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Public Fraud & Theft In the Workplace. Economic Downsizing in Local Governments.

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Presentation on theme: "Public Fraud & Theft In the Workplace. Economic Downsizing in Local Governments."— Presentation transcript:

1 Public Fraud & Theft In the Workplace

2 Economic Downsizing in Local Governments

3 Employee Wage Freezes, Furloughs, and Reduced Benefits

4 Economic Hardships on Individual Employees Loss of Dual Incomes Loss of Investments or Home Values Increased Expenses or Medical Costs Looming Retirement Date

5 Justification/Anger Due To “Wall Street” Bailout or Actual/Perception City Management not Sharing the Cutting Pain

6 Rapid Changes in Financial Systems; including speed, volume, and complexity of transactions and Improvements to technology and improved access to personal information.

7 Changing Societal Values Symantec Smart Phone Honey Stick Project Planted 50 “lost” phones and tracked their movement, return rates, and pilferage of personal data  89% Accessed Personal Data  72% Accessed Personal Pictures  57% Accessed Password Folders  43% Tried to Access Banking Apps  Less than 50% tried to return the phone

8 NumberType 8Theft/Gift of City Service 4Purchasing Fraud 3Cash Stealing 3Other Types 2Payroll Fraud 2Property, Equipment, Small Tools 2Friends and Family Plan – Loans and Checking 1Asset Conversions 25Total “Secretary Cameron would not steal a red hot stove.” Thaddeus Steven, 1861

9 $1.6 (m) – Franklin County Public Works Manager Accused - Payables Fraud Took Over Bankrupt Company ID Created Quasi Bank Account Approved Invoices payable to Company 8 years “Where do people steal the money? They steal it on the way in and the way out. Joe Derives, SAO

10 $1.0 (m+) - City of Seattle Project Engineer Accused - Connection/Late Comers Fees And Other Development Fees Quasi Bank Account – City of Seattle’s Name 6 Years

11 $468(k) – Birch Bay WSD Finance Manager Credit Cards, Payables, Travel Fund, Quasi Bank Account 8 Years

12 $1.3 (m) – City of Arlington Finance Accounting Clerk Accounts Payable - Manual Warrants Quasi Bank Account 8 Years

13 $151(k) – City of Lakewood Police Guild Police Officer Accused - Donations for Memorial Trust Fund Quasi Bank Account 2 Years ?

14 Strong internal controls will not stop fraud! “Ability is nothing without opportunity. Napoleon Bonaparte

15 Strong internal controls will decrease the likelihood of fraud; and,

16 Increase the speed in which the fraud is identified; and,

17 Strong internal controls will decrease the likelihood of fraud; and, Increase the speed in which the fraud is identified; and, Create a better record trail to identify and determine who committed the fraud, its duration, and the amount.

18 Dual Controls, Segregation of Duties, Four Eyes Principle “Trust, but verify” Ronald Regan

19 Pre Employment Background Checks ? In the Franklin County fraud, the employee was hired 8 months after being released from Federal prison for creating a fake company to steal from the Federal Government.

20 Pre Employment Background Checks ? A former Deputy City Clerk, arrested for $7.5 (k), then hired as a bookkeeper for a local roofing company and was later convicted for a $200(k) fraud. Should be noted that she said stole for a psychological need to help other people by giving them money.

21 Pre Employment Background Checks ! Follow your background checks, and don’t hire people that do not pass the background.

22  Daily Deposits Daily Cash Counts Check and Cash Composition Dual Verification of Deposits and Posting Reports Daily Verification of All Deposits

23  Check Issue and Redemption Control of Check Stock Invoice Approval by Non-Check Issuer Detailed Receipts/Invoices for Payment Check Redemption by Non-Check Issuer Final Payments and Invoices Reviewed by Non-Check Issuer Positive Pay with Bank by both Check # and Amount

24  Bank Reconciliation & Online Banking Templates Setup (Quasi Bank Accounts) Daily Cash Management to Posting Deposits Formal Program Monthly of all Bank and Investment Accounts Deposit Composition (Checks/Cash/ACH/Autopay/Credit Card) Check Redemptions and Endorsements Dual Review with Supporting Documentation Dual Approval for All Online Transfer Templates Strong Password Protection Unique User Names ed Alerts

25  Accounts Receivables Utility Billing Registers Off Book Receivables Connection, Latecomer, and ULID Payments Reconciliation between Payments and Services

26  Payroll Written Documentation and Approval of Pay Rates and Benefits Review of Check Issues Reconciliation of Taxes Paid Review of Key Employee Payroll and Paid Time Off Reports Random Review of Time Reporting Records Verification of Checks Issued to Actual Employees

27 All fraud is based on deception 1. Most frauds are larger than initially thought; “All war is deception” Sun Tzu

28 All fraud is based on deception 1. Most frauds are larger than initially thought; 2. Not uncommon to have “stumbled” on the fraud prior to detection;

29 All fraud is based on deception 1. Most frauds are larger than initially thought; 2. Not uncommon to have “stumbled” on the fraud prior to detection; 3. Fraud will have a civil element and may have a separate criminal element;

30 All fraud is based on deception 1. Most frauds are larger than initially thought; 2. Not uncommon to have “stumbled” on the fraud prior to detection; 3. Fraud will have a civil element and may have a separate criminal element; 4. Fraud auditing and resolution take a significant amount of time;

31 All fraud is based on deception 1. Most frauds are larger than initially thought; 2. Not uncommon to have “stumbled” on the fraud prior to detection; 3. Fraud will have a civil element and may have a separate criminal element; 4. Fraud auditing and resolution take a significant amount of time; 5. Rare that a person doing fraud will admit to the fraud.

32 Expect Counter Claims to Arise  Americans with Disabilities Act

33 Expect Counter Claims to Arise  Americans with Disabilities Act  Hostile Work Environment and Sexual Harassment

34 Expect Counter Claims to Arise  Americans with Disabilities Act  Hostile Work Environment and Sexual Harassment  Washington State Whistleblowers

35 Expect Counter Claims to Arise  Americans with Disabilities Act  Hostile Work Environment and Sexual Harassment  Washington State Whistleblowers  The Everyone Else is Doing Theory

36 Washington State Whistleblowers R.C.W protects State employees when they file a whistleblower complaint R.C.W Local Government Whistleblower Act Protection for Counties, Cities, and Special Purpose Districts is their own Agency’s Whistleblowers Policy, or the County Prosecutor’s Officer if the agency has not adopted a Whistleblower Policy “By failing to prepare, you are preparing for failure” Benjamin Franklin

37 R.C.W – Requires state and local agencies to report immediately to the State Auditor’s Office known or suspected loss of funds or assets or other illegal activities.

38 Management Representation Letter – Chief Executive Officer and Chief Financial Officer are fiduciary responsible to disclose any loss of funds, or assets or other illegal activities.

39 R.C.W (7)– Requires any compromise or settlement of any claim arising from malfeasance, misfeasance, or nonfeasance, or by any action therefore, or for any court to enter upon a compromise or settlement of such action without the written approval of the attorney general and the state auditor.

40 City Manager or Chief Executive Officer Police Chief or Sheriff City Attorney Human Resources State Auditor’s Office WCIA (Pre-Defense Review on Personnel Action) Colleagues (with reservations)

41 The cost of fraud is not only measured in the in the lost dollars.  Stress  Time Consuming  Emotionally Demanding and Draining  Divisive  Tarnishes the reputation of the agency and all the other hard working honest employees All Public Employees Carry Each Other’s Honor


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