White Collar Crime - UWF by fjzhangxiaoquan


									White Collar Crime
       UWF Employee Symposium
  Betsy Bowers, Associate Vice President
           Internal Auditing

   Fraud Triangle
   Cash Handling
   Red Flags of Fraud
   PCard Responsibilities
Special Thanks to the Association of College & University Auditors [ACUA] member institutions for aspects of this presentation.
                           Fraud Triangle
                                All Frauds have these three (3) elements:
                                • Financial Pressure ~ This is what causes a person to commit
                                    fraud. It is an unsharable financial need (e.g., It’s one where they do
                                    not want others, even family, to know the need exists. Examples: unable to
                                    pay personal bills, desire for luxury items, gambling, addictions, etc).

                                •   Opportunity ~access to monies and ways to conceal their actions.
                                    The person must see some way to abuse his/her position of trust to
                                    solve their financial problem with a low perceived risk of getting
                                    caught. Opportunity is created by weak internal controls, poor
                                    management oversight, and/or through use of one’s position and
                                    authority. Internal controls and procedures are the only aspects
                                    that UWF has control over.
Source: Dr. Donald R. Cressey
                                •   Rationalization ~reasons the person committing fraud tells
                                    himself that makes his fraud be OK in his mind. Examples are:
                                     –   I am only “borrowing” the money and I will pay it back.
                                     –   If I don’t do this, I will loose everything (house, car, family)
                                     –   I haven’t received a raise in several years, this money is owed to me.
                                     –   I have to do this to save a family member or loved one.
  Cash Handling – It’s my job

Whether you collect lots of money or…

         ……you collect “pennies”…
     Cash Handling
  ……..the principles of good cash
  handling are basically the same.

Segregation of Duties
Management Review
    What is included in “Cash Handling”?
It’s not just “cash”. Cash includes
the following forms of money:
• Coin
• Currency
• Checks/Traveler’s Checks
• Money Orders
• Credit Card Transactions
• Cash Equivalents
   • Tokens
   • Tickets
   • Stamps
   • Gift Certificates/Cards
When this occurs with Money--
  Cash is stolen
  Cash is lost
   Statement of Account doesn’t agree with
     department/units internal records

You can expect the following results when cash
control is inadequate--
    No audit trail
    Finger pointing/Accusations
    Lost revenues
           Risk and Controls!!
Remember – In the cash collecting process,
YOU are just as important as the cash…

The controls (rules) that we will discuss are designed
to protect both YOU and the cash you are handling.
      Before cash collection begins…..
         “The planning checklist”
Send written request to Financial Services AVP/Controller
(Colleen Asmus) seeking approval for being a cash
collection site.

Upon approval, Departmental cash handling supervisor
develops a plan:
    Is a change fund needed?
    How is cash received? Mail or in person?
    Who is going to collect the cash?
    Record the cash?
    How is the cash going to be secured?
    Who is going to prepare the deposit? How?
    Where to deposit? When? Frequency?
    Reconciliation? Management Review?
    Who needs training?
           “Making change”
Is a change fund needed?
  DO NOT use coin & currency income to create a change fund!!
   Never make change from your personal cash!
   Send written request for change fund to Financial Services
  AVP/Controller (Colleen Asmus)
   Keep amount at bare minimum. Talk with the Office of Financial
  Services…they will help determine how much you need.
   Keep the cash safe!
   Change fund money should NEVER be deposited with money
  (income) collected.

              “Collecting the cash”
 How is cash received? Mail or in person?
 Who is going to collect the cash? Record the
Upon receipt (whether by mail or in person):

 When a non-vendor (personal) check is received in person, the customer
should be requested to show their University ID card or Driver’s License. The
ID number should be written on the check.

    “For Deposit Only, University of West Florida”
    You can use a stamp with this message or just write it on
the back of the check – either is fine.
                   “Collecting the cash”
      How is cash received? Mail or in person?
      Who is going to collect the cash? Record the cash?
Upon receipt (whether by mail or in person) (continued):

Where possible, sound internal controls dictate the Department should
direct the vendor to remit any funds directly to the UWF Cashier’s Office.
All money received by the unit should be deposited with the Cashiers
Office, Bldg 20 East.
If a check is received, forward it to the Cashiers Office immediately.
 Foundation checks should delivered immediately to the Foundation
(Bldg 12).
        “Collecting the cash”
 How is cash received? Mail or in person?
 Who is going to collect the cash? Record the cash?
Upon receipt (whether by mail or in person) (continued):

 For proper segregation of duties, the person collecting cash can not
have any other responsibilities related to cash handling. Other cash
handling duties that conflict with cash collection include:
        • balancing change fund and daily collections,
        • preparing and making deposits,
        • reconciling statements of account, and
        • recoding charges and payments to customer accounts.

    If this is occurring due to lack of staffing, compensating controls
    such as management oversight and review should be established
    and used.
“Now that we have collected the $$$$$$,
what do we do with it?”

   Secure
   Balance
   Deposit
   Reconcile
                “Securing the cash”
Safe is located where it is continually visible for access by unit
    employees but out of public sight.
Change combination ONCE a year or at employee turnover.

Secure locking cash box in a locking/fire resistant drawer, that
is not easily movable, to which access is limited to the person
    collecting the cash and his/her immediate supervisor.
Change location of KEYS periodically.

Each person collecting cash should have their own change
fund so that making change is possible if currency is expected
to be collected. Individual change funds should be created
from a larger authorized change fund.
Comprised of:
• Daily Comparison of unit-created records of revenue received with
  the actual money on hand (e.g.: amount received per cash register total
   tape/revenue log/pre-numbered receipts book for the day = actual amount
   of cash, checks and credit card receipts and other cash equivalents
   collected for the day).

• IF      , the Balancer investigates and resolves discrepancies. This
  is called reconciliation. When discrepancies are resolved and/or
  amounts are equal, the Balancer initials (or signs) & dates the cash
  register tape, revenue log, or pre-numbered receipts book to
  document the reconciliation.

• To maintain proper segregation of duties, the Balancer should not
  deposit, collect money, record accounts receivable, or reconcile
  Statements of Account.
                     “The Deposit”
Deposit prepared by someone who didn’t Collect the
cash or open the mail.

Hand deliver the deposit to the Cashiers Bldg 20
East DAILY (intact)
Deposit all funds intact. Intact means the entire amount of money
       (income) collected must be deposited so that all receipts are posted as
       revenue to the Statement(s) of Account. None of the money collected may
be     used for other purposes prior to deposit of the cash. For example, the
       department/unit cannot use $10 of its money collected to purchase
       postage and then reduce its deposit by the $10 used. To do so would
       misrepresent the amount of revenue earned and the amount of
       expenditures incurred in the department/unit’s accounting records.
 Reconciliation! Management Review!

Don’t ever overlook this step!!
Reconciliation must be performed by a person with no
cash handling responsibilities.
    Reconcile the deposit ticket to the departmental copy
   after the deposit has been made.
   Deposit tickets must be reconciled monthly to the
   revenue items on the Detail Activity Report.
    Maintain proof of these reconciliations with initials
   (or signatures) & date.

• Verify the processing or recording of transactions
  to ensure that all transactions are complete,
  authorized, recorded, & deposited on a timely

• Reconciler investigates and resolves
  discrepancies, then initials (or signs) & dates
  documentation reconciled.

• Reconciler should not collect or deposit money to
  maintain proper segregation of duties.
         Management Responsibilities
• Establishing an effective internal control system

• Delegating responsibility for cash handling duties,
  maintaining proper segregation of duties

• Requiring that staff handling cash be properly trained &
  follow all procedures of the University’s cash handling &
  depositing procedures.

• Reviewing internal cash records and reconciliations on a
  regular basis, then initialing (or signing) & dating all
  documentation reviewed
 “Management Review”

 No matter who is collecting, depositing, and
reconciling, Management is ultimately
      It is management’s responsibility to
      regularly review the reconciliation process
      to assure timeliness, accuracy and
      resolution of all outstanding issues.
    Segregation of Duties

This is the most important control in the cash collection
process, and often, the most difficult to manage. A different
person should be involved in each step: recording of
charges/billing, cash collecting, cash depositing,
reconciliation, and management review.

Let’s talk about how to manage segregation of duties.......
          Model – Segregation of the Duties related to cash handling

           Contact Financial Services to discuss options


               Receive                            Deposit
Billing         Cash

                               Post to
                   Transporting Cash
If you have responsibility for taking the money deposits to the Cashier’s
Office, Bldg 20East please use good common sense.

• Secure the cash and checks in a locked cash pouch, if available. DO
         NOT take the key to the pouch with you!
• Don’t be conspicuous. To assist you in this, use a backpack, plastic sack
         or other ordinary receptacle to transport the deposit.
• Don’t take the same route or go at exactly the same time every day –
                  don’t be predictable!
•See UWF Cash Collection Points and Policy at:

•Questions???Contact Coordinator Linda Howard (850-474-2120)

                Cash Equivalents
If you have the responsibility for cash equivalents such as
parking permits, event tickets, stamps or gift cards, remember
that they must be treated as if they are cash:

• Secure in a locked safe or drawer.
• Record the sale.
• Balance sale – sales log against the list of available tickets,
• Deposit money promptly.
• Reconcile sales against statement of accounts.
• Resolve all outstanding issues.
    Departmental Cash Handling Responsibility
•   Every office handling cash or its equivalent is required to review this
    presentation. The presentation may be reviewed as a group or

•   Departmental management must develop their own unit’s cash
    handling procedures in accordance with these guidelines. These
    internal procedures should be documented and communicated to the
    applicable staff.

•   At a minimum, a unit’s cash handling procedures should be reviewed
    annually by departmental management for any procedural changes.
    Your department is responsible for updating its cash handling
    procedural documentation.

•   Departmental management must ensure that all current and new staff
    that handle cash have been adequately trained and meet the
    requirements of the cash handling guidelines.
Red Flags
                            Did you know?
• 22% believed that one had to “bend the
    rules” or act unethically to get ahead, and
    would do so if they believed they would not
    get caught.

• >40% said they would act unethically if
    directed by their boss, and would lie to their
    boss to cover a mistake.

•    70% of undergraduates admit at least one
     instance of cheating.

•    20-25% undergraduates admit to five of
     more instances of cheating.

    What about Ethics in today’s workforce?
    Source: Junior Achievement and Deloitte Ethics Surveys
            What It Means To You
• As an employee of this University,

    be alert to signs of fraud

   observe the applicable provisions of the Code of Ethics for
    Public Officers and Employees, to the extent Part III of
    Chapter 112, Florida Statutes

   it is essential that all the necessary steps are taken to protect
    our customer’s from Identity Theft and be there for them,
    should an instance of ID Theft occur.
              What are Fraud Red Flags?
Indicators of Possible Fraud
     New-found “wealth”
     Secretive
     Absenteeism/ never taking vacation             Financial pressures
     Regular ill health / “shaky” appearance               Medical bills
      Easily making/ breaking promises and                 Family responsibilities
      commitments                                            A spouse losing a job
     Series of creative/unreasonable explanations          Divorce
     Self Centered                                          Debt requirements (e.g.
     Inconsistent or illogical behavior                     foreclosure, bankruptcy)
     Borrowing money from coworkers                        Maintaining a current lifestyle
     Easily annoyed                                        Car repairs
     Territorial regarding workspace                       Addictions
     Family problems                                       Education/Tuition
     Evidence of deceit
     Very social at work
     Dissatisfied employee
     Rewriting records (saying for neatness)
     Extremely devout
          Common Forms of Fraud
 Falsifying timesheets for a higher amount of pay
 Pilfering stamps
 Stealing of any kind (e.g., cash, petty cash, supplies,
  equipment, tools, data, records, etc.)
 Forgery
 Lapping collections on customers’ accounts
   – Holding out cash and then substituting checks to balance
 Pocketing payments on customers’ accounts, issuing
  receipts on self-designed receipt books
 Not depositing all cash receipts
       Common Forms of Fraud (cont.)
 Creating fictitious employees and collecting the paychecks
 Failing to end personnel assignments for terminated
  employees and collecting the paychecks
 Paying for personal expenses with University funds; PCard
 Increasing vendor invoices through collusion
 Billing for services not rendered and collecting the cash
 Seizing/intercepting checks payable to vendors
 Recording fictitious transactions on the books to cover up
        Fraud Danger Signals
 High personnel turnover
 Low employee morale
 No supporting documentation for adjusting entries
 Incomplete or untimely bank reconciliations
 Increased customer complaints
 Write-offs of inventory shortages with no attempt to
  determine the cause
 Unrealistic performance expectations
        Fraud Danger Signals (cont)
 Rumors of conflicts of interest
 Using duplicate invoices to pay vendors
 Frequent use of sole-source procurement contracts
 Unreconciled accounts
 Dormant accounts
 Failure to deactivate or terminate access after
  employees have separated from a position, unit or
  the university
               Suspicious Documents
Documents provided for identification appear to
 have been altered or forged.
The photograph or physical description on the
 identification is not consistent with the appearance
 of the applicant or customer presenting the
Other information on the identification is not
 consistent with information provided by the
 person opening a new covered account or
 customer presenting the identification.
      What if you suspect an irregularity?

UWF Policy P-10.00-10/04 “Policy Against Fraudulent or
 Wrongful Acts” says:
  – Employees, with a reasonable basis for believing such acts
    have occurred, have a responsibility to report such beliefs
    to their supervisor, appropriate administrator or the
    Office of Internal Auditing and Management Consulting

   – Contact UWF Police (x2415) or Silent Witness
   – http://uwf.edu/uwfpolice/silentwitness.cfm
              PCard Fraud:
          Kid Brother to ID Theft

Credit card theft is a much larger menace
 than Identity Theft because it is an easier
 crime to commit and affects many more.
 The growing global reliance on plastic in
 merchant transactions and especially on the
 Internet is leading to a natural growth in
                ~Michelle J. Holland, CFE
    PCard Fraud in Higher Ed
Georgia Tech (2006-2010)
    $312,000 over 5 year period: D Gamble
    http://www.youtube.com/watch?v=Buuen1pwJdo
    $170,000 (M Harris) 2008; sentenced 10 years
 University of Washington Medical Center (2011)
    $252,000 over 2 year period

 University of Georgia (2011)
    2 charged in June 2011
    2 charged in April 2009 $4,284.27

 Coastal Carolina University
    $83,508

 Credit card fraud, misuse found at Florida universities
  ~Auditor General Reports
    Personal items and unallowable items: UF-$13,000; FAMU $12,209; FIU
     $5,000; USF $4,791; FAU $680, and UWF
           Primary Defenses
• Review credit card transactions monthly, if not
• Keep e-mail addresses and phone numbers
  updated . (Argus Directory Tab to check)
• Sign the card.
• When the card is not in use, keep in an
  accessible but secure location.
                 Primary Defenses
• The cardholder whose name appears on the front of the card
  is the only authorized user of the card
• Shred any documents/receipts containing card account
  information before disposal
• If you suspect fraudulent activity, notify our PCard
  administrator (Eric Engelmeyer 474-2029 or eengelmeyer@uwf.edu )
  IMMEDIATELY (minutes count), AND notify our PCard
  Bank ~JP Morgan at 1-800-316-6056
• Keep abreast of our UWF PCard Users Reference Guide
  and UWF PCard Account/Business Manager Guide
       PCard Fraud Indicators
• Employee
  – typically late turning in (or fails to turn in) monthly
    reconciliations to support the charges made.
  – fails to attach any receipts at all, claiming they were lost.
  – attaches a receipt, but not the itemized receipt presented to
    Employee at the time of purchase. If you catch this fraud early
    enough, the vendor may be able to provide you with the
    detailed receipt and you can see exactly what was purchased.
  – presents multiple monthly reconciliations at one time right
    before the deadline believing that the documentation will
    undergo very little scrutiny due to the last minute submittal.
  – submits receipt with long list of items hoping to bury personal
    items in the long list makes purchases at restaurants for
    multiple people, and you see children's dinners ordered, or
    alcohol purchases that may be against company policy.
         PCard Fraud Indicators
 makes multiple gas or food purchases over the weekend when he is not
   traveling for business.
 The person in charge of reviewing the PCard purchases has a
  reporting relationship to the Employee submitting the monthly
  reconciliations, and simply signs off on the reconciliations in fear
  of retaliation if the reconciliation is scrutinized or questioned.
     Similarly, if the Employee submitting the reconciliation is the same
      person in charge of reviewing the reconciliations, this is a situation of
      the fox guarding the hen house and must be avoided. For example,
      the Department Head should not be in charge of reviewing his own

 was recently placed on probation or knows he is in danger of termination,
  which may motivate Employee to cheat the Employer out of money pre-
                Fraudulent Charge on YOUR PCard
• Check daily PCard charges in Banner to immediately identify any
  fraudulent activity.

• Read PCard Fraud on P&C's internal web site
• Approve the Fraud Charge in Banner before the 14-day auto-post date:
  Reference "Approving Fraud Charges"
      Key in Fraud Commodity Code: 000FRAUD;
      Key in Fraud Account Code: 70353;
      Choose the Vendor ID if the vendor is registered with UWF;
      If the vendor is not registered, use B00011744 for the vendor number and FRAUD as the vendor name;

The Cardholder or Managers are responsible for immediately contacting
  ALL of the following:
      Bank - to report theft only. Do NOT order replacement card. 1-800-316-6056
      IAMC (BBOWERS@UWF.EDU OR 474-2636)
      UWF Police (474-2415)
      PCard Administrator (who will order a replacement card)
         •    Eric Engelmeyer 474-2629 eengelmeyer@uwf.edu
Risks range from simple mistakes to "avoidance" of the UWF's
procurement policies to misuse, and can include:
   Personal purchases being made on a PCard
   "Non-compliant" purchases being made - for example:
      Materials being purchased on sponsored funds that aren't allowable
       by the sponsor
      Food being purchased with State funds
      Purchases being attributed to the wrong account
   Lack of compliance with bidding thresholds and UWF
    purchasing processes
   Potentially paying more than contract prices if buying from
    a non-contracted vendor
         Prescribed Procedures

• http://uwf.edu/procurement/internal/pages/PCardWorkflow.pdf
   PCardholder Responsibilities
• Review Cardholder Checklist
  – http://uwf.edu/procurement/PCard_CardholderChkLst_FillIn.pdf
   Account/Business Manager
If I'm an Account or Business Manager, how can I look
   out for issues?
 Carefully review all statements and receipts to be sure that all
  purchases are properly accounted for.
 Look at the delivery address for goods. Are they being delivered to a
  home or non-University address?
 Are there vendors that look like restaurants or caterers on a PCard?
 Are there multiple purchases from the same vendor, close together,
  that look like a "split" order?
 Are there any duplicate charges where a vendor might have double-
  charged the University?
 Is sales tax paid on any of the orders?
 Ask questions! If you are uncertain of a purchase, ask the cardholder
  for more details and note them on the statement if you like.
    Account/Business Manager
• Complete an electronic Application and Agreement (in RouteIt) with
  their Supervisor’s approval.

• Complete the following online training:
     – Banner Basic, PCard Basic, and PCard Manager

• Approve Charges Before 14-Day Auto-Post Date (see Approve Charges)

•   Ensure that the PCard Program’s requirements and guidelines are
    followed. (see also PCard Manager Approving Guide).
     – Failure to use the PCard in compliance with UWF Policy, PCard Reference Guide,
       Application and Agreement, and training will result in the following consequences:
          •   reimbursing UWF;
          •   retraining;
          •   suspension or revocation of the PCard; and,
          •   possible disciplinary action as stated in the PCard Policy.

•   Daily Checking & Reporting
     Account/Business Manager
Importance of Responsibilities: Managers can
   1.   quickly detect stolen card or card numbers;
   2.   quickly detect and report any fraudulent charges;
   3.   avoid budget errors by completing and/or updating the
        required four (4) fields in FAAINVT
   4.   avoid creating inaccurate UWF reports and possible audit
        findings by approving charges before the 14-day auto-post
   5.   avoid processing additional paperwork (Journal Entry Form)
        and creating additional work for employees outside of their
        department to correct the auto-posting.

• Communication: Close communication with the Cardholder is
  imperative especially regarding new vendors being registered with
  UWF and obtaining receipts to approve charges in a timely manner.
PCard Monthly Account Statements
The PCard cannot be used to purchase the following:
     –NO Personal items
     –NO Employee personal travel expenses
     –NO Entertainment expenses
     –NO Alcohol or Tobacco products
     –NO Gift cards, funding of the Nautilus Card gift certificates, or
      other cash equivalents
   – NO Food except as authorized in the PCard Reference Guide
   – NO Cash advances, cash refunds, or “store credit”
   – NO transactions made from units of the University -, the Library,
      and Parking
• Please note: The PCard may be used at outsourced businesses such as
  the UWF Bookstore
            Important Contacts
   Your unit's Business Officer or PCard
   UWF PCard Program Administrator, Eric
    Engelmeyer at 850-474-2629
   Email: eengelmeyer@uwf.edu
   JP Morgan Chase 24 hour Customer Service:

This PPT will reside at: uwf.edu/iamc

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