The Association of Certified Fraud Examiners defines occupational fraud as “the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the organization's resources or assets." There are three primary categories of occupational fraud: asset misappropriation, corruption, and financial statement fraud.
All occupational fraud schemes have four key elements in common. The activity:
- Is clandestine;
- Violates the perpetrator's fiduciary duties to the victim organization;
- Is committed for the purpose of direct or indirect financial benefit to the perpetrator; and
- Costs the employing organization assets, revenue or reserves.
Possible red flags that indicate fraud.
Red Flags do not indicate guilt or innocence but merely provide possible warning signs of fraud.
Personal Red Flags:
- Living beyond ones means;
- Financial difficulties;
- Person is a dissatisfied employee;
- Never takes vacation or sick time;
- Unusually close relationship with vendors and customers;
- Works excessive overtime;
- Dominant personality; and
- Recent divorce or family problems.
Examples of Fraud:
- Personal purchases on the procurement card;
- Inappropriate charges to a travel or accounts payable voucher;
- Theft of university assets;
- Theft of cash from deposits;
- Falsifying time card with time not worked;
- Misrepresenting information on admission applications or financial aid applications;
- Failure to report or properly manage a conflict of interest or conflict of commitment;
- Unauthorized acceptance of funds;
- Falsifying HR records to obtain a salary increase;
- Inappropriate and/or fictitious charges on research studies; and
- Improper use of university assets.
What to do if you suspect fraud.
The Professional Standards and Business Conduct -- Reporting of Fraud policy, requires each University employee to report any instance of suspected fraud to the Director of Internal Audit. If an instance of suspected fraud is reported instead to a supervisor, chairperson, director, dean, vice president, or other responsible person, that person is to report the instance to the Director of Internal Audit. If presented with reasonable evidence of a suspected fraud, the Director of Internal Audit will conduct an audit to determine if the reported suspicions of fraud are valid.