1. BEST PRACTICES
Will Lewis

2. Best Practices – Internal Controls – Mitigating Fraud
Items we will discuss:
Defining fraud
The start of fraud
After the fraud
Signs that fraud could occur
Signs that fraud could already be happening
Policies
Internal Controls
Tips for detecting fraud
One or two-man Housing Authority
Lindsey Software tools to help assist in detecting fraud
MOBILE  DESKTOP  WEB

3. Knowing or using false statements or documents to obtain services
Best Practices
Defining Fraud
Fraud is:
Knowing or using false statements or documents to obtain services
Misrepresentation
Knowing Statements are false or misleading
MOBILE  DESKTOP  WEB

4. Usually starts out small Not usually pre-planned
Best Practices
The Start of Fraud
How fraud begins:
Usually starts out small
Not usually pre-planned
Enacted when opportunity presents itself
Usually justified by the perpetrator
MOBILE  DESKTOP  WEB

5. Signs were usually there Somebody suspected it was going on
Best Practices
After the Fraud
What happens AFTER:
Signs were usually there
Somebody suspected it was going on
Caught by accident (someone notified)
Never as much as the perpetrator lets on
MOBILE  DESKTOP  WEB

6. Signs that Fraud Could Occur
Best Practices
Signs that Fraud Could Occur
Corporate Environment:
Nepotism
HA does not have or is not adhering to a procurement policy
Chaotic atmosphere
Easy access to goods
Absentee Executive Director
Lack of Board meetings
Unproportioned involvement of the Board of Commissioners in day-to-day operations
MOBILE  DESKTOP  WEB

7. Signs that Fraud Could Occur
Best Practices
Signs that Fraud Could Occur
Internal Controls:
Lack of policies, enforcement, or inconsistent enforcement of policies.
Lack of segregation of duties.
Lack of reporting.
Lack of reconciling accounts.
MOBILE  DESKTOP  WEB

8. Signs that Fraud Could Occur
Best Practices
Signs that Fraud Could Occur
Employee Action:
Lack of timesheets, or timesheets are late
Employee reports are constantly being modified
Absenteeism
Always an exception
Lifestyle does not seem to match salary
Lifestyle – gambling addictions, alcohol and drug dependency, heavy debt.
MOBILE  DESKTOP  WEB

9. Signs that Fraud Could Occur
Best Practices
Signs that Fraud Could Occur
Landlord / Resident Actions:
Resident reports zero income
Resident is always requesting new locks on doors
Resident lifestyle does not match reported income
Resident unit is suspicious – “clothes of some other person in unit”
Landlord – unit is always failing
MOBILE  DESKTOP  WEB

10. Signs Fraud Could Be Happening
Best Practices
Signs Fraud Could Be Happening
Bills are being paid late or not at all.
Unusually low rent charges.
Tenant Accounts Receivable are unusually high.
Deposits are not consistently being deposited.
Lots of transactions happening at the close of a critical period.
Financial Reports are incomplete or not at all.
Cash is constantly being moved around.
Inspections are not being done or rotated.
Tenant Files are incomplete, and re-exams are not being done.
Co-mingling funds.
No follow-ups.
MOBILE  DESKTOP  WEB

11. True / False – Fraud is usually well-planned in advance.
Best Practices
Questions
True / False – Fraud is usually well-planned in advance.
True / False – The degree of Board involvement is a sign that fraud is definitely occurring.
True / False – Lack of policies could be a sign that fraud is occurring
MOBILE  DESKTOP  WEB

12. Best Practices Policies Include:
A Fraud Conflict of Interest Policy (HUD Procurement Handbook Rev 2 – Chapter 4)
All related Board-approved policies (Procurement, Collection, Investment, etc.)
Clear documentation of internal controls (HUD Procurement Handbook Rev 2 – Chapter 4)
NOTE: If the PHA has not conveyed policies to staff – it cannot be considered an active policy.
MOBILE  DESKTOP  WEB

13. The person that initiates the transactions
Best Practices
Internal Controls
The HA should always have controls that ensure the following persons are not the same:
The person that initiates the transactions
The person that approves the transactions
The person that accounts for the transaction
NOTE: If procedures are not written down, can they be considered a procedure?
MOBILE  DESKTOP  WEB

14. Tips for Detecting Fraud
Best Practices
Tips for Detecting Fraud
Control access to assets (inventory, credit cards, vendor lists, etc.)
Set up passwords and require them to be periodically changed.
Limit credit availability
Do not maintain a high credit limit
Have the credit card company restrict the use and limit
Establish Positive Pay
Purge old vendors that have not been used in 2+ years
Perform Employee and Resident Credit Checks
Update Technology (scan receipts, online payments)
MOBILE  DESKTOP  WEB

15. Tips for Detecting Fraud
Best Practices
Tips for Detecting Fraud
Rotate Duties (inspectors, maintenance staff, managers)
Update training
At critical time periods – perform a review of transactions (deposits made at the end of month to be sure money is not being “borrowed”)
Perform analytical review – look for inversely-related items (something goes up – expect something to go down)
MOBILE  DESKTOP  WEB

16. Best Practices
Questions
True / False – It is not necessary to have a fraud and conflict of interest policy.
True / False – The person that initiates the transaction, the person that approves the transaction, and the person that accounts for the transaction should be different people.
MOBILE  DESKTOP  WEB

17. One and Two – Person HA’s
Best Practices
One and Two – Person HA’s
Be sure:
The Board of Commissioners has a complete listing of monthly documents to review at the board meeting. These documents should include Financial Statements, bank statements, listing with all appropriate documents available for all transactions.
Hire an outside entity (Fee Accountant) to perform your accounting services.
Have work by outside services sent directly to Board (statements, financials, inspections, etc.)
MOBILE  DESKTOP  WEB

18. Lindsey Software Tools for Preventing and Detecting Fraud
Best Practices
Lindsey Software Tools for Preventing and Detecting Fraud
Unreported Income – Tenant PI
TPI allows users to process background and credit checks on resident and employees. There are currently 2.5 million tenants who owe more than $97,000,000 to our clients. Many of these residents live in OTHER HOUSING AUTHORITIES!
Theft of Rent – Resident Portal
Residents can go online and pay with credit card, check, or set up recurring monthly payments. Also use retail outlet like Family Dollar.
MOBILE  DESKTOP  WEB

19. Lindsey Software Tools for Preventing and Detecting Fraud
Best Practices
Lindsey Software Tools for Preventing and Detecting Fraud
Internal Control – Fee Accounting Services
In order to assist you with your accounting needs, we offer a full accounting service
Internal Control (access) – Lindsey can be set up to restrict access to certain programs
Internal Control (audit) – All transactions or changes posted by any employee can be traced.
Internal Control (technology) – Document Manager – A program where all docs can be scanned and easily accessed.
Internal Control (reporting) – Lindsey can process reports in various formats that can easily trace variances.
MOBILE  DESKTOP  WEB

20. THANKS!
Will Lewis