Introduction to the Investigative Audit Services Group

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• Introduction to the Investigative Audit Services
  Group

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Internal Audits Responsibility

• Develop an annual audit plan based upon a
  system-wide risk assessment process
• Conduct audits in support of the plan
• Investigate fraud or fraudulent actions
• Report results to the Board of Regents, the
  Chancellor, and the Chief Executive Officers and
• Coordinate audit efforts with external and state
  auditors

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Governors Executive Order RP-36 Preventing,
Detecting Eliminating Fraud, Waste Abuse

• Each state agency shall develop a Fraud
  Prevention Program that includes the following
  components
• Culture of Honesty and Ethics
• Antifraud Processes and Controls
• Appropriate Oversight Processes

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Culture of Honesty Ethics

• Ethics Policy
• Fraud Policy
• Ethics Training
• Hotline for employees to report wrongdoing
• Separate investigative group to review reports of
  wrongdoing
• Thorough investigations conducted for allegations
  of fraud with disciplinary action taken against
  violators.

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Antifraud Processes Controls

• Internal Audit prepares a System-wide risk
  assessment as part of the annual audit planning
  process
• Fraud Policy states that CEOs have primary
  responsibility for identifying areas of risk
• Internal Audit utilizes ACL to test for anomalies
  in financial data
• System members utilize positive pay system with
  banks to detect fraudulent checks
• Management tracking report for all audit
  recommendations

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Appropriate Oversight Processes

• Board of Regents is very active in addressing
  control issues identified in audits and
  investigations
• Board of Regents approves the annual audit plan
• Chief Auditor meets regularly with Committee on
  Audit
• Committee on Audit reviews the audit tracking
  report
• Management

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AM System Policy 07.01, Ethics

• All AM System employees are expected to adhere
  to the highest of ethical standards and
  principles. These standards and principles are
  set forth in the AM System Ethics Policy.

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AM System Policy 21.04, Control of Fraud
Fraudulent Actions

• Every employee is responsible for reporting
  factual information suggestive of illegal,
  improper or dishonest acts and/or practices that
  may involve the AM System or one of the System
  members.

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Fraud or Fraudulent Actions

• Theft
• Embezzlement
• Kickbacks
• Travel reimbursement schemes
• Falsification of government documents
• Misappropriation/misuse of property
• Conflicts of Interest

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Methods of Detecting Fraud in Governmental
Agencies

• Tip 39
• Internal Audit 20
• Internal Controls 20
• By Accident 16
• External Audit 15
• Police Notification 7
• Association of Certified Fraud Examiners 2006
  Annual Report to the Nation
• The sum of percentages exceeds 100 because some
  respondents identified more than one method.

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Report Fraud To

• Immediate supervisor
• Agency/University Chief Executive Officer
• The AM System Fraud, Waste Abuse Hotline
  (reports are anonymous)
• The State Auditors Fraud, Waste Abuse Hotline
  (reports are anonymous)

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What Happens Next

• Notification of Agency/University Chief Executive
  Officer
• Investigative Group reviews applicable
  documentation conducts interviews as necessary
  
• Chief Auditor issues report of review findings
• Management takes corrective action if necessary

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Reporting Process

• Report will identify possible criminal
  violations, as well as policy violations
  significant control weaknesses
• Draft report reviewed with management if
  necessary prior to being issued
• Management required to provide a written response
  of corrective actions to be taken with regard to
  policy violations control weaknesses
• Summary of investigations is provided to the
  Board of Regents annually

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Complaints Received

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Investigative Report Findings

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Common Themes in Identified Control Weaknesses

• No Segregation of Duties
• Lack of Reconciliations
• Lack of Documentation
• Lack of Management Oversight

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Segregation of Duties

• An employee performs every step in a particular
  process
• Authorizes purchases, receives invoices, prepares
  vouchers/approves payment, deposits funds,
  processes reconciliations
• Important in A/R, A/P, Working Funds

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Reconciliations

• To check a financial account against another for
  accuracy
• Perform periodically and independently to verify
  the account balances

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Documentation

• Ensuring contracts exist which authorize work and
  payments
• Is there enough information on the invoice to
  confirm what is being purchased?
• Did someone physically inventory or confirm
  deliverables?

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Management Oversight

• Do you know the duties of your employees?
• Is there management approval for purchases,
  including travel and reimbursements?
• Ultimately, the responsibility rests with
  management - Tone at the Top

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Contact Information

• SIAD Phone [phone]
• Hotline [phone]
• Website www.tamus.edu/offices/iaudit/
• SAO Website www.sao.state.tx.us/SIU
• Email
• Robin Woods robin-woods_at_tamu.edu
• Debi Fincher dfincher_at_tamu.edu
• Mark Dickerson m-dickerson_at_tamu.edu

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