Recent Fraud Investigations November 2016 Recent Fraud Investigations

Accountability

Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud Corruption is difficult to prove and there is generally not a bright line between acceptable and unacceptable behavior without a policy or law to say was violated.

Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud Cash Inventory and All Other Assets

Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud Cash Inventory and All Other Assets Theft of Cash on Hand Theft of Cash Receipts Fraudulent Disbursements

Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud 2 Asset Misappropriation Financial Statement Fraud Cash 3 7 Theft of Cash on Hand Theft of Cash Receipts Fraudulent Disbursements

Fraudulent Disbursements Corruption Asset Misappropriation Financial Statement Fraud Cash Theft of Cash on Hand Theft of Cash Receipts Fraudulent Disbursements

Utah Communications Authority Improper Credit Card Disbursements Created Fraudulent Physical Documents

Real or Fake?

Real or Fake?

Real or Fake?

Real

Fake

Missing Receipt Log

Interlocal Entity Credit Card Fraud Supervisor provided card number to subordinate to make purchases. $51,534 – iTunes purchases Concealed by altering card statements Making mid-month payments Ineffective review

What Looks Unusual?

What Looks Unusual? Total $2,004.78

Interlocal Entity Concealed by: Altering card statements Making mid-month payments Ineffective review

Interlocal Entity Payroll Fraud Employee contacted payroll services after payroll submission requesting changes Leave payout Commission Reimbursement (Gym Membership) No comparison of processed payroll to approved payroll.

Theft Summary iTunes (Clash – In-App Purchase) $51,587 Reimbursements (Gym Membership) $26,861 Extra Payroll (Vacation, Sick, Commission) $12,438 Total $90,886

Theft Over Time

State Agency Travel Reimbursement Hotel Per-diem Falsified hotel receipts Ineffective oversight of employee

Confirmation of Stay

Summary Approximately $18,500 in fraudulent reimbursements.

USDB Theft Approximately $60,000 improper credit card purchases (4 years). Due to limited documentation, amount likely much higher. Approximately $3,300 in missing cash receipts.

USDB Theft Sam’s Club Purchases Smith’s Purchases General Ledger Manipulation Missing Cash Receipts

County Treasurer Bank transfers to personal accounts – $34,600 Missing cash receipts – $56,182

Screenshot of Bank Statement Transfers Screenshot of Bank Statement Highlighted transfers are those from the county bank account to a personal account.

Cash Receipts Validated Deposit Slip County Cash Receipt Report $3,560.49 Does cash collected balance? Does total received balance? $93,640.22

Separation of Duties Ideally, the following should be separated: Authorization Custody of Assets Record Keeping Reconciliation Authorization or approval of a transaction Custody of Assets (cash or checks received) Record Keeping (including the ability to adjust accounting records) Reconciliation

Solution Separate Secondary Review of Adjustments Others? Access to Cash from Bank Reconciliation and Reconcile Original Receipt Record to Validated Deposit Slip Secondary Review of Adjustments Others?

Irrigation District Fraudulent Disbursements Checks to self Checks to company owned by check maker Checks to makers credit card company

Check to Credit Card Company

Check to Company

Check to Self

Irrigation District Checks to Self $42,419 to $56,123 Checks to Company $27,253 Credit Card Payments $33,421 Total $103,093 to $116,797

Spear Phishing Targeted email scam thrives on: County Example Familiarity, using information publicly available on an entity’s website – such as names, titles, or other references. Familiarity often makes the recipient of the email less vigilant in verifying the requests. Urgency, indicating that the payment must be made immediately. County Example

Corruption Corruption Asset Misappropriation Financial Statement Fraud Cash Theft of Cash on Hand Theft of Cash Receipts Fraudulent Disbursements

Definition of Corruption A scheme in which an employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain a direct or indirect benefit. ACFE Definition

Definition of Abuse Abuse Example of Abuse GAO 4.07 “…includes misuse of authority or position for personal financial interests or those of an immediate or close family members or business associate. Abuse does not necessarily involve fraud, or noncompliance with provisions of laws, regulations, contracts, or grant agreements.” Example of Abuse “Making travel choices that are contrary to existing travel policies or are unnecessarily extravagant or expensive.” GAO 4.07

What Do You Think? During a Christmas event: $2,118 was spent for 9 room nights for board members at the Grand America Hotel; $1,274 for 23 meals for board members, employees, and spouses; and an additional $145 for parking.

What Do You Think? During a board retreat in Park City: $2,508 – 10 room nights for board members and employees. $1,664 –14 board members, employees, and spouses to have dinner at Ruth’s Chris Steak House ($119 per person). $430 – 4 board members, 2 spouses, and the CEO to golf.

What Do You Think? During a conference in San Diego: $1,339 was spent for board members, trust employees, and spouses (6 spouse meals) to have dinner at Donovan’s. $382 was spent on tickets to a professional baseball game, and $300 was spent on concessions. $1,072 was spent on food and entertainment for 6 board member spouses.

What Do You Think? Councilmember askes to borrow city employee’s credit card. City employee verbally approves spending up to $2,500 for a parade. Councilmember actually spends $5,879. Supervisors statement at council meeting: “If a city council member asks for a card, you get it.”

Theft of Cash Receipts Corruption Asset Misappropriation Financial Statement Fraud Cash Theft of Cash on Hand Theft of Cash Receipts Fraudulent Disbursements

Scrap Metal Sale