health, Education, Labor and Pensions Committee.

EPA Initiatives

EPAFor the first time since 2011, the United States Environmental Protection Agency will update its initiatives starting in October. The newly selected national enforcement initiatives will guide inspection and enforcement resources for the next three years.

The EPA will also increase focus on metals manufacturing, mining, chemical manufacturing, and food processing industries. Increased inspections for facilities under the Clean Air Act are planned, especially where there is a risk of catastrophic releases. Industrial facilities with substantial air emissions and large agricultural facilities are also in line for an expanded EPA focus.

The EPA’s limited enforcement budget makes this announcement noteworthy. Between FY2010 and FY2015 there was a 20% budget decrease. With that tight budget, the EPA’s top priority will switch to larger, complex cases. While this strategy entails fewer cases for the EPA to pursue, the conclusion is it will provide greater environmental and health gains.

Within this structure, the EPA’s attention will continue in focused priorities at facilities: expand targeting toxic air pollution emissions for storage of hazardous waste; ensure large industrial facilities comply with the Clean Air Act; examine energy extraction activities; pursue unpermitted raw sewage discharges; target concentrated animal feeding operations that hinder natural resources.

To compensate for reduced physical inspections and limited enforcement resources, the EPA plans to better engage technologies to gather information about compliance at facilities.

News

Show Low fire district manager indicted in $1.8M embezzlement case
Emmaus shooting range faces $135K in OSHA fines
EEOC sues Mobile Destination, Inc. for disability discrimination

For more information about Red Flag Reporting, the third-party hotline offered by Dean Dorton, please contact Nick Lynch at nlynch@deandorton.com or 859.425.7635.

Article Dean Dorton

Organizations face numerous risks to their success every day including regulatory risk, economic risk, disaster risk, supply-chain risk, and technology risk, just to name a few. Fraud risk is universally one of the risks faced by all businesses, from individually-owned to government entities and every type of business in between. Unfortunately for many organizations, their greatest assets are endangered by their own employees. Those who have been hired to help the organization succeed are potentially the biggest threats to a company.   For the past nine years, the Association of Certified Fraud Examiners has studied occupational fraud, the victims, and various methods used to commit these crimes. Between January 2014 and October 2015, 2,410 cases of occupational fraud were investigated in 114 different countries throughout the world. Highlights of the findings include:

  • The total loss caused by the cases in the study exceeded $6.3 billion, with an average loss per case of $2.7 million.
  • Asset misappropriation was by far the most common form of occupational fraud, occurring in more than 83% of cases, but causing the smallest median loss of $125,000. Financial statement fraud was on the other end of the spectrum, occurring in less than 10% of cases but causing a median loss of $975,000. Corruption cases fell in the middle, with 35.4% of cases and a median loss of $200,000.
  • Among the various forms of asset misappropriation, billing schemes and check tampering schemes posed the greatest risk based on their relative frequency and median loss.
  • The median loss for all cases in the study was $150,000, with 23.2% of cases causing losses of $1 million or more.

Tips were the most common detection method in the study, representing 39.1% of cases. Organizations that had reporting hotlines were much more likely to detect fraud through tips than organizations without hotlines (47.3% compared to 28.2%, respectively). Having a hotline in place allows for employers to address a situation early rather than letting it continue and end in the courts. A hotline also eliminates the employee excuse that they had nowhere to turn.   We believe that organizations should make it easy for their employees to report suspected fraudulent activity/theft, misconduct, or unethical behavior. Operating an effective fraud tip function is neither too complicated nor overly expensive. Dean Dorton can provide a safe, secure, and anonymous way to report these concerns 24/7 through our secure fraud hotline service, Red Flag Reporting. By putting this hotline in place, you will convey to your employees that your organization is committed to an ethical culture. As an employer, you will have comfort in that the hotline provides you with a safeguard that may identify employee concerns or complaints before they develop into a crisis situation. Utilizing a third-party expert provider provides your employees with comfort that their concerns will be handled in a confidential and anonymous manner.Download 2016 Report to the Nations

To learn more about our Red Flag Reporting service or how to investigate potential fraudulent activity, contact Elizabeth Woodward (ewoodward@deandorton.com) or Nick Lynch (nlynch@deandorton.com).

View Elizabeth Woodward’s Bio

Article Dean Dorton

Are you in tune with the fraud risks of your business? On October 23, Dean Dorton’s Nick Lynch and Simon Keemer, along with Timothy Beam, Supervisory Special Agent with the Federal Bureau of Investigations (FBI), shared recent examples and insights with construction professionals at the 2015 Ohio Valley Construction Conference. The panelists provided a variety of “best-practices” related to the deterrence of fraud within an organization.

According to Beam, the FBI continues to investigate cases of email phishing scams, more commonly known as the “Nigerian Email Scam.” In this scheme, scammers target victims by email, letter, text message or through social media outlets soliciting assistance to transfer money from one bank account to another bank account. In a new twist to these email scams, the email accounts of C-Suite employees or owners of the business are spoofed to create the impression that it is the organization’s executives or owners that are requesting lower level employees to make the bank transfers. If you or your organization receives such an unsolicited request, it is best to ignore the request and delete the communication immediately. In our world, where cyber security threats are continually evolving, it is important to remember to remain vigilant.

Other threats common in the construction industry include the misappropriation of assets through activities such as theft of tools and materials from job sites, bid rigging, kick-back schemes and inappropriate use of company credit cards. Financial fraud is also a risk through the manipulation of estimated costs to complete, misallocation of job costs between jobs, and general manipulation of job performance and profitability.

A common tool to assist in the detection and deterrence of fraud is the use of an ethics hotline. Hotlines are affordable to implement and provide an outlet for employees, vendors and customers to report suspected unethical behavior anonymously, either by phone or online. Certified Fraud Examiner (CFE) Nick Lynch advised that frauds are most often detected through tips – the Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud for 2014 shows that 42% of frauds are initially detected through tips. Other common fraud detection methods include management review (16%) and internal audit (14%).

According to Lynch, “The perception of detection is one of the most effective means to prevent or deter fraud. In the construction industry, you can create the perception of detection by publicizing an ethics hotline within the organization and at construction sites.” It is also important to ensure that management fully supports the use of an ethics hotline within the organization and takes the appropriate steps to maintain confidentiality and independence while verifying the accuracy of information received from tips.

Internal audit is also an effective fraud detection and prevention activity. The panel discussed alternative ways in which internal audit procedures can be implemented within an organization in a low cost high impact manner. The discussion included how to use existing accounting personnel to perform internal audit procedures, or even outsourcing or co-sourcing internal audit with an accounting firm.

Regardless of your industry, no organization is immune to the risk of fraud. However, recognizing and understanding the risks specific to your organization is a necessary first step.

If you would like to speak with someone at Dean Dorton regarding fraud prevention, or suspected fraud, please contact Simon Keemer, Payton Miller, or Hunter Stout.

Article Dean Dorton

Did you know tip hotlines have proven to be one of the most effective ways to detect or prevent fraud?  Nearly half (43%) of detected fraud is discovered due to a tip.  Operating without an ethics hotline may be accepting unnecessary risk.  We believe that organizations should make it easy for their employees to report suspected fraudulent activity/theft, misconduct or unethical behavior.

Accounting Today recently published an article, “Best Practices of Employee Hotlines.” This article highlights methods of functionality and internal guidelines as well as employee support, and includes input from our own Nick Lynch. Read the full article here.

Dean Dorton provides employees with a safe, secure and anonymous way to report concerns 24/7 via our ethics/whistleblower hotline – Red Flag Reporting.  Some of the key benefits of this service include:

Fraud Red Flag Reporting

  • We provide live, onsite training from an experienced fraud examiner. A webinar is available for those unable to attend the onsite training.
  • Our hotline allows web reporting and live, 24/7 phone reporting via a toll-free number. We also offer collateral material that helps keep the hotline top of mind, including wallet cards, posters and quarterly emails.
  • Our reports do not go straight from the operator to the client. Our reports first go to an experienced fraud examiner.
  • By putting this hotline in place, you will convey to your employees that your organization is committed to an ethical culture. As an employer, you will have comfort in that the hotline provides you with a safeguard that may identify employee concerns or complaints before they develop into a crisis situation.
  • Utilizing a third-party expert provider provides your employees with comfort that their concerns will be handled in a confidential and anonymous manner.

To put our fraud hotline in action for your organization or for more information about the benefits, contact Nick Lynch (nlynch@deandorton.com) or Elizabeth Woodward (ewoodward@deandorton.com).

View Elizabeth Woodward’s Bio