Association of Integrated Schools Bursars Conference www.pwc.com Association of Integrated Schools Bursars Conference September 2017

What is Fraud ? “Something said or done in a dishonest way to deceive people” “Dishonesty with the intention to create advantage” “Wrongful or criminal deception” “Deceit, trickery, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage” Therefore, fraud can include theft, dishonesty, deception and misstatement of fact. The tip is key. Explain the difference between the four options.

The Fraud Triangle FRAUD Pressure Opportunity Rationalisation A framework for high-risk fraud situations Pressure Financial or emotional force encouraging fraud FRAUD Opportunity Ability to execute plan without being caught Rationalisation Personal justification of dishonest actions

Pressure Drives a person to want to commit the fraud and may include pressure to show good performance or results, financial problems, addictions like gambling, shopping or drugs, or just the thrill of being able to get away with something. Is the motivation behind the crime and can be either personal financial pressure, such as debt problems, or workplace debt problems, such as a shortfall in revenue. The pressure is seen by the individual as unsolvable by orthodox, legal, sanctioned routes and unshareable with others who may be able to offer assistance. A common example of a perceived unshareable financial problem is gambling debt. Maintenance of a lifestyle is another common example. The tip is key. Explain the difference between the four options.

Opportunity Enables one to commit the fraud and is created when there are weaknesses in control mechanism. Individuals think they won't get caught because nobody is controlling, performing reconciliations and reviewing records. Is the means by which the individual will defraud the organisation? In this stage the worker sees a clear course of action by which they can abuse their position to solve the perceived unshareable financial problem in a way that – again, perceived by them – is unlikely to be discovered. In many cases the ability to solve the problem in secret is key to the perception of a viable opportunity. The tip is key. Explain the difference between the four options.

Rationalisation Is when individuals think that they are justified to commit the fraud because of various reasons like being underpaid, that it's for their family, or that they'll return it back before anyone notices? Is the final stage in the fraud triangle? This is a cognitive stage and requires the fraudster to be able to justify the crime in a way that is acceptable to his or her internal moral compass. Most fraudsters are first-time criminals and do not see themselves as criminals, but rather a victim of circumstance. Rationalisations are often based on external factors, such as a need to take care of a family, or a dishonest employer which is seen to minimise or mitigate the harm done by the crime. The tip is key. Explain the difference between the four options.

Real life examples in Corporates Corporate financial reporting fraud: Pressure to achieve monthly result; and Opportunity to post entries without any formal review Fraud for personal gain; Weak controls provided an opportunity; and Financial pressure at home The tip is key. Explain the difference between the four options.

Real life examples School Related Examples False Invoices Services or product not provided – Tessa Grant Altering bank account details – Physical Education NZ (May 2017) Teaming and Lading Receipt of incoming funds (ie Locally Raised Funds) The tip is key. Explain the difference between the four options.

Fraud risk areas in Schools Capital expenditure projects New suppliers or changes to supplier bank accounts Approval of payments Petty cash / cash receipting Credit cards / staff reimbursements Conflicts of interest Theft of assets / resources Misstatement of financial information / roll information The tip is key. Explain the difference between the four options.

Fraud mitigation Ways to mitigate fraud risk: Preventative controls Detective controls Education and training Key controls designed to mitigate risk: Dual authorisation on payments Segregation of duties (where possible) Formal review and approval of invoices and reconciliations Approval of changes to standing data i.e. bank details of suppliers and employees Changes to roles and responsibilities Awareness of cyber attacks and phishing scams that are becoming more pervasive The tip is key. Explain the difference between the four options.

Questions The tip is key. Explain the difference between the four options.