Fraud Plan

Draft Only, gh

 

 

Town of Preeceville

Anti fraud and corruption strategy

 

September 29^th, 2009

 

 

 

Anti fraud strategy – page 2

 

Fraud response plan – page 4

 

Fraud awareness plan – page 6

 

Town policy – page 7

(What staff is following now)

 

 

 

 

 

 

 

 

Anti fraud strategy

Introduction

“Our Town employs staff, engages volunteers and has assets, interests and annual transactions running into hundreds of thousand of dollars. These, combined with its diverse range and nature of services and activities, put the town at risk of fraud and corruption, from both internal and external sources.”

Fraud may be defined as:

“The intentional distortion of financial statements or other records by persons internal or external to the town which is carried out to conceal the misappropriation (misuse) of assets or otherwise for gain.”

Corruption may be defined as:

“The offering, giving, soliciting, or acceptance of an inducement or reward which may influence any person to act inappropriately.”

One of the town’s strategic aims and objectives is to strive to provide services which meet the requirements of its stakeholders in accordance with its core values. In conducting its business, it is committed to ensuring that the opportunity for fraud and corruption is reduced to the lowest possible risk. Where there is a possibility of fraud and corruption, the association will deal with it in a firm and controlled manner.

The town is committed to an effective anti fraud and corruption strategy designed to:

Ø  Promote standards of honest and fair conduct.

Ø  Prevent fraud and corruption.

Ø  Detect and investigate fraud and corruption.

Ø  Prosecute offenders.

Ø  Recover any losses.

Ø  Maintain strong systems of internal control.

Prevention of fraud and corruption

Rules:

One of the aims of the town’s internal policies and regulations is to guard its assets and interests against loss or damage as a result of fraud and corruption. Compliance with these policies is therefore regarded as a basic prerequisite in the town’s anti-fraud and corruption strategy. In order to remain effective, these policies will be regularly reviewed and updated where necessary.

Conduct:

The town expects all people and organizations associated with it to be honest and fair in their dealings with the town and its clients and customers. The town expects its Mayor and Councilors (elected to the town) and managers to lead by example.

Employees:

The town expects its employees to be familiar with:

Ø  Financial Regulations. 

Ø  Procedural Policies Manuals relevant to their duties; and

Ø  The town’s Code of Conduct.

Employees must comply with the town policy regarding the receipt of any gifts or hospitality. They are recommended to error on the side of caution if they are unsure as to what course of action they should take in such circumstances and seek the advice of their Administer/Forman.

The town values its employees and considers that they have an important role to play. They will be encouraged to report any concerns and provide information if they suspect a fraud or irregularity.

Administer/Forman responsibilities:

The Administer/Forman is expected to ensure that all employees have access to thetown’s policies and regulations and to ensure that they receive suitable training. If anyone breaks these policies and regulations, the town may take formal action against them.

The Administer/Forman must ensure that suitable levels of internal check are present in working procedures, especially financial procedures. It is important that duties are organized so that no one person can carry out a complete transaction without some form of checking process being built into the system.

Reporting concerns:

The town recognizes the dilemma faced by individuals who wish to report concerns that may indicate fraudulent or corrupt activity. An ongoing system is to be established and reviewed with various communication channels to facilitate the process.

Ø  Calling the Mayor

Ø  Calling the town auditor

Ø  Calling the Provincial auditor

Ø   

All information received via these facilities will be dealt with in a fair and confidential manner and it will be investigated properly.

Internal Audit:

Internal Audit should play the most important role in the prevention of fraud and corruption by its systematic examination of the associations systems and procedures, geared to maintaining strong systems of internal control.

The scope of each Internal Audit review incorporates fraud awareness and spot checks that are performed in between system reviews to test the probity of arrangements. Internal Audit is always available to provide the staff and board with advice regarding anti-fraud and corruption initiatives.

Detection and investigation

As required by Financial Regulations and the Procedural Policies Manuals, employees must report any suspected cases of fraud and corruption to the appropriate manager. Reporting cases in this way is essential to the anti-fraud and corruption strategy because it ensures that:

Ø  Suspected cases of fraud and corruption are investigated properly;

Ø  All cases are dealt with by a standard process; and

Ø  The interests of individuals and the town are safeguarded.

Prosecution and recovery of losses

The town will press for the prosecution of offenders and will carry out its disciplinary procedure if necessary.

The town will also aim to recover from the perpetrators any losses that it sustains as a result of fraud and corruption.

Conclusion

The town is committed to tackling fraud and corruption. Its response will be organized and effective and will be based on the principles included in this document.

The town shall continue to review its rules and procedures to ensure that this anti-fraud and corruption strategy is regularly examined to maintain its effectiveness.

 

Fraud response plan

Context

The purpose of this statement is to set out the procedures to be followed by town staff where a fraud is suspected or detected. It applies to the Mayor and Councilors (elected to the town)and all personnel whether staff of the town, volunteers, freelance, casual and temporary staff and contractors.

Reporting a suspected fraud

Any suspicion of fraud will be treated seriously and will be reviewed and analyzed in accordance with the town’s Fraud Investigation Plan.

Action by employees:

If you become aware of a suspected fraud or irregularity, write down your concerns immediately. Make a note of all relevant details, such as what was said in phone or other conversations, the date, the time and the names of anyone involved. Report the matter immediately to either: 

Ø  Your Administer/Forman

Ø  Your Mayor.

Ø  The town’s Auditor.

Ø  The Provincial Auditor.

Ø   

When you report your concerns, arrange to hand over your notes and any evidence you have gathered to the appropriate investigator.

Confidentiality for all parties will be maintained over reports made in good faith which cannot be substantiated following investigation.

A member of staff may choose to report their concerns anonymously and such anonymity will be respected. It should be noted that, if the report suggests criminal activity, and the case is to be pursued by police, the identity of the person reporting the details will be needed at a later date if criminal proceedings are to be pursued effectively; identification is preferred and will assist the investigation.

You must not do any of the following:

Ø  Contact the suspected perpetrator in an effort to determine facts or demand restitution.

Ø  Discuss the case facts, suspicions, or allegations with anyone outside the town (including the Press) unless specifically asked to do so discuss the case with anyone within the town other than the people listed above.

Ø  Attempt to personally conduct investigations or interviews or question anyone unless asked to do so by the Mayor.

Action by Administer/Forman:

If you have reason to suspect fraud or corruption in your work area, you should do the following:

Ø  Listen to the concerns of your staff and treat every report you receive seriously and sensitively.

Ø  Make sure that all staff concerns are given a fair hearing. You should also reassure staff that they will not suffer because they have told you of their suspicions.

Ø  Get as much information as possible from the member of staff, including any notes and any evidence they have that may support the allegation. Do not interfere with any evidence and make sure it is kept in a safe place.

Ø  Do not try to carry out an investigation yourself. This may damage any Internal Audit or criminal enquiry.

Ø  Report the matter immediately to the Mayor.

 

 

Malicious allegations

If an allegation is made frivolously, in bad faith, maliciously or for personal gain, disciplinary action may be taken against the person making the allegation.

 

Investigation procedure

Internal Audit is responsible for initiating and overseeing all fraud investigations and for subsequent follow-up work to be completed. Internal Audit will comply with the Fraud Investigation Plan to ensure that all investigations conform to the same standard and in accordance with legislation and the town’s prosecution policy.

Investigation results will not be disclosed to or discussed with anyone other than those who have a legitimate need to know. This is important in order to avoid damaging the reputations of persons suspected, but subsequently found innocent of wrongful conduct, and to protect the town from potential civil liability.

In cases where an individual is suspected of fraud which a subsequent investigation does not substantiate, it is important that the potential damage to the individual’s reputation is minimized. Whoever originally reported the suspected fraud or irregularity will be informed that the investigation has revealed no wrongdoing.

Conduct of investigation

Internal Audit will conduct their investigations in accordance with the Fraud Investigation Plan.

Once the investigation has been completed, a written report will be prepared which states the facts discovered by the investigation. The report will avoid speculation and no statement shall be made that cannot be supported by the facts.

Learn from past experience

Where a fraud has occurred, management must make any necessary changes to systems and procedures to ensure that similar frauds will not recur. The investigation may highlight where there has been a failure of supervision or a breakdown / absence of control. Internal Audit is available to offer advice and assistance on matters relating to internal control, if considered appropriate.

Disciplinary procedure

As for other cases of misconduct, matters of alleged fraud will be dealt with under the procedure laid down in town’s Disciplinary Procedure.

Recovery of loss

Where the town has suffered loss, restitution will be sought of any benefit or advantage obtained and the recovery of costs will be sought from individual(s) responsible for fraud.

As a first step the individual concerned will be asked to make good the loss.

It may be appropriate to consider recovering the loss from any monies due to the individual on termination if the perpetrator is an employee. The advice of the town’s Solicitor should be sought before attempting to make recovery.

If the individual will not make good the loss consideration should be given to taking civil action to recover the loss, subject to legal advice received.

 

 

 

 

 

 

Fraud awareness plan

Context

The key to dealing with fraud is prevention through good internal control systems that people follow and understand. Why will this plan work? Because it helps addresses the fraud triangle: motive – opportunity – rationalization.

 

 

Ø  Importance of internal controls. Segregation of duties, physical safeguards, independent checks, proper authorization, proper accounting and proper internal controls.

Ø  Using analytical reviews as a tool.

Ø  Cash frauds including skimming, cash larceny and fraudulent disbursements.

Ø  Review of non-cash assets. Inventory, office supplies, equipment and individual’s time.

Ø  Payroll fraud. Ghost employees, over stating hourly pay rate, entering false hours of work, faking injury.

Ø  Expense reimbursement frauds. All expenses supported by documentation. Claims reviewed and approved by authorized level. Review of budgeted versus actual expenses.

 

Summary

Ø  Importance of not making assumptions.

Ø  Striking the appropriate balance between trust and oversight.

Ø  Importance of ensuring established internal controls are followed.

Ø  Knowing why and the purpose of internal controls.

Ø  Paying attention to warning signs/red flags.

Ø  Following up, by investigating and notifying.

 

What is Fraud?

                “Fraud is deliberate deceit which is planned and executed to deprive an individual of property, money or any other valuable security. Fraud is committed with intent and includes actions of misrepresentations and/or acts of omission.”

 

Prevention

Ø  Promote a culture of honest and ethical behavior.

Ø  Sufficient “Tone at the Top”

Ø  A code of Conduct or Ethics Policy with core values to guide employees.

Ø  Whistle blowing mechanism that protects against reprisal.

Ø  Background reference checks on new employees commensurate with the risk they pose.

Ø  Assignment of authority, responsibility and accountably for fraud and misconduct.

Ø  Strong corporate governance.

Ø  Fraud awareness training

Ø  A positive workplace environment.

Ø  Appropriate disciplinary measures.

Ø  Management override controls.

 

Key Steps

            If faced with suspected fraud or misconduct:

Ø  After consideration, withdraw authorities, physical access and electronic access rights.

Ø  Retain professional help.

Ø  Secure evidence.

Ø  Inform your insurance company immediately.

Ø  Notes, notes, notes!