Recent headlines involving fraud, waste, and abuse within the public sector serve as constant reminders that conducting proactive audits in organizations are critical to cultivating success and accountability. These audits may uncover issues and identify findings that give rise to the need for an in-depth forensic investigation. The role of CPAs has expanded to include investigative accounting services, often leading to forensic investigations that focus on specific allegations. Investigations might be conducted as a result of unusual transactions identified or reported allegations concerning improper actions of employees, vendors or related-parties. Allegations are often brought to light through a tip but can also surface as auditors become aware of inappropriate or suspicious activity identified during testing procedures.
The largest municipal fraud in U.S. history involved the embezzlement of nearly $54 million over two decades by the treasurer of Dixon, Illinois, a town with an annual budget of $6 million to $8 million. Until 2012, this treasurer’s scam went undetected even through annual audits by two independent accounting firms and in annual audit reviews by state regulators. Closer to home, in December 2015, the U.S. Attorney’s office indicted the former Philadelphia sheriff on federal charges alleging he received gifts, hidden campaign donations and even help to obtain a Florida retirement home to steer foreclosure sales to a favored vendor while in office.
Experienced investigators are often street-savvy financial professionals and skilled interviewers with a unique ability to help reticent witnesses divulge facts and anecdotal information relative to the circumstances surrounding the allegations. Containing the investigation to only include the necessary resources and investigative steps is crucial to cost-efficiency. At the onset, investigators must establish purposeful objectives and develop a fluid strategy for managing the potentially pervasive situation faced by the organization. The decision to retain outside legal counsel and forensic experts as well as the likelihood of recovering potential losses from the perpetrator and/or from insurance proceeds should also be considered when developing your investigative strategy.
When all evidence has been considered and the investigation is deemed complete, how and to whom should the results be communicated? Depending upon the organization’s ultimate objective, investigative findings will usually be communicated in writing; however, oral presentations are often given as a cost-effective alternative to the written report. The investigator should make sure that the person to whom the results are disclosed is someone who will take appropriate action in accordance with the organization’s policies and procedures. In terms of protecting the public interest, reporting the results of the investigation accurately and timely is just as important as promptly reacting to the initial allegations.
When faced with an investigation, consider speaking with a member of Mercadien’s Forensic & Litigation Support team. Our extensive experience working closely with executives and counsel on a variety of forensic investigations allows us to discreetly and expeditiously uncover the facts and recommend remedial actions steps.
If you have any questions or would like further information please do not hesitate to contact us at 609-689-9700.