Case in Point: Lessons for the pro-active manager, from our friends at Auburn University

Published Date: 
Thursday, March 31, 2016
“Transparency, honesty, kindness, good stewardship, even humor, work in businesses at all times” 

-- John Gerzema

This month we continue our review of Case in Point stories from last year with a focus on the category ''Fraud & Ethics Related Events.'' The events we noted in this category during 2015 were as follows:

  • Misappropriation 38%
  • Academic Fraud 22%
  • General ethics questions and/or conflicts of interest 18%
  • Research Fraud (includes misuse of federal funds) 13%
  • Miscellaneous 9%

Historically, this category has been dominated by occupational fraud/misappropriation, which by definition is when an employee steals from their employer. As you see above, this continues to be the largest single item in this category.

As we have noted in prior years, occupational fraud actually occurs frequently within the educational industry. For the past several years, our industry has been one of the most impacted by employee misappropriation. While the overall dollar amount lost is lower than most other industries, it is unfortunate that education remains so high in this ranking.

In the 2014 survey from the Association of Certified Fraud Examiners, education's three most common fraudulent activities are: corruption, billing schemes, and false reimbursements. Corruption schemes include conflicts of interest, such as when an employee takes advantage of a particular situation for personal gain. This often involves competitive bids and related matters. Virtually every corruption scheme begins with a conflict of interest.

Conflicts of interest are the root of many events that become stories in this category. While conflicts of interest do occur within our industry, having a conflict doesn't mean someone has done something illegal or unethical. It does mean however, we need proactive attention to manage the conflict. For researchers, it is important to work with compliance officers to ensure compliance with federal requirements which can vary depending on circumstance.

Many other conflicts of interest fall outside the research area, and the best solution, in our view, is to ensure full disclosure and transparency. For example, employees may have side businesses or business interests through a spouse or family member. We've attempted to address these internally within our office with this form: OACP Conflict of Interest and Commitment Form. While this form is specific to our department, it can easily be adapted for those wanting something similar for their units. The purpose of the form is to ensure we are aware and can manage any conflicts before concerns are raised. Transparency is key to managing conflicts and protects our employees and institution.

Managers who pay attention, ask questions, and raise concerns to the appropriate authority are essential in managing this type of risk. Be sure your faculty and administrative/staff employees know where to turn if ethical issues arise. While one such option is our anonymous EthicsPoint hotline, we should foster a culture in which stakeholders are willing to bring issues directly to management. This is only possible when stakeholders are confident of management's commitment to ethical behavior.

We again invite you to review the issues occurring in higher education with a view toward proactively managing any risks under your sphere of influence. We always welcome your feedback on this publication.

M. Kevin Robinson, CIA, CFE
Associate Vice President
Office of Audit, Compliance & Privacy