The Hunt for Fraud: The Devil’s in the Data Presented by: David R. Hancox, CGFM, CIA Co-Author:...

The Hunt for Fraud: The Devil’s in the DataPresented by: David R. Hancox, CGFM, CIA

Co-Author: Government Performance Audit in ActionFaculty: Siena College and USDA Graduate School,

Washington DCDirector – State Government Accountability: NYS

Comptroller’s Office

•2008Financial Management Institute of Canada – Manitoba Chapter

Professional Development Day

FMI - Manitoba CA Copyright 2008 David R. Hancox, CGFM, CIA 2

Fraud A deception deliberately practiced in order to

secure unfair or unlawful gain.


Audit Requirements

GAGAS – Financial Audits

Auditors should design the audit to provide reasonable assurance of detecting material misstatements resulting from violations of provisions of contracts or grant agreements that have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives.


Audit Requirements

GAGAS – Attestation Engagements

In planning examination-level attestation engagements, auditors should design the engagement to provide reasonable assurance of detecting fraud, illegal acts, or violations of provisions of contracts or grant agreements…


Audit Requirements

GAGAS – Performance Audits

When laws, regulations, or provisions of contracts or grant agreements are significant to the audit objectives, auditors should design the audit methodology and procedures to provide reasonable assurance of detecting violations that could have a significant effect on the audit results.


Audit Tools for Detecting Fraud

A true understanding of internal controls

Real knowledge about the program, function or activity being audited

Sophisticated data analysis – looking for trends, patterns or outliers

True professional skepticism


Understanding Internal Controls

Strong controls, but the wrong controls

Understanding the control environment

Art HayesInternal controls activities are subject to impairment from at least five directions:

1. The extent to which the controls are not updated to cover actual business operations

2. The extent to which the controls are routinely ignored3. The extent to which the controls are overtly overridden. 4. The extent to which the controls are covertly overridden5. The extent to which the controls have express exceptions


Knowledge About The Program

You don’t know, what you don’t know!


Data Analysis

Understanding new statistical techniques and software


Professional Skepticism

There is a plausible explanation for every fraud


Would You Climb A Smokestack?


THEFT AT ROSLYN:

Total Stolen $11.2 MillionFRAUDULENT EXPENDITURES:

Personal Credit Cards $5,902,544

Private Mortgages and Loans $1,137,939

Home Depot $609,000

Food $594,121

Salaries and Benefits $555,120

Gluckin-owned Companies $255,537

Computers and Electronic Equipment $249,883

Private Automobiles $206,798

Insurance Premiums $160,171

Other Personal Expenses $112,983

ABUSE and MISUSE OF DISTRICT FUNDS:

Related Party Consultants $1,074,547

Postage and Shipping $166,945

Travel Expenses $133,619

Other Questionable Expenditures $91,958

TOTAL $11,251,165


Clementine – A powerful tool


Mapping Software - for Finding Fraud


Dolly Rosen – 900 Dental Procedures a Day


Dolly Rosen & The Shelters


Accurint – Finding Relationships to Uncover Fraud


Looking for the Relationship


Establishing the Relationship


Comprehensive Reports


Detailed Information


NYC Public Administrators Need for investigators to confirm

Misappropriating cash – Utica Psychiatric Center Gas Credit Cards Inventory Fraud – Supply Support Program Fraud – TAP Procurement Card Fraud Payroll Fraud – No Show Employee Revenue Fraud – Ski Centers

Frauds

The Hunt for Fraud: The Devil’s in the Data Presented by: David R. Hancox, CGFM, CIA Co-Author:...

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