Fraud may be defined as an intentional act or omission designed to deceive others, resulting in the victim suffering a loss and or the perpetrator achieving a gain. According to the Association of Certified Fraud Examiners, the typical organization loses 5% of its annual income to fraud. www.acfe.com
Fraud encompasses an array of irregularities and illegal acts characterized by intentional deception. The elements of fraud are:
Employees who commit fraud generally are able to do so because there is opportunity, pressure and rationalization. The phases of fraud are best illustrated by The Fraud Triangle below.
Opportunity is generally provided through weaknesses in the internal controls such as inadequate or lack of:
Pressure can be imposed due to:
Rationalization occurs when the individual develops a justification for their fraudulent activities. The rationalization varies by case and individual. Some examples include:
Fraud hurts everyone. Fraud is a common risk that should not be ignored. Failure to do so will eventually result in damaging morale, jeopardizing the reputation of the university and raise questions about its fiduciary duties regarding funds provided by donors, government agencies, students, and parents. Fraud costs everyone through direct influence or indirectly through increased taxes and costs of products and services.
Common fraud schemes which occur at universities include the misuse of procurement cards (“p-cards”), padding expense accounts, listing fictitious vendors, rigging vendor bids, taking kickback and abusing payroll and overtime by fraudulent reporting of hours worked.
The key deterrent of fraud is awareness and prevention. Processes which are deemed most effective for fraud prevention are denial of opportunity, effective leadership, auditing and employee screening. Denial of opportunity may be translated in the form of internal controls and consistently adhering to clearly defined University procedures established by leadership.
Internal Audit's strategy to examining the effectiveness of internal controls, policies and procedures leadership has established consist of annual fraud risk assessments are performed and periodically revisit them; implementing fraud prevention and detection strategies; developing response strategies for the frauds they aren't able to prevent.
Fraud should be detected by personnel in the normal course of performing their duties, if strong controls exist. Internal auditors should have sufficient knowledge of fraud to ensure that they may identify indicators that fraud might have been committed. If significant control weaknesses are detected, additional tests conducted by internal auditors should include tests directed toward identification of other indicators of fraud. Internal auditors are not expected to have knowledge equivalent to that of a person whose primary responsibility is to detect and investigate fraud. Audit procedures alone, even when carried out with due professional care, do not guarantee that fraud will be detected.
The Office of Internal Audit is developing a fraud Awareness Program designed to increase your level of fraud awareness as it relates to your roles and responsibilities here at Wayne State University.
Fraud is a common risk that should not be ignored. All employees have an obligation to report any suspicions or allegations of fraud. to protect the reputation and integrity of the University. Strong fraud prevention processes help increase the confidence students,donors, regulators, board members and the general public have in the integrity of our University and its ability to manage its fiduciary responsibilities.
Fraud Awareness Education is the foundation of preventing and detecting occupational fraud, within the Schools, Colleges and Divisions of Wayne State University. Students, Faculty and Staff members must be educated in what constitutes fraud, how it hurts everyone at WSU and how to report any questionable activity.
Who should I call about an alleged fraud?
If you suspect fraud, any suspicious activity misuse, misappropriation, etc., please contact the Office of Internal Audit Fraud Hotline at 313-577-5138. For Online Reporting submit an Anonymous Tips Form. If the fraud involves stolen or misappropriated assets (e.g., cash, property, equipment, etc.), you should also call Public Safety at 7-2222 to file an incident report.
What will happen if I report an alleged fraud?
All information related to the specific situation is confidential. Employees are not singled out as “whistle-blowers”, however, management is notified of the particular situation in order that a full investigation may be conducted.
Fraud investigations may be conducted by or involve the participation of the Office of Internal Audit, Public Safety, General Counsel, C&IT Security, and other areas of the University as appropriate. The Office of Internal Audit will assess the facts known relative to all fraud investigations in order to:
The Office of Internal Audit may:
Red Flags within an organization are related to the structure of the organization and the manner in which its policies and procedures are implemented. Understanding symptoms of fraud is the key to detecting fraud. A symptom of fraud may be defined as a condition which is directly attributable to dishonest or fraudulent activity. It may result from the fraud itself or from the attempt to conceal the fraud.