GBAS Business Administrator Institute: Presenter: Brian Mikell, Chief Audit Executive Office of Audit and Compliance Review

Transcription

1 GBAS Business Administrator Institute: Presenter: Brian Mikell, Chief Audit Executive Office of Audit and Compliance Review

2 Identify existing tools available to assist with internal controls and compliance of university, state, and federal regulations Examine case studies of non-compliance to determine the weak areas that contributed to the break in accountability, efficiency, or compliance Discuss strategies that can assist in maintaining integrity and adherence to established rules and regulations

3 Decentralized Academic focus Significant variation in staffing size and competencies Unit heads are responsible for: Fiscal and compliance objectives Academic goals and objectives Guiding Principles of Financial Management ( University of Florida Internal Control Principles (

4 DHHS Federal Audit Oversight Office of Auditor General (Legislative Auditors) Local/Regional/National CPA Firms providing financial or limited scope audits on affiliated organizations A number of transaction monitoring or compliance monitoring units are referring themselves as auditors Office of Audit and Compliance Review - Internal Audit Unit

5 Audits and Advisory Reviews adding value to: Operations Financial Reporting Compliance Asset Protection Governance Risk Management Investigative and Special Reviews: Preliminary fact finding Comprehensive review in partnership with management and other agencies Follow-Up Reviews

6 Where did this happen? At UF? Was this incident preventable? If so, how? Discuss how procedures or controls can prevent this from happening again.

7 Joan was a trusted Research Department Business Manager responsible for: Buying all lab supplies Certifying receipt of all goods/services Recording all transactions Performing all reconciliations Producing reports for the Director/PI

8 Transactions were electronically approved for pay by fiscal clerk in oversight department Joan made frequent purchases from a particular vendor that happened to be owned by her spouse Director/PI was unaware of the conflict of interest Joan never disclosed

9 In the beginning, all purchases were legitimate Over time, Joan began to inflate the number of items purchased so that the department was paying 2X, 3X, 4X what was actually received As her confidence grew, Joan began to submit completely fabricated invoices Joan made most purchases via her PCard, but some were vouchered Situation continued for 3+ years For the last year, the department averaged $4,000 per week in fraudulent purchases

10 Investigators identified 194 fraudulent transactions totaling approximately $250,500 The Research Department was funded by Federal grants Amounts to be repaid to Federal government have to be increased by applicable indirect cost rate Joan is no longer employed by the institution Vendor is prohibited from doing business with the institution

11 Tenured professor was the sponsor of the student debate team Arranged all travel took cash advances to pay for student travel expenses Management noted: The number of debate trips per year steadily rising Names of students participating and traveling to debates were often listed twice on the same trip Review revealed 25% of debates were fictitious

12 Professor pressured students to sign off on travel expense documentation They were afraid to report the professor due to influence he had over their majors

13 Professor was also arranging summer debate programs for high schools from around the state: Collecting fees (payable to him) Funding the programs from foundation funds Pocketing the fees for himself Professor found guilty of theft of $38,000, in prison

14 Basic Facts: Research Institute supported by Federal grants Director/PI responsible, but not involved in operations Director/PI unconditionally trusted Business Manager

15 Handling of Participant Stipends: Controlled by Business Manager Disbursed from $4,500 revolving fund Receipt logs used multiple times to request reimbursement Reimbursement requests exceeded use resulting in balance in excess of established fund amount Over 5 years, $206,525 requested for stipends Original participant receipts supported only $72,000 $134,525 unsupported

16 Payroll and Overtime: All employees were OPS (other than Business Manager and PI) Work hours were inflated for employees In class at local school At doctor s appointment Requested more hours due to financial situation On vacation (OPS do not accumulate vacation hours) Director/PI never reviewed final payroll reports Only interim projected payroll Trusted Business Manager to authorize and monitor Loss ranged from $18,000 to 25,000

17 Other Issues: Inappropriate charges for food - $33,600 Business Manager s PCard used by all Sharing passwords to process transactions Director/PI charged to grant: $5,300 for personal home internet service $435 for courier service between home and Institute office Large volume of retro exp adj between grants Department store credit card in institute s name Total Institution Losses - $192,150 plus applicable IDC

18 Leena was a 63 year old executive at an educational institution Embezzled $1.5 million over 7 years Created false executive committee meeting minutes for nonexistent meetings The only order of business was to authorize a leadership stipend payment to Leena Typically in $65,000 lump sum payments Ultimately used for travel and entertainment including A trip to Hawaii A shopping binge at a Vera Wang boutique

19 CFO of a major university foundation Embezzled $850,000 over 2 years Wrote at least 5 checks to himself Largest being $295,000 Checks recorded in accounting records as payments to legitimate vendors CFO was trusted employee Superuser access with lack of monitoring

20 Internationally Respected Researcher at major university Attracted large volume of grants from multiple federal sources for institution Awarded approximately $6.5 million over 20 years Owned a company that also solicited grants Awarded approximately $3.1 Million over 10 years

21 Issues: Disclosure of relationship with outside company as minor employee Actually was only significant employee/owner Salaries charged to grants not properly supported Salaries were paid where money was available w/o regard to effort PI directed fiscal staff they could not say no Used institutional resources, including personnel, to conduct research for private company Plagiarism used grad student research as deliverables for his projects w/o their knowledge

22 Outcome for Institution: Questioned costs - $435,700 Investigative costs - $400,600 Outcome for Internationally Respected Researcher : Convicted of 50+ counts of wire fraud and money laundering Damaged reputation/unemployable Prison/probation

23 While activities or functions may be delegated, accountability will remain with you Recognize and act on red flags Emphasize compliance with rules, policies, and procedures Don t allow staff to sign on your behalf/don t share your password

24 Resist the temptation to assign all critical tasks to the same staff member. Segregation of duties is a critical control Trust but monitor. Even if performed occasionally, supervisory review of departmental ledgers and payroll pay lists demonstrates importance

25 Conduct background and reference checks when appropriate Promote training Ensure that you and staff register for relevant training programs Set achievable and measurable goals and objectives

26 Identify back-up staff and procedures for key operations/processes Be familiar and observe rules governing appropriate fund use

27 Good controls protect you and your staff Control procedures are considered performed only if documented Maintain some level of oversight over: Budgeting and monthly fiscal reports Time reporting-payroll Purchasing cards OPS staffing duties-expectations-schedules

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