Local investigator warns: Clear Lake businesses not immune from fraud

Would your business or non-profit organization turn down a 5 percent increase in revenue every year?  If the organization has no anti-fraud controls, then that may be exactly what it’s doing. 

According to the Association of Certified Fraud Examiners (ACFE), {jcomments on}organizations lose an average of 5 percent of their revenues to fraud each year.  Clear Lake businesses and volunteer organizations aren’t immune from the problem.

{jcomments off}“Fraud hits small businesses particularly hard,” says local CPA and Certified Fraud Examiner, Kelly Westphal Murphy.  “Oftentimes small businesses and non-profit organizations don’t have the resources to devote to putting effective anti-fraud controls in place.” 

And when fraud does strike smaller organizations, it can be devastating.  Many small organizations simply don’t have the reserves to absorb even a small loss.  They’re also much less likely to carry fidelity insurance, which specifically covers acts of employee dishonesty.

According to Westphal Murphy, fraud in an organization often takes place over a long period of time, lasting months if not years.  In fact, according to statistics from the ACFE, fraud in the workplace lasts a median of 18 months before it is detected. 

“Eighteen months is a lot of time to do some serious damage,” said Westphal Murphy.  “But it’s also a lot of time to leave a pretty good paper trail. And that’s where fraud examiners come in, especially those with an accounting background, they follow the paper trail.”

Westphal Murphy should know.  She’s been following the paper trail as a financial analyst for the past 10 years.  As a federal contractor she has assisted the Departments of Justice, Defense and State, the US Postal Inspection Service and the Bureau of Alcohol, Tobacco and Firearms on numerous cases ranging from passport and visa fraud to contractor and insurance fraud.

A native of Des Moines and graduate of Central College in Pella, Westphal Murphy received her master’s degree in accounting from the University of Arizona.  She became a Certified Fraud Examiner in May of this year and is a senior accountant with Potter and Brant, PLC in Clear Lake.  After years of assisting the federal government in fraud cases, she now hopes her experience and knowledge can be used to help small businesses and organizations in North Iowa protect themselves.

“The goal, especially for small organizations, is to try and prevent fraud from happening in the first place because recovering losses after the fact can be extremely difficult.”  According to the ACFE, about half of all victim organizations never recover a single dime of losses resulting from fraud. 

It is also very difficult to determine who will commit an offense.  Studies have shown there is no one particular type of person who commits fraud. Most people charged with occupa- Read More VIa e-Edition