Daily Fraud Fact: Fighting Fraud is Everyone's Responsibility.
Limit Opportunities for Fraud.
One effective way to decrease fraud is to limit opportunities for fraud to occur. You can accomplish this by implementing strong internal controls.
What are Internal Controls?
Internal controls are the plans, methods, policies, and procedures put into place to ensure predictable and organized results. In other words, to provide reasonable assurance that what management wants to happen, will in fact happen, and what they do NOT want to happen, will NOT happen. Management implements internal controls to reduce the opportunities for someone to commit fraud without being detected.
What are my fraud prevention responsibilities?
The tone starts at the top for fraud awareness and prevention, agency managers and supervisors are responsible for the creation of an agency culture that promotes honesty and integrity and implements effective anti-fraud strategies. This includes providing employees the training and resources necessary to perform their anti-fraud internal control duties. Every state employee is responsible to ensure their professional development includes training in fraud prevention, detection and reporting techniques and internal controls. Five fraud prevention must-do’s for every agency:
- Be Proactive. All state employees must read, understand, and comply with the State of Minnesota’s Code of Ethics and Code of Conduct. Agency management must identify areas of operations vulnerable to fraud and evaluate anti-fraud controls for effectiveness by using periodic and ongoing risk assessment. Do not wait for a fraud to occur before taking preventative action.
- Follow Established Hiring Procedures. Minnesota policies and procedures require reference checks and a thorough background investigation, including educational and employment history (as permitted by law).
- Train Employees in Fraud Prevention. Plan and require staff participation in fraud prevention training to ensure all employees understand their fraud prevention responsibilities and know how to report fraud if they know or suspect it is occurring. All state employees should drive a professional development plan that includes training in fraud prevention, detection and reporting techniques and internal controls.
- Implement a Fraud Reporting Mechanism. A tip is what most often detects fraud. Provide reporting channels for employees, contractors, and stakeholders to help uncover more fraud. State employees take action to find out how to report fraud or suspected fraud at your agency.
- Increase the Perception of Detection. Communicate regularly about anti-fraud policies, ways to report suspicions of misconduct, and the potential consequences (including termination and criminal prosecution) of fraudulent behavior. Potential fraudsters will be less likely to try anything inappropriate if they think their colleagues will take note and report them.
Examples of other effective fraud-prevention controls include:
- Written Code of Conduct/ Code of Ethics policies.
- Regular communication and discussion about fraud policies, ways to report misconduct, and potential consequences of fraudulent behavior.
- Formal, documented risk assessments
- Proactive data monitoring and analysis of internal controls
- Periodic job rotation
- Segregation of duties (e.g., separating transaction recording, approval, custody, and reconciliation functions between different divisions or different individuals within a particular business unit).
- Assignment of SWIFT and SEMA4 security roles (limit employee access to only those computer systems and applications needed for an employee to perform their assigned job duties).
- Supervisory review and approval of transactions (e.g., employee timesheets, purchase orders, vendor contracts).
- Delegations of authorities and responsibilities (e.g., formally documented and approved identification of what a specific employee can do/approve/authorize).
Check back tomorrow to learn about your responsibility to report suspected fraud, waste, and abuse.
Thank you for taking action to prevent fraud in Minnesota State Government.