On average, organizational loss from employee dishonesty is estimated to claim 6% of revenue. Most is never discovered and continues for years. This webinar outlined fraud schemes common to municipalities as well as methods to prevent opportunities for theft. Best practices related to handling an incident, evidence gathering and security, proper reporting, whistleblower systems, and use of forensic professionals were discussed.

1. Oh No! Professional Handling of
Fraud Incidents in Government
Presented to the Illinois Municipal League by:
Mary O’Connor, ASA, CFE
Partner, Dispute Advisory Services

2. Agenda
• Role of the external auditor in fraud investigation
• Why are local governments vulnerable to employee dishonesty and
other forms of fraud?
• Conducting a fraud investigation
• Fraud Incident Management Protocol
• Special Focus: Public Relations

3. But My Auditor Gave a Clean
Opinion
• An unqualified audit opinion does NOT mean that there is no
employee dishonesty or fraud occurring in the organization.
• Employee dishonesty and other acts of fraud can be significant and
the books can still balance; often exists even when bank accounts
are reconciled.
• SAS 99, professional skepticism and materiality

4. Why Are Governments Vulnerable?
• Trust culture
• No invoice/receivable cycle: revenue as a gift
• Many part-time employees
• Political implications
• Budget constraints
• Public nature; need for disclosure

5. Conducting the Investigation
Goals in this process are to:
• Follow-up on all credible tips and complaints
• Follow-up on all management letter issues to fraud
• Form a response team that preserves the secrecy of the
situation
• Avoid the “CSI” syndrome
• Create a plan that allows the organization to work together in the
future

6. Conducting the Investigation
Goals (continued)
• Preserve the evidence especially the computer record
• Deal with the administrative leave and other employment issues
• Deal with employee morale issues; manage emotions
• Work for restitution, insurance claim preparation and possible
criminal referral
• Learn from mistakes of the past, and fix
the problems
• Communicate effectively to stakeholders

7. Reasons To Enlist A Forensics Team
Know the endgame – it’s not only to prosecute!
• Preserve the relationship of audit team and staff
• Preserve management relationship with staff
• The Police will not do this for the client
• Tasks for the forensics team
• Surveillance
• Proof
• Security of computer evidence
• Interviewing
• Insurance claim/restitution
• Police/State’s Attorney support

8. Fraud Incident Management Protocol
• Make sure that your organization has thought through this issue and
developed a written plan to address suspicion or actual knowledge
of fraud.
• Establish a whistleblower system
• Need for confidentiality
• Need for public relations sense
• Preservation of evidence
• Legal handling of employment and criminal issues
• Coordination with forensics team
• Control of process
• Members of the team

9. Contact Information
Mary O’Connor, ASA, CFE
Partner, Valuation and Dispute Advisory Services
Sikich LLP
T: 312.648.6652
F: 630.375.8831
M: 708.646.8737
Email: moconnor@sikich.com
www.sikich.com
Corporate Office
1415 W. Diehl Road, Suite 400
Naperville, IL 60563
Chicago Office
123 N. Wacker Dr., Ste 1500
Chicago, IL 60606

10. About Sikich
» Multi-disciplinary: An accounting,
advisory, investment banking, technology
and managed services firm with clients in
the U.S. and internationally.
» Excellent reputation: With a reputation
for professional excellence, Sikich
provides unsurpassed client service as
well as timely and cost effective services.
» Strong talent: We employ more than
500 talented people including 90
partners, all of whom devote their careers
to a focused area.
» Award winning: Accounting Today ranks
the Firm 40th nationally among the top
100 accounting firms and 11th in the top
100 VARs.
$97M in revenue in 2013
6,976 public and private sector clients
8,635 individual clients
500+ total personnel
90 partners
1 collaborative and positive culture

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Honors & Recognitions
Accounting Technology

12. Tracing Our Roots
12
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
2008-2011
Merges with 4
CPA firms and
solidifies
position in the
Top 50 with
more than 375
employees
1982
Sikich Gardner & Co. was
formed; takes up residence in
Aurora and Springfield
1998
Merges with Intelligent Computer
Solutions LLC and starts its
technology practice
2012
30th Anniversary

13. Sikich Service Lines
Securities are offered through Sikich Corporate Finance LLC, a registered broker dealer with the Securities Exchange Commission and a member of FINRA/SIPC.
Advisory services offered through Sikich Financial, a Registered Investment Advisor. General securities offered through Triad Advisors, Member FINRA/SIPC.
Triad Advisors and Sikich Financial are not affiliated.
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Sikich LLP
1415 W. Diehl Road
Suite 400
Naperville, IL 60563
630.566.8400
www.sikich.com