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Copyright Murex Enterprises
Monument Valley Arizona
AZ Fraud Fighter Newsletter 1/18/12
How safe is your business from occupational fraud?


Interesting Fraud Fact -

According to the 2010 Report to the Nations, five percent of all business transactions are tainted with fraud and corruption  If the global economy is approximately $60 trillion, then fraud is a $3 trillion global problem.  


The report also points out that the median fraud is 160K and small businesses tend to be targeted more that larger organizations. 


Is Fraud Inoculation Possible for a Small Business Firm?

Part 1 of 10

Definitions and Challenges

If by inoculation, one means 100% fraud prevention in the future, then the short answer is no. Webster's dictionary definition of fraud includes the following two sentences, "No definitive and invariable rule can be laid down as a general rule in defining fraud, as it includes surprise, trickery, cunning, and unfair ways in which another is cheated. The only boundaries defining it are those which limit human knavery."


This means that new ways to commit fraud are yet to be invented, and no serious person would ever claim to be able to prevent all future instances of fraud in a multiple-person small business. The more interesting question might be, "can essentially all material fraud be prevented, and if so, how?" Response to this question will be considered, analyzed, discussed and explained in detail.


For example, if the word 'material' is defined to be plus or minus one-half of 1%, then in a small business with annual revenues of $2 million, 'material fraud' equals $10,000. Therefore, perhaps the important question to consider is, "Is it possible to prevent material fraud (of $10,000 or more, annually) in a small business, and if so, how?"


In effect, the best way to minimize the likelihood and the size of future fraud is to come as close as possible to balancing cash daily. In this ten-part series, we will show how to do this, assuming that the owner keeps that cash balance in his or her head every day. Though the task may sound daunting, it is not, if one has sufficient motivation.


Fraud Tip - To reduce fraud opportunity, separate risky functions by making sure the person who counts the cash receipts is not the same person who deposits that cash in the bank.

Schedule a Fraud Risk Assessment today. Click here to contact EFM
Copyright Murex Enterprises
Canyon de Chinle
Copyright Jared Updike
Grand Canyon Snow

Interesting Economic Fact -

In 2010, Nigeria had a GDP of $193 billion, and was the 37th largest economy in the world, according to the World Bank. 193 billion dollars might sound substantial, but a Nigerian 2010 population of approximately 150 million (US Bureau of the Census, International Data Base) means per capita GDP in Nigeria is only $1287 per person.


At around $47,000 per capita, people in the US are 10th in most country rankings, behind people in rich, tiny countries like Qatar, Lichtenstein and Luxembourg, while Nigerians are 140th, tied with people from India and Ghana and ranking below people in poor countries like the Philippines or Honduras.


Economic Indicators:  

Unemployment Rate -  

A Look Behind the Numbers.   


                From the Bureau of Labor statistics.

  A                         B                         C                   D                   E    

             231,867,000        153,124,000
2008             233,788,000        154,287,000
2009             235,801,000        154,412,000
2010             237,830,000        153,889,000    14,825,000
2011             239,618,000        153,617,000    13,747,000
Dec-2011             240,584,000        153,887,000    13,097,000

Column A
= Year or Period
Column B
= Non-institutionalized Americans in Civilian Population ages 16 - 65
Column C
= American Civilian Labor Force
Column D
= Number of Americans Reporting They Are Unemployed
Column E
= Calculated Unemployment Rate

Did the unemployment rate reported for December 2011 really decrease? Yes.


Better question - Why?  

Answer - Because over 5 million otherwise eligible people, since 2009, are not included in the official unemployment rate calculation as they are likely too  discouraged to look for employment, and have withdrawn themselves from the Civilian Labor Force.


During the ten-year period from 2000 - 2009 the Civilian Labor Force (column C) averaged a utilization rate of 66.3% (column C divided by column B) of the eligible Americans. Today, as of January 2012, only 64.0% of the eligible population are actually seeking employment, or 2.3% less. This difference of 2.3% means that 5,533,432 fewer Americans are seeking employment because they are too discouraged to look for a job. If they were included in the calculation, then the Unemployment Rate would skyrocket to 12.1%. 
If you have a lunch group or a breakfast group looking for a dynamic speaker to make a meaningful presentation, then call EFM today @ 480-577-6776 to schedule a presentation on Fraud Awareness and Fraud Prevention.
Paul Updike
Executive Financial Management
(480) 577-6776
Copyright Murex Enterprises
Lee's Ferry Arizona