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									Quarterly Chairs’ Meeting

Fraud Awareness and the
  Whistleblower Policy
           Mike Jenson
              Director
     Audit & Advisory Services
            February 4, 2004




Present Situation
 Recovering economy
   Global
   National
   State-wide
 Budget cuts
 Staff lay-offs
 No staff merits

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Do More with Less…

Inadequate segregation of duties
Lack of supervision, monitoring and
reconciliation procedures
Short cuts – production oriented
Policy and Law Non-compliance
Rationalize fraudulent activities

                                      3
     Fraud is Costly

Direct monetary costs/losses to the dept.
Devastating (senior trusted employee)
Question management skills
Time and resources involved in investigation procedures
Disciplinary action decisions
Damaged careers and reputations
Negative impact on staff morale
Possible external agency audits
Negative impact on future funding or donations
Negative media exposure




     Headlines…..Headaches
San Francisco Chronicle (August 1995)
Embezzlement probe of UC Claims Manager – at least $500k gone
Wall Street Journal (December 1996)
Audit finds financial irregularities at UC Berkeley Business School
Los Angeles Times (February 1997)
Doctor who studied at UCI says her eggs were misused
 San Francisco Chronicle (July 1999)
Fired UC Cashier Arrested in $4.7 million theft suspect financed
daughter's angel firm, police say
Los Alamos National Laboratory (2003)
Procurement card issues
The Press-Enterprise (December 1998)
Ex-UCR employee arrested – Nearly $20,000 was allegedly embezzled
The Press-Enterprise (February 2001)
Former UCR employee sentenced to prison- Starting in 1996, she
embezzled $188,563 via checks to persons not on the University payroll   5




      Common Types of Fraud
          Procurement card
          Fictitious travel vouchers & purchase orders
          Unrecorded vacation and sick leave
          University resources used for personal gain
          Entertainment w/o legitimate business purpose
          Claimed benefits for non-dependents
          Missing cash w/o forced entry
          Unrecorded cash collections
          Payroll issues
   Duties of Department Chairs
APM-245-4:
  A department chair is a faculty member who serves as the academic
  leader and administrative head of a department of instruction or
  research, or a clinical service.
APM-245 Appendix A:
  As leader of the department, the chair has the following duties:
   3. The appointee should be receptive to questions, complaints, and
      suggestions from members of the department, both faculty and staff
      personnel, and from students, and should take appropriate action on
      them.
  The chair’s administrative duties include the following:
   5. To prepare the budget and administer the financial affairs of the
      department, in accord with University procedures.


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    Helpful Hints

        Be involved with finances
        Be aware of “red flags” of fraud
        Balance risk and controls
        Be ethical and do the right thing
        Implement fraud prevention measures




  Fraud Prevention Measures

      Strong internal controls
      Background checks on new employees
      Continuing monitoring procedures
      Willingness to take action
      Employee training
      Independent reconciliation procedures


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 Fraud Opportunity Checklist

     Ask Yourself:
       What deviations from acceptable
       business practices are possible?
       Are there significant variations from
       expected financial results?
       What are the weakest links in my
       department’s internal controls?




  UC INVESTIGATION SOURCES FY 2003 Count


                                Audit
          Anonymous              5%
             4%                                Management
                                                  55%

Whistleblower
    25%



         UC Police
            4%                  Outside Party
                                     7%

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  Conclusion on Fraud Detection


  “ Relatively few fraud and abuse
    offenses are discovered through
    routine audits. Most fraud is
    uncovered as a result of tips and
    complaints from other employees.”

        Source: Association of Certified Fraud Examiner, 1996



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Whistleblower Policies
 Policy on Reporting and Investigating Allegations of
     Suspected Improper Governmental Activities
                       and
Policy for Protection of Whistleblowers From Retaliation
 and Guidelines for Reviewing Retaliation Complaints
           (Whistleblower Protection Policy)

represent the University’s implementing policies for the
       California Whistleblower Protection Act

                Effective October 2002
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      POLICY OBJECTIVE

        To assure an appropriate
   INSTITUTIONAL response to any
  known or suspected impropriety and
     to create an environment that
  encourages candor while protecting
         the rights of all parties
    (i.e. whistleblowers, investigation
         participants, subjects and
               investigators).
                                                        14




Policy Objective

  UC values ethical and lawful conduct
  Policy designed to:
     Encourage timely, safe, and open reporting
     of alleged wrongs
     Ensure consistent and timely institutional
     response
  Appropriate reporting of whistleblower
  investigations
                                                        15
 Improper Governmental Activity
Any activity by a state agency or by an employee that is
undertaken in the performance of the employee’s
official duties, whether or not that action is within the scope
of his or her employment, and that (1) is in violation of any
state or federal law or regulation, including, but not
limited to, corruption, malfeasance, bribery, theft of
government property, fraudulent claims, fraud, coercion,
conversion, malicious prosecution, misuse of government
property, or willful omission to perform duty, or (2) is
economically wasteful, or involves gross misconduct,
incompetency, or inefficiency.
Serious or substantial violations of University policy
may constitute improper governmental activities.
Must directly involve the University either as victim or
perpetrator
                                                              16




  Illegal Order

       Any directive to violate or assist in
  violating an applicable federal, state, or
      local law, rule or regulation or any
   order to work or cause others to work
     in conditions outside of their line of
  duty that would unreasonably threaten
    the health or safety of employees or
                   the public.


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      PROTECTED DISCLOSURE

        Any good faith communication that
     discloses or demonstrates an intention to
      disclose information that may evidence:
     1) an improper governmental activity; or
      2) any condition that may significantly
   threaten the health or safety of employees
   or the public if the disclosure or intention to
       disclose was made for the purpose of
             remedying that condition.
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Whistleblower
     Person/entity making a protected disclosure
     (reporting party)
     UC employees (academic personnel or staff),
     students, applicants for employment,
     vendors, contractors or general public
     NOT investigators or fact-finders (do not
     determine appropriate corrective or remedial
     action that may be warranted)

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Locally Designated Official (LDO)
     Appointed by Chancellor
     Delegated overall coordination and
     implementation of whistleblower procedure
     for UCR
     Manages all implementing procedures and
     ensures UCR effectively responds to
     whistleblower reports
     Ensures adequate communication and
     coordination of allegations of suspected
     improper governmental activities

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Section III Conditions
1.   Possible violation of any state or federal law or
     regulation
2.   Significant internal control or policy deficiency
     that puts campus at risk of potential losses
3.   Likely to receive media or other public attention
4.   Misuse of campus resources or creates an
     exposure to a significant liability
5.   Significant possibility of being the result of a
     criminal act


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     Section III Conditions (continued)

6.   Significant threat to the health or safety of
     employees, students or the public
7.   Situation that is economically wasteful, or
     involves gross misconduct, incompetency,
     or inefficiency
8.   Likely to involve multiple investigative units
9.   Significant or sensitive for other reasons

                Significant = $1,000

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     Making a Whistleblower Report

REPORTS:
 Encouraged to be written
 May be oral
 Should be factual and detailed
 May be direct or anonymous


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     Making a Whistleblower Report (continued)


     Reports could be reported to:
       Campus investigative units
       UC Whistleblower Hotline (800-403-4744)
       Locally Designated Official (LDO)
       Reporting employee’s immediate or other
       supervisor
       Other appropriate campus administrators
       State Auditor or State Auditor Hotline
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                          Receiving a Whistleblower Report

       Be aware of and alert to any communications that may
       constitute reports of allegations of suspected improper
       governmental activity
       Ask questions; obtain specific and relevant information from the
       WB during initial contact
       Encourage the whistleblower to make a written report
       Immediately create written document of all oral reports
       Unless a section III condition, exercise appropriate professional
       judgment in determining which matters can be reviewed under
       own authority

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                          Receiving a Whistleblower Report
                          (continued)

                                Consult with supervisors, LDO, campus investigative
                                units and exercise of judgment should err on side of
                                upward reporting
                                Turn matter over to LDO or investigative unit if
                                investigative procedures go beyond normal
                                responsibilities
                                If your whistleblower wants to be anonymous, advise
                                him/her that confidentiality will be maintained to the
                                extent possible, but within
                                      limitations of law and policy
                                      Need to conduct a competent investigation

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                                                                    Whistleblower suspects improper governmental activity
Whistleblower reports to
      UC Hotline                                                         Whistleblower reports to report recipient                                    Whistleblower reports to
     800-403-4744                                         (LDO/Supervisor/Other campus administrators/Campus investigative units)                     Bureau of State Audits
                                                                                                                                                       Hotline 800-952-5665

                                                                                   Is the alleged matter an
    Report to LDO                                                             improper governmental activity
                                                                                                                                                         Bureau of State Audits
                                                                             and is there sufficient information?                       No
                                                                                                                                                            addresses matter
                           Is the alleged matter an                                                                         Whistleblower informed
                                                                                                   Yes
                     improper governmental activity and                                                                      of no investigation
 No                    is there sufficient information?                                  Is a Section III
                                                                                                                                                                  Operating unit
                                                                                         condition met?
 Whistleblower                                                                                                             No                                     management
                                                                                                                                 Directed to operating              addresses
  informed of                                 Yes                                                    Yes                          unit management
 no investigation                                                                                                                                                     matter
                                      Is a
                                   Section III                                      Involves Chancellor, LDO
      No                         condition met?                                       or LDO’s supervisor?
                                                          Involves                                                   Yes              Report to
                                                                               No                                                                            UCOP Sr. VP-
                                                     Campus investigative                                                          UCOP Sr. VP-            Business & Finance
  Directed to operating                                  unit head?                                                              Business & Finance
                                   Yes                                                                                                                      addresses matter
   unit management
                                                                    No      Report recipient documents report in writing
                                                    Yes
                                                             Report recipient requests whistleblower to complete UCR Whistleblower Report Form
                            Involves Chancellor
  Operating                 or LDO’s supervisor?
    unit
 management
                          Yes                                                    Whistleblower completes UCR                         No      Report recipient completes UCR
  addresses                                                                      Whistleblower Report Form?                                    Whistleblower Report Form
                                          No
    matter
                                                                                                      Yes
                                Involves campus                      Report recipient completes UCR Investigations Report Form
                                  investigative
                                    unit head?      No                Report recipient forwards UCR Whistleblower Report Form &
   Report to UCOP
                                                              UCR Investigations Report Form to LDO within one business day of receipt of report
   Sr. VP-Business
      & Finance
                                Yes
                                                                                LDO assigns a master case number

   UCOP Sr. VP-                     LDO
                                  addresses               LDO and Investigations Team coordinate with the appropriate campus investigative unit
Business and Finance
  addresses matter                 matter                                                                                                                              27
                                                           Alleged matter is investigated and whistleblower informed of outcome, as appropriate
    Policy for Protection of Whistleblowers from
Retaliation and Guidelines for Reviewing Retaliation
   Complaints (Whistleblower Protection Policy)


UC is committed to protecting employees from interference
with or retaliation for having made a protected disclosure or
for having refused an illegal order.
A University employee may not directly or indirectly use or
attempt to use the official authority or influence of his or her
position or office for the purpose of interfering with the right
of a person to make a protected disclosure.
It is the intention of the University to take whatever action
may be needed to prevent and correct behavior that violates
this Policy.
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    Contact Information
Audit & Advisory Services (A&AS)
   Address: 1201 University Avenue, suite 209 (University Village)
   Telephone: 909-787-4667
   Fax: 909-787-7209
   A&AS homepage: http://audit.ucr.edu/
   Suggested links:
      About Internal Controls:
      http://audit.ucr.edu/internal_controls.htm
      Internal Control Quiz/Checklist:
      http://audit.ucr.edu/departmental_quiz.htm
      UC Whistleblower Policies:
      http://www.ucop.edu/ucophome/coordrev/policy/10-04-02.html

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