OBJECTIVES To encourage a culture within merSETA where all employees continuously behave ethically in their dealings with members of the public and other stakeholders; and To encourage all employees and other stakeholders to strive towards the prevention and detection of fraud impacting, or having the potential to impact on the merSETA.
Why Fraud? What is Fraud? Examples of Fraud Who commits fraud The fraud triangle Motivation/Pressures Opportunity and control issues Rationalisation Fighting Fraud Fraud preventing Early detection Fraud response plan Whistle-blowing guidelines TODAY’S TOPICS
“Fraud is the unlawful and intentional making of a misrepresentation with the intent to deceive and to defraud by causing actual and potential prejudice” “Wrongful or criminal deception intended to result in financial or personal gain” “Unfair advantage by unlawful or unfair means” WHAT IS FRAUD?
Procurement Fraud; Deliberate non-compliance to DOA limits; Abuse of leave; Inflated and falsified subsistence and travelling claims; Disclosing confidential or proprietary information to outside parties; Creditors fraud; Suppliers submitting invalid invoices or invoicing for work not done; Failure to properly support the use of funds; EXAMPLES OF FRAUD & CORRUPTION
Inflated quotations or invoices; Theft of assets, funds or supplies; Personal use of resources; Acceptance of “kick-backs”; Pursuing private business interests without permission; Transgression of prevailing legislation would also amount to corruption. False or misleading information in application or subsequent narrative progress or financial status report. EXAMPLES OF FRAUD & CORRUPTION
Who is a typical fraudster? Perceived as someone greedy and deceitful by nature. However, it’s someone driven by influencing factors – financial worries, job dissatisfaction, aggressive targets or simply an opportunity to commit fraud. WHO COMMITS FRAUD?
KPMG GLOBAL SURVEY 2011
Do I have a reason to steal? Biggest driver of fraud – personal financial gain Greed & work pressures External pressures MOTIVATIONS FOR FRAUD
Can I get away with it? Exploitation of weak internal controls Collusion to circumvent good controls Reckless dishonesty regardless of controls OPPORTUNITY
Can I live with myself? The ability to persuade oneself that something you know is wrong is really OK All internal restraints has been removed Entitlement mentality “Everyone is doing it” “The company owes me” “I will replace the money next month” “No one gets hurt” RATIONALIZATION
Adopt a zero-tolerance culture; Embrace an ethical workplace; Identifying potential for fraud; Reporting alleged fraud incidents; Well designed & tested systems of internal controls; Adherence to internal controls; Declarations; and Raise awareness PREVENTION
EARLY DETECTION/RED FLAGS Behavioural red flags: Rarely takes holidays; Refuses or does not seek promotion and gives no reasonable explanation; Does not or will not produce records/information voluntarily or on request; Tends to shift blame and responsibility for errors; Unreliable and prone to mistakes and poor performance; Surrounded by “favourites’ or people who don’t challenge them;
EARLY DETECTION/RED FLAGS Behavioural red flags: Bullies or intimidates colleagues; Vendors/suppliers will only deal with this individual; Lifestyle seems excessive for income; Volatile and melodramatic, arrogant, confrontational, threatening or aggressive when challenged; Is suspected to have over-extended personal finances; Cuts corners and/or bends rules;
EARLY DETECTION/RED FLAGS Behavioural red flags: Seems unhappy at work and is poorly motivated; Accepts hospitality that is excessive or contrary to corporate rules; Seems stressed and under pressure; Self-interested and concerned with own agenda; and Micromanages some employees and keeps others at arm’s length.
RESPONSE PLAN Reporting Channels – Fraud Hotline ( ) – Direct Manager – Chairperson of the Audit & Risk Committee Response Steps – Evaluate allegation in terms of accuracy & completeness; – Secure all assets at risk; – Suspend the suspected employee; – Data back up & secure all records – Initiate an investigation process
RESPONSE PLAN – Initiate disciplinary action where appropriate; – Involve SAPS (or other Governmental agencies where applicable) and other specialist service providers where necessary. – Audit internal procedures and improve processes where applicable; – Capture details into fraud register; and – Report the outcome of the investigation to deter potential perpetrators.
WHISTLE BLOWING Assurances to whistle blowers Protected in terms of the Protected Disclosure Act No victimisation or suffer any occupational detriment Allegations must not be malicious, must be in good faith and must have reasonable grounds for believing the allegations are substantially true Protection of identity
WHISTLE BLOWING Useful information when reporting: Background & history of concern (provide dates) Reason why concerned about the situation Extent to which you have personally witnessed or experienced the problem (documented evidence where possible) Anonymous reporting channel Vuvuzela Hotline at or