Embezzlement. Employee theft. Credit card fraud. Illegal acts such as these can send many small businesses and not-for-profit organizations into a tailspin.
Fraud victims have only a few options: crunch the numbers themselves, swallow their losses, or pay forensic accountants to help recover some of the money. But none of these may be appealing options for cash- and manpower-strapped not-for-profits and mom-and-pop businesses. Many fraud victims contact police departments only to have their cases shelved because the authorities don’t have the time or manpower to investigate.
Some enterprising accounting professors have found a solution: enlist college students, a group of technologically savvy and eager learners, to help these fraud victims find justice. Several universities nationwide have established free community assistance programs that give accounting students experience investigating real-world fraud.
Gonzaga University started the Justice for Fraud Victims Project in 2010 and has since provided the model for other programs nationwide. The project, a labor-intensive college course in which students investigate actual fraud cases, was a collaborative effort among Gonzaga’s accounting department, the local Spokane, Wash., police department, prosecutors, and mentors from the Association of Certified Fraud Examiners. Other universities have since adopted similar programs, including Portland State University (PSU) in Oregon, George Fox University in Oregon, Marquette University in Milwaukee, and the University of Alaska, Anchorage.
The projects generally work like this: Students apply to be a part of the forensic accounting courses at their schools. Depending on the university, applicants are typically junior, senior, or master’s-level accounting majors who have taken or are taking an auditing course as well. The instructors choose the students based on rigorous application processes. At PSU, for instance, interested students must fill out a detailed application, submit to a criminal background check by the Portland Police Bureau, and provide a transcript of their grades. If students have a financial felony on their record, they are rejected, said Nancy Young, CPA, a senior manager at accounting firm Moss Adams LLP, and an adjunct faculty member who helped start the PSU program.
Students are split into teams and assigned real-life fraud cases, which are often collecting dust on local police department shelves. At PSU, a detective selects cases for the class, with an eye for ones that can be investigated in just one semester. The students work with police detectives, mentors, and prosecutors, who bring their real-life experiences into the classroom.
PSU students must gather evidence, such as taking photos of internal controls that are not working—such as a protected building where the door is propped open, Young said. As part of their class work, students also are required to make presentations on subjects such as evidence gathering, different fraud schemes, how to tell when someone is lying, and internal controls that can prevent fraud.
Students in fraud investigation programs garner impressive results
Since the PSU program’s inception, PSU students have helped uncover about $100,000 worth of fraud, and their tips have helped detectives obtain three convictions, according to Detective Brian Sitton, who works in the White Collar Crimes and Fraud Unit of the Portland Police Bureau.
Associate Professor of Accounting Sara Kern, CPA, Ph.D., who helped start Gonzaga’s program, said that school’s students have investigated more than a dozen cases since the project’s inception. Several have led to convictions, including one that eventually enabled a victim to receive full restitution, said Kern, who, along with colleague Gary Weber, won a 2010 Mark Chain/FSA Innovation in Graduate Teaching Award from the AICPA for her work in the program.
The cases also highlight accounting education. Gonzaga students have worked on several notable cases that drew media attention, including one that involved several hundred thousand dollars.
Students gain many benefits from these programs, including analytical and critical-thinking skills, and public speaking experience. They also get the chance to work on a real fraud case and learn about internal control systems, which can help them in any accounting position.
Katy Spray, a 2014 graduate of PSU’s accounting program, said the class gave her a clearer picture of fraud investigations. “What I learned is how detail-oriented forensic accounting is and how hard it is to prove fraud,” she said.
For Spray, who is studying for her CPA exam, the experience was invaluable. “I know a lot of students felt that they had more accounting in this class than they had done in an entire year of school,” she said.
Advice for starting a fraud victims’ assistance program
Professors interested in establishing a fraud victims’ assistance program at their university should start by taking the following steps:
- Put a solid team in place. It should include law enforcement, prosecutors, an instructor, and fraud-savvy mentors who can help determine the greatest need in the community. This team must be fully committed since such projects require hours of preparation and classroom and out-of-classroom meetings.
- Keep class size reasonable. PSU caps the class at 22 students, and Gonzaga typically has two to four teams of three students each.
- Know your time limits and give students a workable caseload and reasonable dollar level of fraud. If a case is several million dollars in size, Kern said, it’s best to leave that one to law enforcement, which has more resources. Similarly, cases that may take years to finish are not good fits for students who have only a quarter or semester to investigate. Also, determine the potential for prosecution and whether the victim can handle the possible publicity that results from a court case, she added.
- Grade students based on numerous tasks. In PSU’s forensic accounting course, students are graded on various individual and group presentations, a midterm, and their final presentations to their instructor. “It’s a tough class,” Young said. “They earn their grade.”
- Create a plan for keeping evidence confidential. At PSU, student teams are given a box of evidence, which stays inside the school. PSU students are also not allowed to meet the alleged victims of the cases they are investigating. At Gonzaga, students interview alleged victims but are held to strict confidentiality guidelines even years after they graduate.
Editor’s note: Sara Kern (firstname.lastname@example.org), who is completing a research publication on how to start a fraud victims’ assistance program, will gladly share her advice with faculty members interested in launching similar programs.
Cheryl Meyer is a California-based freelance writer.