The Real Cost of Fraud

It is important to be proactive in the prevention of fraud.  In my experience, associations that have had fraud lost a significant amount of money to the perpetrator.  But it is the other costs that are what people don't think about that make it so devastating.  In some cases, the financial books and records are so substandard because of lack of review that it costs thousands of dollars in consulting and accounting fees to correct the financials.  When fraud is detected there is almost always employee turnover within the accounting department.  Other employees in the accounting department will have to pick up the slack.  Don't forget about the headache that management deals with finding, hiring, and training new employees, not to mention the legal issues that are involved.  If management is determined to be at fault, they could be replaced as well, which can lead to further inefficiencies.  It can often take about 2 years or more for the full damages of the fraud to be corrected.

Comments

[kare anderson]

Kurt
an apt topic in a bad economy where there's increasing temptation for white collar crime - it is already happening.

Idea: To take the preventive action you advocate (saves money, reputation, time, emotional grief etc.) what if a member asn that has members involved in forensic accounting, detective work etc. co-created a checklist of things asns could do such as proper check and balance systems reduce the likelihood of fraud?

The members of that group who produced the checklist are bound to get business from asns.

[Kurt Peterson]

Yes, that could add some potential for business. Thanks. Associations could also have their control systems evaluated by an outside party/service. The independent party could review all areas with room for fraud and identify weaknesses that could permit fraud to occur. I would like to think that some associations would see some value in that.