Fraud knowledge is essential in combatting wasteful expenditure in the education sector, which, according to a 2013 report by Corruption Watch, a civil society watchdog, accounts for as much as R3,3-billion of R30-billion of wasteful expenditure lost annually by the state, says Clayton Thomopoulos, director in Risk Advisory at Deloitte.
As highlighted by Finance Minister Nhlanhla Nene in his Medium-Term Budget Policy Speech, the introduction of a modernised procurement system in the public sector will lead to reduced opportunity for corruption, increased accountability, more cost-effective operations and improved efficiency.
Ethical breaches in educational institutions are unfortunate realities that ultimately affect the future not just of students but all taxpayers and donors. As such, fraud prevention, detection and forensic investigations have become critical elements in ensuring that educational institutions minimise risks against such realities, especially as they receive funding from a number of sources.
The most common types of fraud within these bodies include: funding or grants being misused for other purposes or to further an employee’s personal business interests; employees inflating expenses or submitting fictitious claims, the likelihood of which is increased through nepotism, lack of policies and procedures and inconsistent segregation of duties.
Another warning sign is evidence of employees making use of institutions’ facilities, equipment and infrastructure to engage in personal business activities or other income-generating initiatives. In addition, the exponential increase in demand for student accommodation in recent years has created a new stream for potential abuse, especially where the planning for student accommodation is not adequately considered and sourced, resulting in last minute or temporary accommodation arranged without following the prescribed processes.
The need to engage with specialised forensics resources is emphasised by the fact that fraud, corruption and other ethical breaches take many guises and continually evolve over time. Early detection and timeous disciplinary action is the only means to effectively stamp it out before it takes root. There are a number of internal actions educational institutions can and should take in order to reduce the likelihood of fraud and corruption:I looked on the e-mails from her but there’s no signature.
* Implement clear and unambiguous policies and procedures in respect of ethics, fraud, corruption, gifts and conflicts of interest; with each employee required to sign such a code on an annual basis.
* Each employee should declare their interests, which should be verified against official company registration data and supplier records.
* Scrutinise the process of implementation, communication and monitoring of financial policies in respect of all elements of the finance function.
* Internal controls aimed at appropriate delegations of authority, recording of revenue and segregation of duties should be adhered to without exception.
* Depending on the level of the institution’s controls maturity, an appropriate Continuous Control Monitoring solution should be considered, preferably through an external data hosting and analysis process.
* Implement a robust supplier verification and appointment process, including the procurement and payment lifecycles.
* Employee appointment procedures should provide for stringent vetting, particularly to verify qualifications and previous employment history.
* Consider utilising an externally managed ethics or fraud hotline allowing for anonymous 24/7 reporting of offences, providing multiple language options.
* Develop a detailed Fraud Response Plan that clearly spells out procedures to be adopted in the event of fraud or an irregularity.
* Effective forensic investigation should be initiated in order to assist in the resolution of any potential issue that may have been identified.
* Any offenders should be dealt with swiftly and consistently, regardless of their position or seniority within the institution.
Forensic specialists can provide invaluable assistance in drafting, assessing and updating anti-fraud related policies and ethics guidelines. They help develop conflicts of interest and annual declaration processes, as well as training appropriate staff in their application. Forensic specialists can be called upon to perform compliance reviews of historical transactions, as well as the level of compliance to prescribed policies and procedures.
They execute fraud risk assessments aimed at identifying key areas of fraud, corruption or ethics risk and help with identifying risk mitigation measures. An important risk mitigator is raising fraud awareness among employees and communicating their obligations; as well as assessing cases reported through an anonymous hotline, including the planning and execution of any subsequent investigation.
A first step for any educational institution is to assess their current fraud landscape and ethical parameters to determine how resistant their operating environment is to such irregularities. To conduct an appropriate assessment, specialist resources are required – yet the cost must be measured not only against actual losses incurred, but the value of future deterrence. An environment which has a propensity to propagate fraud, corruption and dishonesty, will most likely, in fact, result in the same.