Reposted from the This Week in Nonprofit Fraud Blog – December 2, 2013
November 25, 2013: Lorraine Dispaldo was sentenced to 18 months in prison after pleading guilty to 36 counts including conspiracy, mail fraud, wire fraud, filing false personal income tax returns, and bankruptcy fraud. With the help of then-Philadelphia Traffic Court Judge Robert Mulgrew, Dispaldo directed nearly $200,000 in grants awarded by the Pennsylvania Department of Community and Economic Development (DCED) to friends and family. The awards were meant to pay for neighborhood revitalization efforts, and while some improvements were made, the grants were largely used for personal benefit. Dispaldo hid the fraud by submitting the same receipts months apart, in the hopes that DCED would not notice the duplicate receipt numbers. In addition to her jail sentence, Dispaldo was ordered to repay $125,000.
See more on this case at USDOJ: US Attorney’s Office – Eastern District of Pennsylvania
- Many times, busy executives do not put forth the time and effort to perform a thorough and effective review of expense reimbursements and invoices. It is important that your organization thoroughly review expense reimbursements and invoices to spot anomalies. In this case, the fraudsters were caught because of a careful review that spotted identical receipts months apart!
Raffa Forensic Practice Tips:
- Organizations should have thoughtful and thorough review and approval processes before making any reimbursements, both for employee and grantee expenses.
- Does your organization have a formal review and approval process that include original receipts and review signoffs in writing?
- Who is held accountable for failing to perform an effective review?
- Does your organization have a formal policy and checklist to facilitate a proper review?
There Aren’t Enough Hours in the Day
November 28, 2013: The Alaska Department of Health and Human Services has temporarily stripped Good Faith Services of its Medicaid billing privileges. Good Faith Services is accused of billing Medicaid for more than $360,000 for home health care services that were never provided. Thirty-nine of the organization’s caregivers have been implicated in the fraud; 10 have already been convicted and sentenced. One of the caregivers, Barbara Kanehailua, was put under investigation when it was discovered that she was simultaneously submitting timesheets for as many as 7 companies at the same time, for an average of 29 hours on the clock per day!
See more on this case at The Anchorage Daily News
- Nonfinancial data can be just as critical as financial data in uncovering a fraud scheme. In this case, a caregiver’s reported hours didn’t pass “the smell test” and helped uncover a much larger scheme.
Raffa Forensic Practice Tips:
- Analyze and evaluate all the data you have, not just the financial data!
- Does your organization have formal management reporting for key nonfinancial data which might also help uncover a fraud?
- When a potential fraud loss is discovered, take action right away to minimize losses.
- Does your organization have a formal fraud policy that outlines your response to an alleged fraud?
DON’T BE THE NEXT VICTIM OF FRAUD!
The Raffa Forensic Accounting Services Practice offers a wide variety of fraud prevention and detection services including Fraud Risk Assessments, Background and Workplace Investigations, Fraud and Internal Investigations, Transactional Due Diligence Investigations, Anti-Fraud Consulting and Training, and Computer Forensic Analysis.
For more information on the Raffa Forensic Accounting Services Practice please visit us at www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at www.raffa.com/Fraud/Pages/Default.aspx.
You can also contact the following Raffa professionals with any questions or if your organization needs assistance in fraud prevention: