INTERNAL AUDIT - ACCOUNTS RECEIVABLE AND COLLECTIONS AUDIT University of Washington August 11, 2011 Kim Herrenkohl, Director Western Washington University Office of the Internal Auditor

Training Objectives Discuss common fraud risks Objectives of an operational accounts receivable and collections audit Discuss WWU’s Audit Program Discuss WWU’s Audit Report

Common Fraud Risks in a Receivables Process Improper separation of key processing duties between cash receipting and A/R system capabilities (process credit memo or write off as bad debt) Create fictitious refund checks Write off debts without going through collections for relatives or for kick backs Less incentive in Higher Education for fraudulent overstatement of receivables

Washington State Receivables Frauds Fire Department was notified by former accountant’s bank about FD checks deposited or cashed. ($77,153) Parks employee had complete control of registering, receipting money and reconciling and falsified the documents ($6,320) Student notified College of a payment that was not properly posted to his account. Found the cashier was manipulating accounts and misappropriated part of the payment ($11,260 )

Objectives of Accounts Receivables & Collections Audit As Internal Auditors (not financial statement auditors), our audit scope typically includes reviewing for: Effectiveness Efficiencies Compliance with policy & regulation Safeguarding assets (reasonable internal controls)

Western Washington University’s Policies Select “Business & Financial Affairs Division “ Scroll down to policies starting with # Billing and Collection