Fraud Awareness and the Fraud Awareness and the Whistleblower Policy Whistleblower Policy Mike Jenson Director Audit & Advisory Services Quarterly Chairs’ Meeting Quarterly Chairs’ Meeting February 4, 2004 February 4, 2004
Jan 01, 2016
Fraud Awareness and theFraud Awareness and the Whistleblower PolicyWhistleblower Policy
Mike JensonDirector
Audit & Advisory Services
Quarterly Chairs’ MeetingQuarterly Chairs’ Meeting
February 4, 2004February 4, 2004
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Present SituationPresent Situation
Recovering economy Global National State-wide
Budget cuts Staff lay-offs No staff merits
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Inadequate segregation of duties
Lack of supervision, monitoring and reconciliation procedures
Short cuts – production oriented Policy and Law Non-compliance Rationalize fraudulent activities
Do More with Less…Do More with Less…
Fraud is CostlyFraud is CostlyFraud is CostlyFraud is Costly
Direct monetary costs/losses to the dept. Devastating (senior trusted employee) Question management skills Time and resources involved in investigation procedures Disciplinary action decisions Damaged careers and reputations Negative impact on staff morale Possible external agency audits Negative impact on future funding or donations Negative media exposure
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Headlines…..HeadachesHeadlines…..Headaches San Francisco Chronicle (August 1995) Embezzlement probe of UC Claims Manager – at least $500k gone Wall Street Journal (December 1996) Audit finds financial irregularities at UC Berkeley Business School Los Angeles Times (February 1997) Doctor who studied at UCI says her eggs were misused San Francisco Chronicle (July 1999) Fired UC Cashier Arrested in $4.7 million theft suspect financed
daughter's angel firm, police say Los Alamos National Laboratory (2003)
Procurement card issues The Press-Enterprise (December 1998)
Ex-UCR employee arrested – Nearly $20,000 was allegedly embezzled
The Press-Enterprise (February 2001)Former UCR employee sentenced to prison- Starting in 1996, she embezzled $188,563 via checks to persons not on the University payroll
Common Types of Fraud Common Types of Fraud
Procurement card Fictitious travel vouchers & purchase orders Unrecorded vacation and sick leave University resources used for personal gain Entertainment w/o legitimate business
purpose Claimed benefits for non-dependents Missing cash w/o forced entry Unrecorded cash collections Payroll issues
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Duties of Department ChairsDuties of Department Chairs
APM-245-4: A department chair is a faculty member who serves as the
academic leader and administrative head of a department of instruction or research, or a clinical service.
APM-245 Appendix A: As leader of the department, the chair has the following
duties:3. The appointee should be receptive to questions, complaints,
and suggestions from members of the department, both faculty and staff personnel, and from students, and should take appropriate action on them.
The chair’s administrative duties include the following:5. To prepare the budget and administer the financial affairs of
the department, in accord with University procedures.
Helpful HintsHelpful Hints
Be involved with finances Be aware of “red flags” of fraud Balance risk and controls Be ethical and do the right thing Implement fraud prevention
measures
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Strong internal controls Background checks on new
employees Continuing monitoring procedures Willingness to take action Employee training Independent reconciliation
procedures
Fraud Prevention MeasuresFraud Prevention Measures
Fraud Opportunity ChecklistFraud Opportunity Checklist
Ask Yourself: What deviations from acceptable
business practices are possible? Are there significant variations
from expected financial results? What are the weakest links in my
department’s internal controls?
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UC INVESTIGATION SOURCES FY 2003 CountUC INVESTIGATION SOURCES FY 2003 Count
Audit 5%Anonymous
4%
Whistleblower 25%
UC Police 4% Outside Party
7%
Management 55%
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Conclusion on Fraud DetectionConclusion on Fraud Detection
“ Relatively few fraud and abuse offenses are discovered through routine audits. Most fraud is uncovered as a result of tips and complaints from other employees.”
Source: Association of Certified Fraud Examiner, 1996
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Whistleblower PoliciesWhistleblower Policies
Policy on Reporting and Investigating Allegations of Policy on Reporting and Investigating Allegations of Suspected Improper Governmental Activities Suspected Improper Governmental Activities
and Policy for Protection of Whistleblowers From Policy for Protection of Whistleblowers From
Retaliation and Guidelines for Reviewing Retaliation Retaliation and Guidelines for Reviewing Retaliation ComplaintsComplaints (Whistleblower Protection Policy)
represent the University’s implementing policies for
the California Whistleblower Protection Act
Effective October 2002Effective October 2002
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POLICY OBJECTIVEPOLICY OBJECTIVE
To assure an appropriate INSTITUTIONAL response to any known or suspected impropriety and to create an environment that encourages candor while
protecting the rights of all parties
(i.e. whistleblowers, investigation participants, subjects and
investigators).
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Policy ObjectivePolicy Objective
UC values ethical and lawful conduct Policy designed to:
Encourage timely, safe, and open reporting of alleged wrongs
Ensure consistent and timely institutional response
Appropriate reporting of whistleblower investigations
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Improper Governmental ActivityImproper Governmental Activity
Any activity by a state agency or by an employee that is undertaken in the performance of the employee’s official duties, whether or not that action is within the scope of his or her employment, and that (1) is in violation of any state or federal law or regulation, including, but not limited to, corruption, malfeasance, bribery, theft of government property, fraudulent claims, fraud, coercion, conversion, malicious prosecution, misuse of government property, or willful omission to perform duty, or (2) is economically wasteful, or involves gross misconduct, incompetency, or inefficiency.
Serious or substantial violations of University policy may constitute improper governmental activities.
Must directly involve the University either as victim or perpetrator
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Illegal OrderIllegal Order
Any directive to violate or assist in violating an applicable federal,
state, or local law, rule or regulation or any order to work or cause others to work in conditions outside of their line of duty that
would unreasonably threaten the health or safety of employees or
the public.
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Any good faith communication that discloses or demonstrates an intention
to disclose information that may evidence:
1) an improper governmental activity; or
2) any condition that may significantly threaten the health or safety of employees or the public if the
disclosure or intention to disclose was made for the purpose of remedying
that condition.
PROTECTED DISCLOSUREPROTECTED DISCLOSURE
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WhistleblowerWhistleblower
Person/entity making a protected disclosure (reporting party)
UC employees (academic personnel or staff), students, applicants for employment, vendors, contractors or general public
NOT investigators or fact-finders (do not determine appropriate corrective or remedial action that may be warranted)
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Locally Designated Official (LDO)Locally Designated Official (LDO)
Appointed by Chancellor Delegated overall coordination and
implementation of whistleblower procedure for UCR
Manages all implementing procedures and ensures UCR effectively responds to whistleblower reports
Ensures adequate communication and coordination of allegations of suspected improper governmental activities
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Section III ConditionsSection III Conditions
1. Possible violation of any state or federal law or regulation
2. Significant internal control or policy deficiency that puts campus at risk of potential losses
3. Likely to receive media or other public attention
4. Misuse of campus resources or creates an exposure to a significant liability
5. Significant possibility of being the result of a criminal act
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Section III Conditions (continued)Section III Conditions (continued)
6. Significant threat to the health or safety of employees, students or the public
7. Situation that is economically wasteful, or involves gross misconduct, incompetency, or inefficiency
8. Likely to involve multiple investigative units
9. Significant or sensitive for other reasons
Significant = $1,000
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Making a Whistleblower ReportMaking a Whistleblower Report
REPORTS: Encouraged to be written May be oral Should be factual and detailed May be direct or anonymous
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Making a Whistleblower Report (continued)Making a Whistleblower Report (continued)
Reports could be reported to: Campus investigative units UC Whistleblower Hotline (800-403-
4744) Locally Designated Official (LDO) Reporting employee’s immediate or
other supervisor Other appropriate campus
administrators State Auditor or State Auditor Hotline
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Receiving a Whistleblower ReportReceiving a Whistleblower Report
Be aware of and alert to any communications that may constitute reports of allegations of suspected improper governmental activity
Ask questions; obtain specific and relevant information from the WB during initial contact
Encourage the whistleblower to make a written report Immediately create written document of all oral reports Unless a section III condition, exercise appropriate
professional judgment in determining which matters can be reviewed under own authority
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Receiving a Whistleblower Report Receiving a Whistleblower Report (continued)(continued)
Consult with supervisors, LDO, campus investigative units and exercise of judgment should err on side of upward reporting
Turn matter over to LDO or investigative unit if investigative procedures go beyond normal responsibilities
If your whistleblower wants to be anonymous, advise him/her that confidentiality will be maintained to the extent possible, but within
limitations of law and policy Need to conduct a competent investigation
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Whistleblower suspects improper governmental activity
Is a Section IIIcondition met?
Directed to operating unit management
Operating unitmanagement
addresses matter
Involves Chancellor, LDO or LDO’s supervisor?
Report to UCOP Sr. VP-
Business & Finance
UCOP Sr. VP-Business & Finance
addresses matter
Whistleblower reports to Bureau of State Audits Hotline 800-952-5665
Whistleblower reports to report recipient (LDO/Supervisor/Other campus administrators/Campus investigative units)
Report recipient documents report in writing
Report recipient requests whistleblower to complete UCR Whistleblower Report Form
Whistleblower completes UCRWhistleblower Report Form?
Report recipient completes UCR Whistleblower Report Form
Report recipient completes UCR Investigations Report Form
Report recipient forwards UCR Whistleblower Report Form & UCR Investigations Report Form to LDO within one business day of receipt of report
LDO assigns a master case number
LDO and Investigations Team coordinate with the appropriate campus investigative unit
Alleged matter is investigated and whistleblower informed of outcome, as appropriate
Whistleblower reports to UC Hotline
800-403-4744
Bureau of State Audits addresses matter
InvolvesCampus investigative
unit head?
Report to LDOIs the alleged matter an
improper governmental activityand is there sufficient information?
Is aSection III
condition met?
Directed to operatingunit management
Involves Chancellor or LDO’s supervisor?Operating
unit management
addresses matter
Whistleblower informed of no investigation
LDOaddresses
matter
Is the alleged matter an improper governmental activity and
is there sufficient information?
NoNo
YesYes
NoNo
YesYes
YesYes
YesYes
NoNo
YesYes
YesYes
NoNo
YesYes
Involves campusinvestigative
unit head?Report to UCOP Sr. VP-Business
& Finance
UCOP Sr. VP-Business and Finance
addresses matter
YesYes
Whistleblower informed ofno investigation
NoNo
NoNo
NoNo
NoNo
YesYes
NoNo
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Policy for Protection of Whistleblowers from Policy for Protection of Whistleblowers from Retaliation and Guidelines for Reviewing Retaliation Retaliation and Guidelines for Reviewing Retaliation
Complaints (Whistleblower Protection Policy)Complaints (Whistleblower Protection Policy)
UC is committed to protecting employees from interference with or retaliation for having made a protected disclosure or for having refused an illegal order.
A University employee may not directly or indirectly use or attempt to use the official authority or influence of his or her position or office for the purpose of interfering with the right of a person to make a protected disclosure.
It is the intention of the University to take whatever action may be needed to prevent and correct behavior that violates this Policy.
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Contact Information
Audit & Advisory Services (A&AS) Address: 1201 University Avenue, suite 209 (University
Village) Telephone: 909-787-4667 Fax: 909-787-7209 A&AS homepage: http://audit.ucr.edu/ Suggested links:
About Internal Controls: http://audit.ucr.edu/internal_controls.htm
Internal Control Quiz/Checklist: http://audit.ucr.edu/departmental_quiz.htm UC Whistleblower Policies:
http://www.ucop.edu/ucophome/coordrev/policy/10-04-02.html