Full slide deck from fmi*igf's December webinar "Fraud in the Public Sector"

1. Fraud in the Public Sector
Welcome to the Financial Management Institute Webinar
Thursday, December 12, 12:30pm EST

2. Panel:
• Francis Liska, CGA, CISA, CICA, CMC - CEO OTUS
Group
Marc-André Audette, CMA, CFE, Director, Integrity
Policy and Program Development, Service Canada
Moderator:
• Steve Whitla, Partner for Fraud Investigations and
Dispute Services, Ernst & Young Canada
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3. What is Fraud?
Fraud is the use of one’s occupation for personal
enrichment through deliberate misuse or
misapplication of the employing organization’s
resources or assets
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4. • Nature and threat of fraud is almost universal across
sectors and regions
• Most commonly victimized industries in 2012 were
the banking and financial services, government and
public administration, and manufacturing sectors
(2102 Global Fraud Study – Association of Certified Fraud Examiners)
Where is Fraud Most Prevalent?
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5. • Most fraudsters are first time offenders with clean
employment history
• The vast majority of frauds were committed by
people in one of six departments – accounting,
operations, sales, executive/upper management,
customer service and purchasing
(2102 Global Fraud Study – Association of Certified Fraud Examiners)
Who Commits Fraud?
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6. • We live in a culture of trust
• There is a perception that that people are usually
ethical
• Adequate controls are not in place – fraud is most
often a crime of opportunity
Why Does Fraud Occur?
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7. • Targets
– Revenue – Income tax, HST, custom duties
– Benefits – Employment Insurance, Retirement Benefits
– Property – Computers, phones, supplies
– Entitlements – Payroll, expenses, travel allowances
– Facilities – Unauthorized use of vehicles, tools, etc.
• Methods
– Theft, credit card misuse
– Counterfeiting documents, providing false information
– Bribery, corruption, abuse of office, collusion
(Australian Institute of Criminology)
The Nature of Public Sector Fraud
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8. Circumstances that Increase the
Risk of Fraud
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9. • Under stress without a high workload
• Reluctance to take time off
• High wealth inconsistent with salary
• Key documentation missing
• Supplier or contractor who will deal with only one
staff member
• Excessive variations or budgets or contracts
Red Flags – Fraud Risk
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10. • No code of ethical conduct
• Policies not followed
• Numerous adjusting entries
• Refusal of a promotion
• Ongoing management override of internal
controls
Red Flags – Fraud Risk
(Office of the Auditor General of British Columbia)
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11. • Charbonnneau Inquiry
• Ornge
• Mayor of London, ON accused of using taxpayer
money to pay for family wedding
• Senate expense scandal
Recent Examples of Possible Public Sector Fraud
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12. • Understand your fraud risks
• Establish clear roles and responsibilities
• Appropriately designed prevention and detection
mechanisms in place
• Appropriate detective, investigative, disciplinary
and monitoring procedures in place
• Regularly communicate fraud management
results to stakeholders
Five Steps to Reduce the Risk of Fraud
(Office of the Auditor General of British Columbia)
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13. Detection method of fraud in the government *
0 10 20 30 40 50
IT Controls
Confession
Notified by Policy
Surveillance/Monitoring
Document Examination
Account reconcilliation
By accident
External Audit
Management review
Interanl Audit
Tip
DetectionMethod
%
Report to the Nations on Occupational Fraud and Abuse – Association of Certified
Fraud Examiners
How is Fraud Commonly Identified?
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14. Fraud Risk
Assessment
Fraud
Awareness
and
Education
Training
Fraud Policy
Fraud Risk
Management
Program
Fraud
Prevention
and Detection
Fraud
Reporting
Fraud
Investigation
Fraud Risk Management
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15. Attribute Description
1 Anti-fraud Culture &
Governance
An effective tone at the top is established to demonstrate a clear
stance on fraud tolerance. An appropriate governance structure for
the development and continued effectiveness of the fraud
prevention/detection framework is formally established and
maintained.
2 Accountability Structure A clear line of responsibility for fraud prevention/detection is
established.
3 Fraud Risk Assessment Management has up-to-date information in order to decide how to
allocate resources to treat and monitor exposure to fraud.
4 Fraud Reporting and
Monitoring Systems
Matters potentially affecting financial reporting are immediately
communicated to the appropriate executive member(s).
5 Awareness Programs Employees, contractors and clients/recipients understand their
responsibilities to contribute to the prevention/detection of fraud.
6 Protection for those who raise
concern in good faith
A clear and unequivocal commitment to supporting and protecting
all complainants in identifying fraud and corruption within the
organization is established.
7 Investigation/ Examination
Standard
Once reported, the allegation is promptly handled and investigated
competently.
Fraud Risk Management Program
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16. Fraud Risk is an organization’s level of vulnerability to those capable of
committing and concealing fraud, and may come from sources internal and/or
external to the organization.
Fraud Risk Assessment
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17. LIKELIHOOD
IMPACT
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4
3
2
1
1 2 3 4 5
Fraud Risk Assessment
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18. Questions and Answers
Be sure to tune in to next month’s webinar!
• “CFO Attestation”
• Presenters: Jean Roussel and Donna Dériger
• Thursday, January 16th, 2013 at 12:00pm EST
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