The minimum daily requirements for fraud examinations

July/August 2012

By James D. Ratley, CFE

From the President and CEO

Meat and potatoes. That's what many fraud examiners dine on every day. Most of us don't investigate huge frauds that implode corporations. We're normally investigating some type of asset misappropriation scheme — possibly by a middle manager who probably never committed fraud before.

In fact, the 2012 Report to the Nations on Occupational Fraud and Abuse found that 87 percent of the cases reported to us involved misappropriating assets and approximately 87 percent of occupational fraudsters had never been charged or convicted of a fraud-related offense. (You can download a copy of the report.)

As we've found in research for previous reports, perpetrators with higher levels of authority tend to cause much larger losses. However, most of your time isn't taken up with "C-level suite" fraudsters. (Though you may have encountered a crooked CFO or two.) Your fraud examinations often deal with that longtime trusted bookkeeper who embezzled $70,000 in six years. Or that cashier who's been skimming for six months.

And then there are contracting officials (CO) who have been selecting several new bidders for jobs and seemingly ignoring longtime contractors. Charles Piper, in this issue's cover article, writes how he discovered the COs at a company had given low ratings in a bidding round to all the reputable contractors.

However, the COs then gave high ratings to a new company and awarded the contract to that company at double the price they could have paid. Piper later learned the bid evaluators were friends with the contractor. The winning bidder actually had offered a bid evaluator a job with the company during the bid evaluation process. Piper describes 12 red flags of contract and procurement fraud.

Bid rigging is the kind of nuts-and-bolts fraud that we cover in our training events and materials (such as the Contract and Procurement Fraud seminar and a separate self-study workbook).

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