The news of the former Dixon, IL comptroller’s alleged embezzlement of more that $50 million dollars has shocked this small Illinois town located roughly 100 miles northwest of Chicago. The crime has even the best fraud investigators asking very simple questions as to how one individual could get away with fraud on such a massive scale.

Information published in the Association of Certified Fraud Examiners (ACFE) 2014 Global Report to the Nation reports the statistical profile of a fraudster and cites the following characteristics to be most prevalent:

Age: Between 31 and 45
Gender: Male
Function: Financial or Finance-related
Tenure: 1 to 5 years with the company
Collusion: Commonly occurring

While Rita Crundwell, being female and over the age of 45, does not meet all of the criteria of a typical perpetrator, she did however, work for the City of Dixon for over 30 years in a financial position as their comptroller. Noteworthy statistics published in the 2011 Marquet Report on Embezzlement also indicate that Pink Collar Crime is on the rise. Of 473 active 2011 embezzlement cases, nearly 64% of the incidents involved female perpetrators.

Craig Greene, partner, CPA and Fraud Examiner at GFAS recently commented, “Rita Crundwell does, in fact, meet the typical profile of a fraudster based on our experience at McGovern & Greene. We often like to tell our clients that ‘trust is not an internal control’ “.

Many fraudsters possess the ability to garner trust from others. When a person is able to garner this trust, it is much easier to defraud. If you look closely at the Rita Crundwell case, she is described as a hard-working, trustworthy person that everyone liked. These qualities make it easier for fraudsters to perpetrate their crimes because few associates will question a person that has been deemed so trustworthy by others. Unfortunately, many organizations often ignore red flag indicators. According to Greene, “The City of Dixon fell victim to a small town culture of ‘trusting your neighbor’ and never suspected that their city comptroller could be a crook.” He also stated that given the magnitude of the fraud, the CPA firm that audited the city completely missed signs of the massive embezzlement and were probably inexperienced in performing comprehensive city financial statement audits.

Rita Crundwell’s lavish lifestyle should have been a red flag to parties involved in the audit, but obviously, the trust factor clouded the judgment of many involved in the oversight function. Rajan Sachar, principal at McGovern and Greene, stated that inadequate internal controls were some of the key factors which allowed massive fraud to go undetected for decades. A lack of oversight by the City Council, in addition to the inexperience of the internal and external auditors also contributed to this problem.

Questions on the minds of many concerned citizens may be “Will Dixon recover?” and “Could my town be next?” It is critical that governmental agencies and nonprofit organizations understand the importance of obtaining a quality audit. Oftentimes, organizations view the audit as a commodity and will hire auditors based on the cheapest bid offered. As the old saying goes, you get what you pay for. Craig Greene stated his belief that “…had the Dixon City Council vetted the auditors better and hired a high-quality firm to conduct the annual audit, a 20-year fraud never would have occurred.”

A quality audit is the cornerstone of sound corporate governance. Additionally, it is important that any organization be run by competent leadership with a basic understanding of fiscal management. In 2003, the U.S. Government Accountability Office recommended that public sectors should consider the benefit of utilizing audit committees. As research indicates, an effective audit committee can increase the integrity and efficiency of the audit process, as well as the system of internal controls and financial reporting.

Penny by penny, the City of Dixon is trying to recover. To date, the preliminary sales figures for the U.S. Marshals two-day auction of Rita Crundwell’s assets (horses, horse-related equipment, tack, vehicles and trailers) amounted to $4.78 million. City governments throughout the country should look closely at the Dixon, IL fraud as an example of what can happen in any city government where internal controls are weak, oversight is minimal, and trust is high.

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