South Texas College Fraud Awareness and Fraud Surveys Business Office South Texas College Fraud Awareness and Fraud Surveys “Count on Satisfaction”

Accounting Group Manager Cynthia Villarreal Accounting Group Manager 872-4610 cvillar@southtexascollege.edu

Purpose Fraud intentional deception to unlawfully deprive the College of something of value Waste extravagant, careless or needless expenditure of College funds, incurring of unnecessary expenses, mismanagement of college resources or property or the consumption of College property that results from deficient practices, systems, controls or decisions Abuse intentional, wrongful, or improper use or destruction of College resources; excessive or improper use of an employee or official’s position in a manner other than its rightful or legal use

2016 Global Fraud Survey Occupational Fraud the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.

2016 Global Fraud Survey

Three Major Types of Occupational Fraud Asset Misappropriation – 83.5% Theft or misuse of organization’s cash or assets Most common (billing schemes) but lowest losses ($125,000-average) Corruption – 35.4% Off the books fraud that occur in the form of kickbacks, gifts, or gratuities to employees from contractors/vendors Financial Statement Fraud – 9.6% Deliberate misrepresentation of the financial condition of an organization through intentional misstatement or omission Highest loss ($975,000-average) Median Duration-18 months

Fraud Diamond Rationalization Pressure / Incentive Justify crime to make it acceptable Inappropriate values Job/company dissatisfaction Financial stress Greed Drug addiction Meet work productivity targets Capability (Criminal Mindset) Opportunity Personal traits Character Skills/abilities Confidence/Ego Effective lying Immunity to stress Weak internal controls Weak / Remote Management Abuse of one’s position

2016 Global Fraud Survey Behavioral Red Flags

2016 Global Fraud Survey Detection Methods Active Internal Audit – 16.5% Management Review – 13.4% Account Reconciliation – 5.5% Document Examination – 3.8% Surveillance/Monitoring – 1.9% IT Controls – 1.3% Active/Passive Tip – 39.1% (employees-51.5%) External Audit – 3.8% Passive Accident – 5.6% Notified by Law Enforcement – 2.4% Confession – 1.3%

Factors Contributing to Fraud Lack of internal controls (segregation of duties) Override of existing internal controls Lack of management review (too much trust) Poor tone at the top No follow up, action or consequences for Non-Compliance Lack of Policies

Examples of Acts of Fraud, Abuse and Other Improprieties Theft or misappropriation of funds Falsifying timecard with time not worked False overtime Sick Time abuse Use of College property for personal benefits Waste of supplies Fictitious vendor, employee or student payments Personal purchases on College credit cards

Examples of Acts of Fraud, Abuse and Other Improprieties False reimbursements Forgery or alteration of documents Unauthorized use of records or access to information systems Falsification of reports to management or external agencies Authorizing or receiving compensation for goods not received or services not performed Improper handling or reporting of financial transactions

Combating Fraud Tone at the Top – Code of Ethics Internal Controls/Segregation of Duties Management Review / Audits Employee Trainings Data Monitoring - 54% reduction in duration and total loss of fraud schemes Visualize and explore data to profile, pattern, and detect outliers not associated with logic-checks Build models to identify suspicious transactions and predict likelihood of fraud

South Texas College Guidelines for Reporting and Investigating Suspected or Known Fraud, Abuse and Other Improprieties http://hr.southtexascollege.edu/forms/policies/policies_reporting_fraud_procedures.pdf

Introduction STC is committed to creating an environment where fraud, waste, abuse and other improprieties are not tolerated Responsibilities for educating employees Responsibilities for internal controls Responsibilities for identifying and evaluating risks

Employee Responsibilities Report the act to: Immediate supervisor (20.6%), Next highest level of management (18%), Director of Human Resources, Anonymous Fraud and Ethics Hotline (39.5%), or State Auditor’s Office Fraud, Waste and/or Abuse Hotline

Employee Responsibilities Employee should prepare written report Department where the act is occurring What is occurring When it occurred Who is involved How is it occurring Employee will refrain from further examination of incident with anyone other than proper personnel

Employee Disciplinary Actions An employee – found to have participated who hinders a fraud inquiry or investigation by making a false or misleading statement who has knowledge of fraud of a dishonest act, but fails to report it according to these guidelines Shall be subjected to disciplinary action

Doing What’s Right If you don’t feel comfortable discussing the issue within normal channels, you may call The Network, an independent company which provides an anonymous reporting service for hundreds of companies worldwide. http://finance.southtexascollege.edu/businessoffice/forms/survey/Fraud_Hotline_Flyer.pdf

Doing What’s Right This service is not intended as a substitute for speaking directly with management. It is an option that is always available if you want to help, but prefer not to give your name.  

Doing What’s Right Anonymous Fraud & Ethics Hotline 1-800-482-5158 This toll-free number is staffed by The Network, an independent organization operating 24 hours a day, 7 days a week. You do not have to give your name. An Interview Specialist documents your concern, assigns you a personal reference number, and relays your concerns to the company.

Fraud Survey http://finance.southtexascollege.edu/businessoffice/survey.html

Questions