1. Fraud in the Public Sector Welcome to the Financial Management Institute Webinar Thursday, December 12, 12:30pm EST

2. Panel: Francis Liska, CGA, CISA, CICA, CMC - CEO OTUS Group Marc-Andr Audette, CMA, CFE, Director, Integrity Policy and Program Development, Service Canada Moderator: Steve Whitla, Partner for Fraud Investigations and Dispute Services, Ernst & Young Canada 2 3. What is Fraud? Fraud is the use of ones occupation for personal enrichment through deliberate misuse or misapplication of the employing organizations resources or assets 3 4. Nature and threat of fraud is almost universal across sectors and regions Most commonly victimized industries in 2012 were the banking and financial services, government and public administration, and manufacturing sectors (2102 Global Fraud Study Association of Certified Fraud Examiners) Where is Fraud Most Prevalent? 4 5. Most fraudsters are first time offenders with clean employment history The vast majority of frauds were committed by people in one of six departments accounting, operations, sales, executive/upper management, customer service and purchasing (2102 Global Fraud Study Association of Certified Fraud Examiners) Who Commits Fraud? 5 6. We live in a culture of trust There is a perception that that people are usually ethical Adequate controls are not in place fraud is most often a crime of opportunity Why Does Fraud Occur? 6 7. Targets Revenue Income tax, HST, custom duties Benefits Employment Insurance, Retirement Benefits Property Computers, phones, supplies Entitlements Payroll, expenses, travel allowances Facilities Unauthorized use of vehicles, tools, etc. Methods Theft, credit card misuse Counterfeiting documents, providing false information Bribery, corruption, abuse of office, collusion (Australian Institute of Criminology) The Nature of Public Sector Fraud 7 8. Circumstances that Increase the Risk of Fraud 8 9. Under stress without a high workload Reluctance to take time off High wealth inconsistent with salary Key documentation missing Supplier or contractor who will deal with only one staff member Excessive variations or budgets or contracts Red Flags Fraud Risk 9 10. No code of ethical conduct Policies not followed Numerous adjusting entries Refusal of a promotion Ongoing management override of internal controls Red Flags Fraud Risk (Office of the Auditor General of British Columbia) 10 11. Charbonnneau Inquiry Ornge Mayor of London, ON accused of using taxpayer money to pay for family wedding Senate expense scandal Recent Examples of Possible Public Sector Fraud 11 12. Understand your fraud risks Establish clear roles and responsibilities Appropriately designed prevention and detection mechanisms in place Appropriate detective, investigative, disciplinary and monitoring procedures in place Regularly communicate fraud management results to stakeholders Five Steps to Reduce the Risk of Fraud (Office of the Auditor General of British Columbia) 12 13. Detection method of fraud in the government * 0 10 20 30 40 50 IT Controls Confession Notified by Policy Surveillance/Monitoring Document Examination Account reconcilliation By accident External Audit Management review Interanl Audit Tip DetectionMethod % Report to the Nations on Occupational Fraud and Abuse Association of Certified Fraud Examiners How is Fraud Commonly Identified? 13 14. Fraud Risk Assessment Fraud Awareness and Education Training Fraud Policy Fraud Risk Management Program Fraud Prevention and Detection Fraud Reporting Fraud Investigation Fraud Risk Management 14 15. Attribute Description 1 Anti-fraud Culture & Governance An effective tone at the top is established to demonstrate a clear stance on fraud tolerance. An appropriate governance structure for the development and continued effectiveness of the fraud prevention/detection framework is formally established and maintained. 2 Accountability Structure A clear line of responsibility for fraud prevention/detection is established. 3 Fraud Risk Assessment Management has up-to-date information in order to decide how to allocate resources to treat and monitor exposure to fraud. 4 Fraud Reporting and Monitoring Systems Matters potentially affecting financial reporting are immediately communicated to the appropriate executive member(s). 5 Awareness Programs Employees, contractors and clients/recipients understand their responsibilities to contribute to the prevention/detection of fraud. 6 Protection for those who raise concern in good faith A clear and unequivocal commitment to supporting and protecting all complainants in identifying fraud and corruption within the organization is established. 7 Investigation/ Examination Standard Once reported, the allegation is promptly handled and investigated competently. Fraud Risk Management Program 15 16. Fraud Risk is an organizations level of vulnerability to those capable of committing and concealing fraud, and may come from sources internal and/or external to the organization. Fraud Risk Assessment 16 17. LIKELIHOOD IMPACT 5 4 3 2 1 1 2 3 4 5 Fraud Risk Assessment 17 18. Questions and Answers Be sure to tune in to next months webinar! CFO Attestation Presenters: Jean Roussel and Donna Driger Thursday, January 16th, 2013 at 12:00pm EST 18