Corporate Compliance

Watch for fraud red flags

Compliance Monitor, January 7, 2004

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In spite of checks and balances, heavy consequences, and other deterrents, people still commit fraud. Knowing the circumstances that can lead to criminal behavior and recognizing "red flags" can help you safeguard your facility against fraud.

Some of the more common reasons employees commit fraud include the following:

  • Short-term lulls in company cash

  • An attempt to preserve or increase bonuses

  • Pressure to attain financial goals

  • Desire for grant money for projects and prestige

  • Making the company attractive to investors for stock, and mergers and acquisitions

  • Personal problems like high personal debt or dissatisfaction with salary

  • Changes in market conditions

    The most important motivating factor behind fraud is greed, and it certainly plays a role in many publicized corporate fraud scandals. Compliance officers and internal auditors can prevent financial mishaps by watching for situations that are conducive to fraud.

    Some ways you can keep an eye on fraud in your facility include the following:

  • Perform regular audits of financial statements and check for improper expenses, ill-timed and fake revenues, etc.

  • Enforce and publish sanctions

  • Stay abreast of personal and organizational situations that can lead to fraud

  • Pay close attention to employees' personal and corporate needs

    Be sure your company polices and procedures for dealing with issues of integrity-both large and small-are clearly and regularly communicated to all employees. You have to be consistent and straightforward if you want to create a culture of honesty.

    This column was written by Hank Vanderbeek, MPA, CIA, CFE. IRP, Inc. - an Innovative Health Solutions company



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