Fraud Stories: $10M Billing Fraud Scheme
Today is day 3 of our Fraud Awareness Week series, Fraud Stories and Lessons Learned. Tom Dolan, Manager of Claims & Research for Lowers & Associates, shares his story of a $10M billing fraud scheme he and the L&A team helped to uncover. This was an occupational fraud scheme that had been perpetrated over the course of 15 years by a contractor and a trusted employee. The contractor provided janitorial products to the US headquarters. With the help of the company’s facilities manager, the contractor developed a relatively simple fraud scheme in which he would bill and over-bill for products that were never delivered.
According to the Association of Certified Fraud Examiners (ACFE), billing schemes are the most common form of asset misappropriation and also cause a high median loss of $100,000, making this type of fraud a particularly significant risk. A typical billing fraud scheme lasts 24 months before being discovered.
In this fraud story, Tom explains how this billing scheme was allowed to happen, why it took 15 years to uncover, and what organizations can do to prevent becoming victims themselves.
Listen to the story here:
Danielle Gardiner, Senior Vice President of Lowers Forensics International, offers further advice: “As forensic accountants we investigate patterns in business activity to uncover potential vulnerabilities, including overbilling, fraud, and internal control weaknesses. Success of this type of fraud scheme depends entirely upon weaknesses in an organization’s internal control structure. In addition to forensic analysis and interviews, forensic accounting firms work with business owners to recommend internal controls to establish as a deterrent for future incidents.”
In its 2020 Report to the Nations on Occupational Fraud, the ACFE points out the top three control weaknesses within organizations that experience fraud. They are lack of internal controls, lack of management review, and overriding of existing internal controls. In today’s fraud story, unfortunately, all three of these weaknesses were present.
Stay tuned tomorrow for another fraud story from the front lines of Lowers & Associates.