Tiffany R. Winters, Esq. - PowerPoint Presentation

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Tiffany R. Winters, Esq. - PPT Presentation

twintersbrumancom Brustein amp Manasevit PLLC Fall Forum 2015 How to Detect and Deter Fraud Fun Fraud Facts The typical organization loses 5 of revenues to fraud Medium loss was 130000 ID: 475976

amp brustein pllc manasevit brustein amp manasevit pllc 2015 reserved rights fraud federal internal control controls 200 www http

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Slide1

Tiffany R. Winters, Esq.twinters@bruman.com Brustein & Manasevit, PLLCFall Forum 2015

How to Detect and Deter FraudSlide2

Fun Fraud FactsThe typical organization loses 5% of revenues to fraudMedium loss was $130,000Average time frame fraud is committed = 18 monthsOver ½ victims never recover lossWhat can you do? https://www.nsbank.com/fightfraud/1099.jsp

37.8% fraud identified through tips!!

Exs are the best reporters!17.1% fraud identified from management review.08% identified from confession

2Slide3

Fun Fraud Facts (cont.)Top Reasons for Embezzlement18% Needed the money or desired personal gain 14% Living beyond means14% In debt

14% Temptation too great

13% Greed

9% Vice (gambling, drugs, alcohol)7% Contempt for company or very low pay

4% Desire to lead a wild life 3% Family problemshttp://jayalbanese.com/yahoo_site_admin/assets/docs/Albanese_wcccasino_2008.354141925.pdf

3Slide4

Criminal ConsiderationsSmart people who know the system

They believe they will remain undetected

“I’m Smarter Than My Boss”

86% criminals never previously charged

Take advantage of people’s good willThey are above suspicionThey are often ahead of the game, may destroy evidenceThey often leave clues

Excessive spending

100% in control of the situation

Gambling

Personal financial crisis

Off or unusual behavior

4Slide5

Victim Considerations

We do not want to believe they are bad

Smoke and Mirrors cloud our view

Just a mistake

It’s a simple discrepancyAnomalies can be explainedIt was a one time honest mistake

5Slide6

10 Ways to Embezzle Everyone please state the following:

“By Listening to this presentation, I, (insert name) promise to use the information for good and not evil.”

6Slide7

1 – Take an AssetFrom 1996 to 2000, employees from a McDonald’s vendor stole winning game pieces and “won” virtually all the top prizes in the Monopoly game, a total of $13 million. The eight arrested included an employee in the security department.http://www.nytimes.com/2001/08/22/us/eight-charged-with-rigging-mcdonald-s-prize-contests.html

7Slide8

2 – Accept DonationsAn 81 year old man in Camden, Maine was the President of the Board for a charity for 17 years and was found to have deposited $3.8 Million in his personal account. http://bangordailynews.com/2015/02/09/news/midcoast/criminal-charges-anticipated-against-man-accused-of-stealing-3-8m-from-camden-charity/

8Slide9

3 – Borrow MoneyAn 83-year old Virginia man served as a volunteer treasurer of a fire department and “borrowed” $121,022.90 without permission and without ever paying back the “loans”http://www.delmarvanow.com/story/news/local/virginia/2014/11/18/james-morris-fire-department/19223217/

9Slide10

4 – Charge ItFrom 2006 to 2011, a 33 year old woman employed as a purchasing agent for HHS used an organization credit card to make over 250 unauthorized personal purchases totaling $114,494. http://www.justice.gov/opa/pr/department-health-and-human-services-employee-pleads-guilty-theft-government-funds

10Slide11

5 – Recognize Your Hard WorkA law firm manager stole $603,560 by paying herself unearned overtime pay and by giving herself unauthorized pay raises. http://www.highbeam.com/doc/1P2-37076736.html http://www.jdjournal.com/2014/08/14/former-law-firm-office-manager-pleads-guilty-to-fraud/

11Slide12

6 – Fake or Padded Travel VouchersThe former head of Oxfam’s counter-fraud efforts submitted phony invoices to obtain $108,000 in fraudulent travel reimbursements. http://www.telegraph.co.uk/news/uknews/crime/10858267/Oxfam-anti-fraud-boss-jailed-for-stealing-65000-from-the-charity.html

12Slide13

8 – Pay You, Pay MeFrom 2006 to 2010, a woman embezzled almost $300,000 from a non-profit by falsifying beneficiary’s TANF eligibility and splitting proceeds with recipients.http://www.greatfallstribune.com/story/news/crime/2014/06/12/ex-blackfeet-director-gets-years-theft/10396929/

13Slide14

9 - Fake Company / Fake Invoices A 59-year old school district security manager created two shell companies and invoiced his employer for equipment and services that were never received, resulting in up to $7 Million in losses. http://www.wfaa.com/story/news/crime/2014/08/21/14189836/

14Slide15

10 - Transfer Funds to YouOver a 22 year period, the comptroller of a small town transferred over $54 Million to an official sounding account that she actually controlled. https://www.illinoispolicy.org/former-dixon-comptroller-sentenced-to-19-5-years-in-prison-for-53-million-tax-theft/

15Slide16

Fraud Consequences

Program Integrity and Reputation of Organization

Reporting

IRS Form 990 (

Return of Organization Exempt From Income Tax)“Did the organization become aware during the year of a significant diversion of the organization’s assets?”

2 CFR 200.113 Mandatory Disclosures

Must disclose in writing, in a timely manner all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.

16Slide17

Fraud Consequences (cont.)

Administrative Actions

by USDE, DOL, HHS, etc.

Cancelled awards or repayment

Suspension and DebarmentCivil False Claims Act

Restitution (Up To $5,500 to $11,000 per false claim)

Triple damages

Criminal Prosecution

Arrest

Restitution

Imprisonment

17Slide18

What Can Your Organization Do?

18Slide19

How Do I Know If We Have Problems?“Because We’ve Always Done It That Way!”Magical Letters“I signed off on it because Joe did”Attempts to Circumvent Procedures

Missing Property

Employees in the News

19Slide20

Communication is KeyWhat you said… “Our policies are being drafted.”“We have a small staff, and many people have collateral duties.”

“I need to check around to find that document.”

“You can use my logon to review system records.”

What the Auditor Heard…

The program may not be administered effectively. Let’s increase our testing sample.No segregation of duties, potential for

fraud.

There

is no document management system. The records are not accurate.There

are no controls over systems. There is potential error, fraud and unauthorized use

Test Your Internal ControlsInternal controls are a major focus under new EDGAR/UGGDefinition 200.61, 200.62New Requirements under 200.303Controls Time and Effort Reporting 200.430Program Specific Audits 200.507

Scope of Audit 200.514 – 200.520

21Slide22

Internal Controls 200.303The non-Federal entity must:

Establish

and maintain effective internal control

over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

22Slide23

Internal Controls 200.303 (cont.)These internal controls should be in compliance with guidance in:

“Standards for Internal Control in the Federal Government”, issued by the Comptroller General of the United States, or

The “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

23Slide24

Internal Controls 200.303 (cont.)Comply with Federal statutes, regs

, and the terms and conditions of the Federal awards.

Evaluate

and monitor the non-Federal entity's compliance with statutes, regs

and the terms and conditions of Federal awards.Take prompt action when instances of noncompliance are identified including in audit findings.

Take

reasonable measures to safeguard protected personally identifiable

info (PII) and

other information designated or deemed sensitive

24Slide25

The 5 Components and 17 Principles of Internal Controls

25Slide26

Control Environment Principles

A commitment to integrity and ethical values;

Independent oversight over the development and performance of internal controls;

Clearly defined organizational structure, clear reporting lines, appropriate authorities

;

A commitment to attract, develop and retain competent individuals; and

Maintain a level of competence

that allows personnel to accomplish their assigned duties (and holding individuals accountable)

26Slide27

Control Environment ExamplesWell-written policies and procedures manuals Addressing employee responsibilities, limits to authority, performance standards, hiring practices, whistleblower policies, conflict of interests, etc.

Organizational chart

Clear lines of authority and responsibility

Accurate Job descriptions

Adequate training programs and performance evaluations

27Slide28

Risk Assessment PrinciplesClear objectives to enable the identification and assessment of risks;

Identify risks to achievement of objectives across the entity and analyze risks as a basis for determining how the risks should be managed;

Consider the potential for fraud

; and

Identify and assess changes that could significantly impact the system.

8Slide29

Risk Areas (cont.)Examples:

New personnel

Experienced personnel

Lack of personnel

ReorganizationsRapid growthChanges in Population

Risks are not stagnate; they increase and change as laws and operational environments change.

Leadership Changes

Change in Laws / Regulations

New

Grants

New Technology

High Crime Area

29Slide30

Risk Mapping

30Slide31

Control Activities PrinciplesSelect and develop control activities that contribute to the mitigation of risk and achievement of objectives to acceptable levels;

Select and develop general control activities over technology to support the achievement of objectives; and

Deploy control activities through

polices that establish what is expected

and procedures that put policies into action.

31Slide32

Control Activity ExamplesPreventive Controls: Control that helps management avoid issues before they occur.

Approval for purchases

Restricting Access (Passwords)

Training

Security and surveillance systemsSegregation of Duties

Safeguarding Assets

Detective Controls

Control that discover issues after they occur.

Match

receiving to POs

Compare actual expenditures to budgeted

Reconciliations

Physical inventory count

Review activity logs

32Slide33

Information and Communication PrinciplesObtain or generate or use relevant, quality information to support the functioning of the entity;

Internally communicate info, including objectives and responsibilities necessary to support the entity; and

Communicate with external parties regarding matters affecting the functioning of the entity.

Develop

procedures for identifying pertinent information and distributing it in a form and timeframe that permits people to perform their duties efficiently.

33Slide34

Monitoring PrinciplesSelect, develop and perform ongoing and/or separate evaluations to ascertain whether the components of internal controls are present and functioning

;

Evaluate and communicate internal control deficiencies in a timely manner to parties responsible for taking corrective action.

34Slide35

Monitoring Examples Ongoing program and fiscal monitoring Regular oversight by supervisors

Record reconciliation

Formal program reviews/audits

Annual single audits

Include policies and procedures for correcting any findings in a timely manner

35Slide36

Weak Internal Controls – What Now?Document findingsDiscuss the results of the walkthrough with management and inform them of any deficiencies that need immediate attention.

36Slide37

Resources DOJ OIG Presentation at NGMA April 22, 2015GAO “A Framework for Managing Fraud Risks in Federal Programs” July 2015The Green Book - Comptroller

General of the United

States “

Standards for Internal Control in the Federal Government” September 10, 2014Financial Fraud Law Report, Embezzlement by Frank W. Abagnale, Volume 3, Number 3 March 2011

37Slide38

Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice or a legal service. This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct. Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.

Tiffany R. Winters, Esq. - PowerPoint Presentation

Tiffany R. Winters, Esq. - PPT Presentation

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