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Auditor with a Badge Auditor-Controller

Auditor with a Badge Auditor-Controller. OFFICE OF COUNTY INVESTIGATIONS. Maria Santana, Senior Investigator, CFS Jim Christensen, Senior Investigator, CFE. MISSION.

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Auditor with a Badge Auditor-Controller

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  1. Auditor with a BadgeAuditor-Controller

  2. OFFICE OF COUNTY INVESTIGATIONS Maria Santana, Senior Investigator, CFS Jim Christensen, Senior Investigator, CFE

  3. MISSION • The primary mission of OCI is to ensure public trust in County government by providing a mechanism for reporting, investigating and where appropriate prosecuting fraud, theft, waste, abuse and inefficiency in government. 3

  4. AUTHORITY Penal Code Section 830.13 P.O.S.T. Certification Board of Supervisors Policy 9.040 Centralized Reporting and Investigation of Fraud L.A. County Fiscal Manual Countywide Guidelines for Handling Suspected Employee Misconduct 4

  5. OCI - WHO ARE WE ?? • 12 Investigators • 4 Support Staff • 1 Ombudsman • 3 HIPAA

  6. RESPONSIBILITIES • Investigating all employee, and contractor misconduct. • Particularly losses of County funds, resources or assets. • Coordinates all such cases and where appropriate works these cases with law enforcement. • County Fraud Hotline

  7. Who Performs Investigations in the County • Office of County Investigations-Criminal/Administrative • District Attorney- Criminal • Department of Human Resources-Personnel • CEOP – Discrimination, Harassment • Department’s Internal Affairs, Internal Audit, Personnel, etc.-Administrative/Management

  8. TRAINING • Complete Peace Officers Standards and Training (POST) PC 832 Arrest training. • Investigators are encouraged to have at least two certifications: CFS, CPA, CIA, CFE, CISA or private investigators license. • Degrees in accounting, computer science. • Training sources: DOJ, local law enforcement, Reid & Associates, Public Agency Training. • Most important training: Interview and Interrogations

  9. HOW TO OBTAIN PENAL 830 STATUS • Establish that primary duties of investigators are to investigate criminal fraud cases related to the theft of funds. • Staff should be regularly employed and paid in the capacity as investigators.

  10. WHAT IS CALIFORNIA PENAL CODE 830.13 ? • PC 830.13 allows investigators of a county’s auditor-controller or director of finance to: • Serve Search Warrants • Receive State Criminal History information the same as peace officers of the state. • PC830.13 does not give Powers of Arrest or authority to carry firearms.

  11. Effectiveness of OCI • 1,400+ CASES ANNUALLY • 25% Substantiated • 35% Not substantiated • 40% Immaterial, previously investigated, not enough information, or referred out to CEOP, Welfare Fraud Hotline or other non-County agencies • HOTLINE OPERATOR • SEMI-ANNUAL REPORTS • Disciplinary Action Follow-Up • TIME THEFT IS THE #1 ALLEGATION REPORTED TO THE HOTLINE

  12. What is Fraud? Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain. Source: “Managing the Business Risk of Fraud: A Practical Guide” sponsored by IIA, AICPA and ACFE. 12

  13. $2.9 Trillion, 5% of Revenue is Loss Annually to Fraud (based on Gross World Product) 2002 Revenue Loss Survey 13

  14. $3 Trillion, 5% of Revenue is Loss Annually to Fraud (based on Gross World Product) 2012 Revenue Loss Survey 14

  15. TYPES OF CASES INVESTIGATED • Theft • Timecard, mileage claims, medical certifications, abuse of County assets and resources • Bribery • Computer Crimes • Surveillance – Physical – Cameras • Contractor/Vendor Fraud • Identity Theft

  16. Fraud Triangle – Why do people commit fraud? Opportunity Pressures Rationalization

  17. Nathan Mueller

  18. RED FLAGS

  19. Types of Red Flags • Life Style and Personality • Organizational • Accountability and Control • Financial Documents

  20. Organizational RED FLAGS • Lack of Attention to Detail • Changes in Organizational Structure • Lax Management Style • Tendency Toward Crisis Management • No Communication of Expectations • Too Much Trust in Key Employees • Lack of Proper Authorization Procedures

  21. Accountability and ControlRED FLAGS • Separation of Duties • Lack of Physical Security and/or Key Control • Not rotating assignments among employees • Weak Links in Chain of Controls and Accountability • Missing Independent Checks on Performance • Poor System Design • Inadequate Training

  22. Financial Document RED FLAGS • Missing Documents • Alteration of Documents • Excessive Number of Voided Documents • Documents Not Numerically Controlled • Questionable Handwriting or Authorization • Duplicate Payments • Unusual Billing Addresses or Arrangements • Address of Employee Same as Vendor • Duplicate or “Home Made” Photocopied Invoices

  23. Lifestyle and PersonalityRED FLAGS • Wheeler/Dealer Attitude • Financial Difficulties • Living Beyond Means • Control Issues • Dissatisfied Worker * • Family Problems • No Vacations or Sick Time • Close Customer/ Vendor Relationships • Unusual or Change in Personality (irritable, defensive, argumentative) • Vices (alcohol, drugs, gambling) • Too Good to Be True Performance

  24. INTERNAL CONTROLS Internal Control is an organizational plan which defines separation of duties and how an operation can ensure that assets are safeguarded, accounting records are accurate and timely, and transactions that get processed and recorded are only those transactions that management wants processed and recorded.

  25. Case Study Learning Activity Mr. Smith Dr. Dentist Mr. Wiggins

  26. Webne

  27. PROACTIVE FRAUD DETECTION Data Mining • Continuous Monitoring and Real Time • Transaction Inspection 27

  28. AUTOMATED DETECTION Continuous Systems Monitoring • Suspicious Transaction Flagging Address and Account # Comparisons Payment Analysis 28

  29. INTERNET CONTENT FILTERING • BLUE COAT • TRACKS INTERNET USAGE • BLOCKS SPECIFIC WEBSITES 29

  30. Fastest Growing Cases • Time Abuse • Identity Theft • Cash/Deposit Theft • Gas Theft (Voyager cards) • IT Misuse • Stolen County Warrants 30

  31. IDENTITY THEFT Protection of Client and Employee Data • Limiting Dissemination of Personal Data • Document Shredding • Data Wiping (Computers and Media) • Physical Security and Access Controls • Responses to I.D. Theft Incidents 31

  32. FRAUD HOTLINE INTERNET FRAUD.LACOUNTY.GOV PHONE (800) 544-6861 E-MAIL HOTLINE@AUDITOR.LACOUNTY.GOV 32

  33. Effectiveness of Investigations Departments have been more responsive to discipline employees, including managers for misconduct, etc.

  34. TONE FROM THE TOP • Management must: • Set the tone that reflects the desired culture • Personally demonstrate the tone in everyday communications and functionality • Drive tone down through all levels of the organization • Communicate with specific message of ethics and integrity at least annually • Consistently enforce the organization’s Code of Conduct “It's pretty clear that the best compliance program in the world is meaningless - even if it is funded with a well-meaning compliance officer - if the leadership is not behind it and isn't supportive.” - Honorable Michael E. Horowitz, Commissioner, United States Sentencing Commission

  35. Questions? 35

  36. THE END

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