Click to return to iNEWS ARCHIVES page


This Week in the iNews:
▲ LUNCH & LEARN SERIES PROGRAM #2 - FRAUD
▲ Corporations Entitled to Refund of FICA Taxes Paid on Medical Residents’ Stipends; Student Exclusion Applied (Center for Family Medicine, DC S.D.)
▲ FOCUS ON FRAUD: 2008 Report to the Nation on Occupational Fraud and Abuse, ACFE – Part 5

▲ Lunch & Learn Series Program # 2 - Fraud
Please join us for the second program of our Lunch & Learn Series at noon on Tuesday, September 16, 2008 in the Prangley Marks, LLP lunch/conference room.
Everything You Always Wanted To Know About Fraud, but were afraid to ask -or, better yet - 2008 Report to the Nation on Occupational Fraud and Abuse, ACFE - Presented by Marty Grausam, CPA, CFE

A look into the world of occupational fraud and abuse as reported in this extensive, bi-annual world-wide study recently published. The factors and trends may alert you or alarm you, but will definitely inform you

Reserve your seat now! Contact Michelle Ripley at mripley@pmcpa.com or at (616)774-9004.
Seating is limited!

▲ 112 605 Corporations Entitled to Refund of FICA Taxes Paid on Medical Residents’ Stipends; Student Exclusion Applied (Center for Family Medicine, DC S.D.)

Two non-profit, charitable, educational and scientific corporations that qualified as schools, colleges or universities within the meaning of Code Sec. 3121(b)(10) were entitled to a refund of FICA taxes that they withheld from stipends paid to medical residents enrolled in their
residency programs. The residents qualified for the student exemption under Code Sec. 3121 LK:NON: IRC-FILE S3121 because they were students enrolled in classes as part of their residency programs, and the stipends paid to them were exempt from FICA taxes.
The residency programs reviewed applications, ranked residents and entered into contracts with the selected residents. The residency programs were employers of the medical residents because they controlled the manner in which the residents performed under their contract, monitored their performance through regular evaluation and had the ability to discipline or ultimately discharge the residents. Moreover, the residents worked with hospitals that were contractually affiliated with the programs to fulfill the educational mission of the residency programs. The fact that the hospitals received a benefit did not result in the residents being employed by those hospitals. The on-the-job and patient care services performed by the medical residents in the hospitals were incidental to and for the purpose of pursuing their studies and were part of the residency programs necessary to practice medicine.
However, the student exemption did not apply to chief residents. The chief residents were not students, but coordinators of the residency programs; therefore, the corporations were not entitled to refunds for FICA taxes paid on their behalf.

▲FOCUS ON FRAUD: 2008 Report to the Nation on Occupational Fraud and Abuse, ACFE – Part 5

This study is based on data compiled from 959 cases of occupational fraud that were investigated between January 2006 and February 2008. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases.

Executive Summary – Part 5, Measuring the Cost of Occupational Fraud

Fraud, by its very nature, does not lend itself to being scientifically observed or measured in an accurate manner. One of the primary characteristics of fraud is that it is clandestine, or hidden; almost all fraud involves the attempted concealment of the crime.

Consequently, many instances of occupational fraud may go completely undetected. Further, even for those cases that do come to light, the full amount stolen may not be ascertainable, or the victim organization may decide not to report the theft to the authorities or the general public. As a result, determining the true breadth and depth of this form of crime is nearly impossible.

The 2008 Report included responses by the survey participants who estimated the percentage of annual revenues lost by the typical U.S. organization to fraud each year. The median response indicates that the typical U.S. organization loses 7% of its annual revenues to fraudulent activities each year. The application of this estimate to the 2008 U.S. gross domestic product estimate projects a 2008 occupational fraud loss of $994 billion!!!

As previously noted, many obstacles stand in the way of accurately measuring the amount of loss due to employee fraud. Nevertheless, the 7% figure is meaningful in that it is an insightful estimate that may be as close to a reliable measurement of the cost of fraud that one can get. The figure provides a best-guess point of reference based upon the
opinions of 959 anti-fraud experts with a median of 15 years experience in the prevention and detection of occupational fraud.

Next time: Executive Summary – Part 6, How Occupational Fraud is Committed