Transcript Presentation Materials - University of North Carolina

Managing Fraud Risk
in
Higher Education
2014 UNC Fall Controller's Workshop
November 10, 2014
David A. King, CPA, CFE – Director, Special Investigations
North Carolina Office of the State Auditor
Session Objective
Discuss challenges, trends,
and strategies for managing
fraud risk in higher education
Managing fraud risk
requires awareness, tools,
and proactive efforts,
including collaboration with
professional peers
Session Outline
The Tone at the Top
 Examination of University Fraud Cases
 COSO Framework and the Audit Committee
 ACFE Report to the Nations
 Financial Aid Fraud
 Fraud Prevention and Mitigation

The Tone at the Top
AICPA / ACFE Video: “The Tone at the Top”
http://www.acfe.com/vid.aspx?id=4294974597
Steven Salbu
Georgia Institute of Technology – Atlanta, GA
Four Things Leaders Can Do to
Create An Ethical Climate within
Their Organization
1. Lead with Integrity
–By Example
2. State Clearly and
Convincingly the
Organization’s Ethical
Requirements and Values
3. Create a Path for
Reporting Misdeeds
(e.g., – a Whistleblower
Hotline)
4. Reward (at least
recognize) Integrity
Are you in a university leadership
role as a controller, accountant,
financial professional?
What are you doing on your
campus to promote an ethical
culture among your peers?
From the Headlines……..
Audit Uncovers Suspected
Fraud at Georgia Tech
Former Georgia Tech Employee
Indicted on Fraud Charges
UC Berkeley Fires Administrator
for Stealing Thousands to Pay
for Kids’ Tuition
UNIVERSITY OF FLORIDA
NUCLEAR ENGINEERING
PROFESSOR AND WIFE
CONVICTED OF FEDERAL
CONTRACT FRAUD
Examination of Four University
Fraud Cases
Internal Control Deficiencies?
Circumvention of Internal Controls?
Management Override of Internal
Controls?
The Elements of Fraud
(The Fraud Triangle)
Opportunity
Pressure / Need
Rationalization
The COSO Framework
Control Environment
 Risk Assessment
 Control Activities
 Information and Communication
 Monitoring Activities

The Updated COSO Cube
The
Control Activities
•
Authorization of Transactions and Activities
•
Segregation of Duties
•
Use of Adequate Documents and Records
•
Adequate Safeguards over Access to and
Use of Assets and Records
•
Independent Verification of Transactions
The COSO Framework and the
Audit Committee
ACFE’s Report to the Nations

According to the 2014 ACFE’s Report to the
Nations – tips were the most common means
by which occupational fraud was detected

45% of the fraud cases in the ACFE study
were initially detected through tips

15% of the fraud cases were detected
through management review
Initial Detection of Fraud Schemes
Whistleblower Hotlines
(Federal – State – Universities)
The State Auditor’s Hotline
The State Auditor maintains a toll-free telephone
number to report allegations of improper
governmental activities.
1-800-730-TIPS (8477)
Webpage link: www.ncauditor.net
Data Mining / Predictive Analytics
/ Benford’s Law
http://www.nigrini.com/
Financial Aid Fraud
Fraud Prevention and Detection
Verify the deliverable – payments
should always require adequate
supporting documentation
 Know the people in your organization
 Perform proactive audits
 Focus on internal control
 Leverage technology – use data mining
/ data analysis

Fraud Prevention and Detection

Internal Control / COSO Framework

Management Control

Employee Education and Training

The Role of Human Resources in Selecting and Screening
Employees

Management Due Diligence in Selecting and Screening
Employees

Establishing and Maintaining an Ethical Workplace
Managing Fraud Risk Requires
Effective Internal Controls and an
Ethical Culture
Resources
http://antifraud.aicpa.org/
http://www.acfe.com/home.asp
http://www.coso.org/
http://www.acua.org/
http://www.theiia.org/
Contact Information
David A. King, CPA, CFE
Director of Special Investigations
North Carolina Office of the State Auditor
Phone (919) 807-7606
Email: [email protected]
State Auditor’s Hotline: 800-730-TIPS (8477)