Plante Moran offers tips to protect corporate assets and reputation against fraud

Grand Rapids, Michigan — A string of high-profile embezzlement cases in West Michigan should encourage companies and nonprofits to review their financial processes, according to a partner at Plante Moran.

Michelle McHale, a Grand Rapids partner who leads Plante Moran’s Forensic and Valuation Services, notes that according to the Association of Certified Fraud Examiners, or ACFE, the typical organization loses 5 percent of its revenue to fraud each year — translating to a potential projected global fraud loss of nearly $3.7 trillion.

“Fraud affects more than the company’s bottom line — it affects every single person in your organization,” McHale explained. “Giving your employees the education to detect, deter and report fraud is vital and necessary to protecting both your company’s financial and human assets."

McHale advises companies, large and small, to follow these fraud-reducing guidelines:

• Implement good hiring practices.
  It is important to perform background checks on potential job candidates, contact references and verify educational degrees.
• Establish and adhere to a written code of ethical conduct.
  A concise, strong ethics policy defines improper and illegal behavior, including conflicts of interest, kickbacks, embezzlement, etc. The policy should be given to employees to read and sign at the time of hire, and it should be reviewed with employees annually. Ensure the rules of conduct apply equally to everyone within the firm.
• Discipline fairly and consistently.
  Employees and members must understand that there is zero tolerance for improper business conduct or fraudulent behavior and that disciplinary action will be taken for infractions.
• Implement and monitor internal controls.
  Sound internal controls require that transactions are properly authorized, recorded and reported and that all assets are safeguarded. Safeguards include securing firm assets within controlled areas, vendor and client verification and random, periodic checks of accounting activities.
• Training.
  Offering ongoing training to employees is important to keep them apprised of what constitutes fraud and how it is prevented, detected and reported. Take time to educate employees about fraud and how it affects the company.
• Reporting opportunities.
  Give employees a variety of methods to report their concerns about fraud, illegal actions or unethical behavior, including telephone hotlines, emails, web-based portals, faxes or even face-to-face meetings. Anonymous reporting, either internally or through independent service providers, can help employees feel their information has been shared in a safe and confidential manner.
• Empowerment.
  Equip employees to utilize the services. There could be a negative stigma attached to whistleblowing, but encouragement from senior management as well as ongoing training and support from the organization may ensure a more robust fraud reduction program.

“Organizations will find their workforce to be their largest and most effective reporting source,” McHale said. “Maintaining a robust culture of ethics and compliance along with an open door policy for senior management and effective communication channels for reporting employee-related concerns will help employees feel comfortable and engage in fraud prevention.

"When employees are given tools to report policy violations and inappropriate behaviors, they are given a clear signal that management is committed to the elimination of dishonesty in the workplace.” 

About Plante Moran

Plante Moran is among the nation's largest accounting, tax and consulting firms and provides a full line of services to organizations in the following industries: manufacturing and distribution, financial institutions, service, health care, private equity, public sector and real estate and construction. Plante Moran has a staff of more than 2,000 professionals in 23 offices throughout Michigan, Ohio, and Illinois with international offices in Shanghai, China; Monterrey, Mexico; and Mumbai, India. Plante Moran has been recognized by a number of organizations, including FORTUNE magazine, as one of the country's best places to work.

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