States Have a Great New Weapon Against Fraud: Big Data

By Jeffrey Stinson,


November 20, 2014

Indiana began a big crackdown on identity crooks this year and the results are startling: The state has saved Hoosier taxpayers $85 million so far by not paying out bogus tax refunds. The savings come from using research firm LexisNexis’ giant database to verify the identities on state income tax returns. By spotting false or stolen identities, the state can determine which returns are concocted and block the fake refunds.

The Indiana Department of Revenue’s identity-matching effort is indicative of the types of data-driven programs most states have undertaken to combat an exploding number of sham tax refund filings, false Medicaid and unemployment claims and public assistance fraud that can cost taxpayers billions of dollars.

Related: How Big Data Can Stop Traffic Jams and More

Indiana’s results are proof that using data has a payoff. And they provide a tantalizing glimpse of the cost-savings states could get from applying a government-wide “big data” approach to combatting the fraudulent claims states face in an Internet age when identity theft is rampant. Indiana spotted 74,782 returns filed with stolen or manufactured identities as of the end of last month with its new identity-matching effort. Without it, the Department of Revenue caught just 1,500 cases of identity theft out of more than 3 million returns filed in all of 2013.

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When it Comes to Fraud, Prevention Means Education

Earlier this year, an employee of the State of Vermont tried to make a personal purchase online using a check issued from the State. The employee, the sole liability claims adjuster within the office of Risk Management, had asked for a claims check to be returned to her instead of being mailed out directly to the claimant, per usual practice. Thanks to the skeptical check recipient, the State of Vermont was alerted to a possible fraud.

The employee was accused of using her position to falsify a claim and use those funds for online shopping.  What lessons can we learn from this employee’s access to funds and her ability to get as far as she did in committing fraud?

  • No one person should have full control over any aspect of a system. Having just one claims adjuster may help lower the overall employee salary budget, but not for establishing proper oversight. Was there another employee who could have reviewed the cut checks, and another to sign them? Checks and balances are just one tool used to protect an organization from employee fraud.
  • Any departure from protocol should be a red flag. When the check was returned to the adjuster instead of mailed, other employees should have questioned the request. However, even with strong safeguards in place, employees must be trained on how to follow the proper steps to help prevent fraud.
  • This employee may not have been so bold if she knew the State may do a surprise audit at any time.Make employees aware that surprise audits may happen, and follow through with those audits. Fear of discovery can be a powerful fraud deterrent.
  • Just like in this example, many instances of fraud are caught by a third party or a tip. Companies should standardize the reporting process with a way for employees to anonymously report when policies and procedures are not being followed. A hotline is a great way to offer that ability to employees.

Preventing fraud in the workplace is about education.  Employees need to be aware of the company or organization’s fraud policies and the consequences for fraud.  This can help lessen the fraud risk and also give employees some guidance on reporting fraud should they observe any red flags.

PBTK Joins Movement to Shine a Spotlight on Fraud

Fraud costs organizations worldwide an estimated five percent of their annual revenues, according to a study conducted by the Association of Certified Fraud Examiners (ACFE). If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion.

The seriousness of the global fraud problem is why Piercy Bowler Taylor & Kern (PBTK) will be participating in International Fraud Awareness Week, Nov. 16-22, 2014 to promote anti-fraud awareness and education. The movement, known commonly as Fraud Week, champions the need to proactively fight fraud and help safeguard business and investments from the growing fraud problem.

PBTK joins hundreds of organizations who have partnered with the ACFE, the world’s largest anti-fraud organization and premier provider of anti-fraud training and education, for the yearly Fraud Week campaign.

During Fraud Week, PBTK will engage in various activities including fraud awareness training for employees and posting articles on the firm website and social media pages about fraud and fraud prevention.

ACFE President and CEO James D. Ratley, CFE, said that the support of organizations around the world helps make Fraud Week an effective tool in raising anti-fraud awareness.

“The latest statistics tell us that fraud isn’t going away, and companies that don’t have protective measures in place stand to lose the most,” Ratley said. “That’s why it is reassuring to me to see so many businesses, agencies, universities and other organizations involved in the Fraud Week movement. The first step in combating fraud is raising awareness worldwide that it is a serious problem that requires a proactive approach toward preventing it.”

For more information about increasing awareness and reducing the risk of fraud during International Fraud Awareness Week, visit

About Piercy Bowler Taylor & Kern

Piercy Bowler Taylor & Kern is a full-service accounting and business advisory firm that provides accounting and auditing, tax, consulting, valuation and litigation support services. Founded locally in 1990, the firm specializes in the casino gaming and leisure time industries, governmental and not-for-profit organizations, real estate development and construction industries and the legal and general business communities. Now with offices in Salt Lake City, Utah, and Las Vegas, Nevada, PBTK is one of the few independent accounting firms in its local markets to perform SEC audits. For more information on PBTK, visit or call Shannon Hiller at 702.384.1120.

About the Association of Certified Fraud Examiners
Based in Austin, Texas, the ACFE is the world’s largest anti-fraud organization and premier provider of anti-fraud training and education. Together with more than 70,000 members, the ACFE is reducing business fraud worldwide and inspiring public confidence in the integrity and objectivity within the profession. For more information, visit

5 Simple Steps to Prevent Expense Fraud (Entrepreneur Magazine)

Entrepreneur Magazine (By Chris Farrell): Consider the following expense fraud scenarios: airfare for a canceled flight, a $50 travel meal of Ketel One and sodas, and pay-per-view movies lumped into the nightly hotel room rate.

While it’s easy to believe a few dollars here and there won’t hurt, expense fraud adds up over time and is difficult to detect. A recent survey conducted by the Association of Certified Fraud Examiners revealed that employees comprising the “Executive/Upper Management” level in a company account for nearly 27 percent of expense reimbursement fraud cases. The resulting disciplinary measures and dismissals of key employees can be a tremendous distraction — just ask Hewlett Packard and Walmart.

Without clear and firm guidelines for expense reports, employees are more likely to cross the line. However, following these five simple steps can mitigate the risk:

1. Start by defining your expense report policies. Smaller companies will typically have a simpler set of policies than larger organizations. That said, the following recommendations apply to companies of all sizes:

  • require expenses be submitted within 30 to 60 days of incurring the expense
  • require receipts for all purchases over $25
  • require itemization of multi-category purchases such as hotel stays (pay-per-view movies go under “Entertainment,” room service belongs to “meals”, etc.

Continue reading at Entrepreneur Magazine.