Fraud: What`s It All About? - Business & Financial Services
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Transcript Fraud: What`s It All About? - Business & Financial Services
Fraud: What’s It All
About?
Ethics and Fraud in the Workplace
January 19, 2012
Sam Hartline
Principal Auditor
UCSB Audit and Advisory Services
Agenda
What
is fraud?
Identifying
Fraud in the Workplace
Minimizing
Fraud
UC
Whistleblower
What is Fraud?
“…any intentional act or omission designed to
deceive others and resulting in the victim
suffering a loss and/or the perpetrator
achieving a gain.”
“The use of one’s occupation for personal
enrichment through the deliberate misuse
or misapplication of the employing
organization’s resources or assets.”
Source: Association of Certified Fraud Examiners (ACFE)
What Actions Constitute Fraud?
Fraud Triangle
Source: ACFE
Incentive/Pressure
• Habitual criminal who steals for
the sake of stealing
• Personal prestige, goal
achievement
• Morally superior, justified in
making others victims
• Desperate need for money
• Vices such as gambling/drugs
Attitude/Opportunity
Weak
internal controls
Circumvention
of internal controls
The
greater the position, the
greater the trust and exposure to
unprotected assets
“Most
Trusted Employee”
Top 10 Rationalizations for
Committing Fraud
I need it more than
the other person.
I’m borrowing and
will pay it back later.
Everybody does it.
The University is so
big that it won’t even
be missed.
Nobody will get hurt.
Top 10 Rationalizations for
Committing Fraud
I deserve it.
It’s for the greater good.
I’m not paid enough.
It’s just part of the job.
I’m not gaining
personally.
…and a bonus # 11
It’s legal!
Conditions that Contribute to
Fraud
Poor internal
controls
Inadequate Pay
Low Loyalty
Rigid Rules
Poor Promotion
Opportunities
Pressure to Perform
Lack of Recognition
Unreasonable Budget
Expectations
Reactive vs. Proactive
Hostile Work
Environment
Poor or No Training
Inadequate
Staff/Resources
Characteristics of Classic
Embezzlers
Usually work their crimes alone.
Tend to be compulsive
(gambling, abusing
alcohol/drugs).
Spend money freely (their own
and/or the University’s).
Rationalize their thefts by
thinking they are merely
“borrowing.”
Characteristics of Classic
Embezzlers
Tend
to repeat their
crime.
Exploit
weaknesses in
internal controls to
cover up their crimes.
Have
ready access on
the job to cash or its
equivalent.
Lifestyle and Personality Red
Flags
Wheeler/Dealer
Dissatisfied Worker
Dominating Personality
Unable to Relax
Living Beyond Means
No Vacations or Sick Time
Poor Money Management
Poor or “Too Good to Be
True” Performance
Unusual or Change in
Personality (alcohol, drugs,
sleep, irritable, defensive,
argumentative)
Source: Harvard Internal Audit Home Page
Organizational Red Flags
Bad “Tone at the
Top”
Lack of Attention to
Detail
No Communication of
Expectations
Poor Segregation of
Duties
Too Much Trust in Key
Employees
Tendency Toward
Crisis Management
Lack of Proper
Authorization
Procedures
Accountability and Control Red
Flags
Lack of Separation of Duties
Lack of Physical Security and/or Key Control
Weak Links in Chain of Controls and Accountability
Missing Independent Checks on Performance
Relaxed Management Style
Poor System Design
Inadequate Training
Source: Harvard Internal Audit Home Page
Actions to Minimize Fraud
Investigation
& Follow-up
6
Proactive
Detection
Reporting &
Monitoring
5
1
4
Tone at the
Top
2
Education
& Training
3
Integrity
Risk &
Controls
Fraud Opportunity Checklist
Ask Yourself :
What are the weakest links in my
department’s internal controls?
What deviations from acceptable
business practices are possible?
How can I get a check issued or get my
hands on cash, property, or
information?
What accounting documents are
easiest to access and forge?
UC Whistleblower
Responsibilities
Locally Designated Official
Associate Vice Chancellor of Administrative Services Ron Cortez
Investigations Workgroup
Convenes on a monthly bases to receive status updates on
active cases from the Whistleblower Investigator.
UC Whistleblower Resources
UC Whistleblower Hotline
(1-800-403-4744)
http://universityofcalifornia.edu/hotline
Whistleblower Policies/Information
http://ucwhistleblower.ucop.edu
http://www.whistleblower.ucsb.edu/whistleblowerp
rocedures.html
UC Whistleblower Protection
Whistleblower Protection
Policies/Information
http://ucwhistleblower.ucop.edu
http://www.whistleblower.ucsb.edu/
Protection
Retaliation Contacts
Humanfrom
Resources
Academic Personnel
Locally Designated Official, or
Your Supervisor
What is your responsibility?
What to do when confronted with a
whistleblower allegation:
Recognize and be alert to informal
communications of allegations (protected
disclosures)
Notify one of the following, orally or in writing
Locally Designated Official
Appropriate campus administrator(s)
Campus Investigative Unit(s)
UC Whistleblower Hotline
Act promptly
Maintain confidentiality
Consult Whistleblower policies/information
http://ucwhistleblower.ucop.edu
What NOT to do when confronted
with a whistleblower allegation:
Dismiss the matter out of hand.
Launch your own investigation.
Confront the accused or otherwise tip them
off.
Disclose the matter to any unnecessary
parties.
Try to settle or resolve the matter yourself.
Association of Certified Fraud
Examiners Conclusion on
Detecting Fraud:
“Relatively few occupational fraud
and abuse offenses are discovered
through routine audits. Most Fraud
is uncovered as a result of tips and
complaints from other employees.”
Source: ACFE
Conclusion
Be Aware of Your Environment
Take Steps to Minimize Fraud
Be Aware of Fraud Red Flags
Consider Design When Planning
Controls
Key Contacts
John Kushwara, Whistleblower Complaint
Investigator – Ext. 4335
Ron Cortez, Associate Vice Chancellor of
Administrative Services – Ext. 8291
Robert Tarsia, Acting Audit Director– Ext. 4080
Jim Corkill, Controller and Director, Accounting
Services & Controls – Ext. 5882
Cindy Dougherty, Academic Personnel Director –
Ext. 8332
Tricia Hiemstra, HR Director – Ext. 4832
Questions/Comments?