1. Recent Fraud Investigations
November 2016
Recent Fraud Investigations

2. Accountability

3. Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud
Corruption is difficult to prove and there is generally not a bright line between acceptable and unacceptable behavior without a policy or law to say was violated.

4. Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud
Cash
Inventory and
All Other Assets

5. Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud
Cash
Inventory and
All Other Assets
Theft of Cash
on Hand
Theft of Cash
Receipts
Fraudulent
Disbursements

6. Fraud Tree Corruption Asset Misappropriation Financial Statement Fraud2
Asset
Misappropriation
Financial Statement
Fraud
Cash 3 7
Theft of Cash
on Hand
Theft of Cash
Receipts
Fraudulent
Disbursements

7. Fraudulent Disbursements
Corruption
Asset
Misappropriation
Financial Statement
Fraud
Cash
Theft of Cash
on Hand
Theft of Cash
Receipts
Fraudulent
Disbursements

8. Utah Communications Authority
Improper Credit Card Disbursements
Created Fraudulent Physical Documents

9. Real or Fake?

10. Real or Fake?

11. Real or Fake?

12. Real

13. Fake

14. Missing Receipt Log

17. Interlocal Entity Credit Card Fraud
Supervisor provided card number to subordinate to make purchases.
$51,534 – iTunes purchases
Concealed by altering card statements
Making mid-month payments
Ineffective review

18. What Looks Unusual?

19. What Looks Unusual?
Total $2,004.78

21. Interlocal Entity Concealed by: Altering card statements
Making mid-month payments
Ineffective review

22. Interlocal Entity Payroll Fraud
Employee contacted payroll services after payroll submission requesting changes
Leave payout
Commission
Reimbursement (Gym Membership)
No comparison of processed payroll to approved payroll.

23. Theft Summary
iTunes (Clash – In-App Purchase) $51,587 Reimbursements (Gym Membership) $26,861 Extra Payroll (Vacation, Sick, Commission) $12,438 Total $90,886

24. Theft Over Time

25. State Agency Travel Reimbursement Hotel Per-diem
Falsified hotel receipts
Ineffective oversight of employee

26. Confirmation of Stay

27. Summary
Approximately $18,500 in fraudulent reimbursements.

28. USDB Theft
Approximately $60,000 improper credit card purchases (4 years).
Due to limited documentation, amount likely much higher.
Approximately $3,300 in missing cash receipts.

29. USDB Theft Sam’s Club Purchases Smith’s Purchases
General Ledger Manipulation
Missing Cash Receipts

30. County Treasurer Bank transfers to personal accounts – $34,600
Missing cash receipts – $56,182

31. Screenshot of Bank Statement
Transfers
Screenshot of Bank Statement
Highlighted transfers are those from the county bank account to a personal account.

32. Cash Receipts Validated Deposit Slip County Cash Receipt Report
$3,560.49
Does cash collected balance?
Does total received balance?
$93,640.22

33. Separation of Duties Ideally, the following should be separated:
Authorization
Custody of Assets
Record Keeping
Reconciliation
Authorization or approval of a transaction
Custody of Assets (cash or checks received)
Record Keeping (including the ability to adjust accounting records)
Reconciliation

34. Solution Separate Secondary Review of Adjustments Others?
Access to Cash from
Bank Reconciliation and
Reconcile Original Receipt Record to Validated Deposit Slip
Secondary Review of Adjustments
Others?

35. Irrigation District Fraudulent Disbursements Checks to self
Checks to company owned by check maker
Checks to makers credit card company

36. Check to Credit Card Company

37. Check to Company

38. Check to Self

39. Irrigation District
Checks to Self $42,419 to $56,123 Checks to Company $27,253 Credit Card Payments $33,421 Total $103,093 to $116,797

40. Spear Phishing Targeted email scam thrives on: County Example
Familiarity, using information publicly available on an entity’s website – such as names, titles, or other references. Familiarity often makes the recipient of the less vigilant in verifying the requests.
Urgency, indicating that the payment must be made immediately.
County Example

41. Corruption Corruption Asset Misappropriation Financial Statement Fraud
Cash
Theft of Cash
on Hand
Theft of Cash
Receipts
Fraudulent
Disbursements

42. Definition of Corruption
A scheme in which an employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain a direct or indirect benefit.
ACFE Definition

43. Definition of Abuse Abuse Example of Abuse GAO 4.07
“…includes misuse of authority or position for personal financial interests or those of an immediate or close family members or business associate. Abuse does not necessarily involve fraud, or noncompliance with provisions of laws, regulations, contracts, or grant agreements.”
Example of Abuse
“Making travel choices that are contrary to existing travel policies or are unnecessarily extravagant or expensive.”
GAO 4.07

44. What Do You Think? During a Christmas event:
$2,118 was spent for 9 room nights for board members at the Grand America Hotel;
$1,274 for 23 meals for board members, employees, and spouses;
and an additional $145 for parking.

45. What Do You Think? During a board retreat in Park City:
$2,508 – 10 room nights for board members and employees.
$1,664 –14 board members, employees, and spouses to have dinner at Ruth’s Chris Steak House ($119 per person).
$430 – 4 board members, 2 spouses, and the CEO to golf.

46. What Do You Think? During a conference in San Diego:
$1,339 was spent for board members, trust employees, and spouses (6 spouse meals) to have dinner at Donovan’s.
$382 was spent on tickets to a professional baseball game, and $300 was spent on concessions.
$1,072 was spent on food and entertainment for 6 board member spouses.

47. What Do You Think?
Councilmember askes to borrow city employee’s credit card.
City employee verbally approves spending up to $2,500 for a parade.
Councilmember actually spends $5,879.
Supervisors statement at council meeting:
“If a city council member asks for a card, you get it.”

48. Theft of Cash Receipts Corruption Asset Misappropriation
Financial Statement
Fraud
Cash
Theft of Cash
on Hand
Theft of Cash
Receipts
Fraudulent
Disbursements

49. Scrap Metal Sale