Fraud and Corruption Awareness November 2017
Fraud 1. OBJECTIVES Peninsula Health is committed to preventing fraud in the workplace. All Peninsula Health employees must share in this commitment, especially senior Executives and Managers, who must also be aware of the circumstances which lead to fraud, and ensure appropriate internal controls are operating to minimise exposure to fraudulent activities.
Fraud Fraud is defined as: � Dishonest activity causing actual or potential financial loss to any person or entity including theft of moneys or other property by employees or persons external to the entity and where deception is used at the time, immediately before or immediately following the activity. � This also includes the deliberate falsification, concealment, destruction or use of falsified documentation used or intended for use for a normal business purpose or the improper use of information or position for personal financial benefit.
Fraud Examples of fraudulent behaviour include: • improper use of a corporate credit card; • an excessive claim for expenses or an allowance; • theft of food or consumables • theft of stationery • payment of salary or wages to a fictitious employee; • falsely recording work attendance and time; • not recording leave taken or the false classification of leave; • using a departmental petrol supply card for a petrol purchase for a private purpose; and • acceptance of offers of kickbacks for a preferential treatment.
Corruption Corruption is defined as: � Dishonest activity in which a director, executive, manager, employee or contractor of the entity acts contrary to the interests of the entity and abuses his / her position of trust in order to achieve some personal gain or advantage for him or herself or for another person or entity.
EXAMPLES OF CORRUPTION
Corruption issues affecting the public health sector • Theft of controlled drugs; • Fraudulent billing practices; • Procurement and contract management; • Conflicts of interest; • Employment Practices; and • Theft of cash and portable assets.
RESPONSIBILITIES WITH REGARD TO FRAUD PREVENTION AND AWARENESS It is the responsibility of all managers to ensure there are mechanisms in place within their area of control to: • assess the risk of fraud; • promote employee awareness of ethics; • educate employees about fraud prevention; and • implement procedures aimed at detecting fraud and corruption.
REPORTING AND INVESTIGATION • All employees have a responsibility to report any suspected fraud. If an employee of Peninsula Health becomes aware of or has good reasons to suspect fraudulent activity, the employee must report it immediately to his/her manager. If an employee feels that he/she cannot report it to his/her manager or the manager does not act on the report promptly, he/she can report it to a manager at a higher level or the relevant Executive Director. • If this is not possible or effective, the staff member can make a disclosure under the Protected Disclosure Act 2012 . Peninsula Health cannot accept a protected disclosure under the Protected Disclosure Act. This disclosure must be made to the Independent Broad-Based Anti-Corruption Commission (IBAC)
A selection of good management practices that may assist in limiting fraud exposure • regulations governing contracts and the supply of goods and services are properly enforced; • accounting records provide a reliable basis for the preparation of financial statements. • controls operate which ensure that errors and irregularities become apparent during the processing of accounting information; • a strong internal audit presence; • management encourages sound working practices; • effective segregation of duties exists, particularly in financial, accounting and cash/securities handling areas;
A selection of good management practices that may assist in limiting fraud exposure • creation of a climate to promote ethical behaviour; • act immediately on internal/external auditor's report to rectify control weaknesses; • review, where possible, the financial risks of employees; • set standards of conduct for suppliers and contractors; • review large and unusual payments; • perpetrators should be suspended from duties pending investigation;
A selection of good management practices that may assist in limiting fraud exposure • maintain good physical security of all premises; • conduct regular staff appraisals; • review work practices open to collusion or manipulation; • develop and routinely review and retest data processing controls; • regularly review accounting and administrative controls; • set achievable targets and budgets, and stringently review results; • ensure staff take regular leave; • rotate staff; • ensure all expenditure is authorised; • issue accounts payable promptly and follow up any non- payments;
Indicators which may flag the potential for exposure to fraud • excessive variations to budgets or contracts • related party transactions • borrowing from fellow employees • an easily led personality • covering up inefficiencies • lack of management oversight • no supervision • staff turnover is excessive
Indicators which may flag the potential for exposure to fraud • large outstanding bad or doubtful debts • employees suffering financial hardships • employees apparently living excessively beyond their means • heavy gambling habits • signs of drinking or drug abuse problems • conflicts of interest • lowest tenders or quotes passed over with scant explanations recorded
Indicators which may flag the potential for exposure to fraud • excessive generosity • lack of clear financial delegations • secretiveness • apparent personal problems • marked character changes • excessive ambition • poor morale • excessive control of all records by one officer
Indicators which may flag the potential for exposure to fraud • poor security checking processes over staff being hired • unusual working hours on a regular basis • personal creditors appearing at the workplace • non taking of leave • excessive overtime • lost assets • absence of controls and audit trails
Tone from the top down � Where it fails � Authorising, instructing or condoning non-compliant and unethical conduct; � Failing to take reasonable steps to ensure an ethical culture exists and is maintained; � Making exceptions to compliance obligations, rationalized for some reason as been acceptable; � Doesn’t filter down to other leaders throughout the organization.
Tone from the bottom up � Recognising that everyone in an organisation has leadership responsibilities when it comes to compliance and ethical conduct, all employees have a duty to speak up; � Organisations need to ensure that an adequate framework is in place to support all its people to show leadership on issues of ethical conduct and non compliance; � An organisations people are the most common source of detecting and reporting fraud and corruption, a resource that needs support and encouragement; � Increasing focus on whistleblowers and Protection disclosure rights
• Recommendations � Conduct regular staff surveys; � Training and feedback surveys, continuous monitoring; � Evidence of accountability, enforcement and consequences
QUESTIONS?
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