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Presentation. CIFAL PRESENTATION Date: 13 JUNE 2012 Place : Durban. Ugu District Municipality. Whistle Blow and Fraud Presentation. AGENDA. Introduction Definition of Fraud Fraud Triangle Definition of Corruption Types of Fraud and Corruption Dealing with Fraud Fraud Red Flags

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  1. Presentation CIFAL PRESENTATION Date: 13 JUNE 2012 Place : Durban

  2. Ugu District Municipality Whistle Blow and Fraud Presentation

  3. AGENDA • Introduction • Definition of Fraud • Fraud Triangle • Definition of Corruption • Types of Fraud and Corruption • Dealing with Fraud • Fraud Red Flags • Legal Framework • Protected disclosure Act • Questions

  4. Introduction and Fraud Definition Introduction The purpose of this presentation is to provide Ugu District Municipality employees and other stakeholders with the essential information regarding Ugu District Municipality anti-corruption campaign. Definition of Fraud Fraud is an unlawful and intentional making of misrepresentation which cause actual or and potential prejudice to another person.

  5. Fraud Triangle Opportunity Pressure Rationalisation

  6. Definition of Corruption Corruption is a conduct or behaviour where a person accepts or agree or offers any gratification for him/herself or for another person where the purpose is to act dishonestly or illegally. Examples of Corruption Bribery Extortion Abuse of power Conflict of interest Favouritism Nepotism Favouritism etc. Definition of Corruption

  7. Dealing with Fraud Preventative • Fraud Risk Assessment • Internal Control • Fraud Awareness Training • Fraud Hotline • Fraud Prevention plan • Pre-employment Screening • Management Commitment

  8. Dealing with fraud (continue) Fraud Detection • Internal Audit • External Audit • Incident/Exception Reports • Whistle Blower Fraud Response • Investigation • Reviewing of system and procedure • Disciplinary Hearing • Asset Recovery • Providing Information to third parties

  9. Fraud Red Flags Employees Red Flag Employees lifestyle changes: expensive cars, jeweleries etc Significant personal debt and credit problem Behavioral changes: drugs, alcohol etc Refusal to take vacation leave Lack of segregation of duties Management Red Flag Reluctance to provide information Management engage in frequent dispute with auditors Management decision are dominant by individual and small group Weak internal control Decentralization without adequate control Frequent change of External Auditors Company assets sold under market value Continuous rollover of Loans

  10. Red Flags (continue …) Payroll Inconsistence overtime hours worked Overtime charged during a slack period Overtime charged for employees who normally do not worked overtime Payroll budget variation Employees with statutory deduction only Purchasing Lack of physical security Vendors without physical address Purchases that bypass normal procurement procedures High purchase from new vendor Purchases from vendors who are not on approved list

  11. Red Flags (continue) Change in Behavior Borrowing money from co-workers Gambling beyond the ability to stand the loss Excessive drinking Providing unreasonable response Carrying unusual some of money Creditors or collectors appearing at the work place Cash or Accounts Receivable Excessive number of void transaction Unauthorised Bank Account Discrepancies between bank deposits and posting

  12. Other Fraud Signals Supporting document not found when requested Using of duplicate invoice Usage of pro forma invoice Cash Lobbing Increase in customer complaints Cancellation of cash transaction Criminal records Failure to discipline violators IT SHOULD BE NOTED THAT RED FLAGS ARE WARNINGS THAT SOMETHING WRONG COULD TAKE PLACE. LITLE FRAUD SOON BECOME LARGE.

  13. Legal Framework Corruption Act, 94 of 1992. Protected Disclosure Act. Code of Conduct. Anti-Fraud and Corruption Policy of Ugu District Municipality. Access to Information Act. Corporate Governance. Aunt-Money Laundering Act. Financial Intelligent Centre Act. MFMA. PFMA KING 3

  14. Protected Disclosure Act The protected Disclosure Act,26 0f 200 makes provision for the protection of employees who make a disclosure that is protected in terms of this act. Any disclosure made in good faith and sustainably in accordance with any procedure prescribed by the employee’s employer for reporting is considered a protected disclosure under this Act. An employee making protected disclosure is protected from victimisation. It should be noted that this Act does not protect false disclosure.

  15. Thank You

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