WEST FARGO - Letting your workplace dress code get a little more relaxed is not necessarily a bad thing, but relaxing your firm’s accounting and cash accountability standards can lead to thefts that put a thumping on the bottom line.

“Seventy-five percent of all businesses are victims of fraud” and that may be a low estimate, says Brett Johnson, a senior manager in forensic accounting for Eide Bailly.

Losses to fraud average 5 percent of companies’ total revenue, with a median loss of $150,000, Johnson told attendees at a Fargo Moorhead West Fargo Chamber of Commerce training event Wednesday, March 11, at the DoubleTree by Hilton.

Thefts are not always perpetrated in one big scheme, but can be found with several smaller schemes going on at the same time. With weak financial safeguards, fraud can also go undetected for a long time - 16 months on average, Johnson said, with most of the people caught committing fraud having no prior criminal history.

Johnson’s talk, “The Normalization of Deviance: How workplaces can Avoid Deceit,” focused on how relaxing internal finance and money-handling controls over time can allow behaviors that are sketchy - or downright criminal - to become the norm in a company’s culture.

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A new worker may walk into a business and question iffy cash handling or some other practice, but other workers whose standards may have been eroded over time may say, “This is how it has always been done,” Johnson said.

Common fraud includes sneaking cash from a till, stealing food at a restaurant, lifting merchandise off a loading dock, and misusing company credit cards and checkbooks. But it is also seen with complex accounting schemes and other illegal or unethical behaviors.

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Johnson said Eide Bailly has investigated fraud schemes that range from $5,000, all the way up to $15 million for an executive who was arranging huge loans to his friends.

The opening for fraud often comes with bad processes. Expenses may get a “rubber stamp” review rather than a close look; inventory may get counted without actually looking in boxes or on the shelves; false entries on time cards; using company equipment - including construction equipment - for personal business; allowing credit cards to get used without scrutiny.

Credit card fraud is “a big one, and also gets rationalized rather easily,” Johnson said.

To combat the problem, Johnson says companies need to implement good internal controls and constantly scrutinize those controls, and other policies and procedures.

He urges firms to create a culture where questioning practices and procedures is accepted.

Communication “is huge” in making sure that fraud is kept in check, he said.

After all, 40 percent of fraud is pointed out by other employees, Johnson said.

And a company should be proactive by having a fraud policy in place, and making its employees aware that company officials will be vigilant. That “perception of protection” can make a big difference in the amount of fraud perpetrated, he said.

If a firm finds fraud going on, Johnson said business owners or company officials shouldn’t panic, but they also shouldn’t say anything right away to the person they suspect.

Instead, he urges firms to collect their evidence, contact attorneys and human resources personnel, and hire a forensic accountant.

While the temptation exists to fire an employee right away, Johnson said it can be wiser to put a suspected thief on paid leave until evidence is collected. That way, the company is more likely to have a shot at recouping any losses.