Internal Auditing

Case in Point:
Lessons for the pro-active manager

February 2009
Vol. 1 No. 2
Point to Ponder...

 

Every dollar you lose to fraud or compliance failure is a dollar you've lost to your primary mission of education, research and outreach.

 

As higher education copes with the economic downturn and declining budgets, it is important to realize any personnel and functional changes (e.g. consolidating functions, eliminating positions) can have a significant impact on your area's control structure.  Research indicates our risk of fraud increases during an economic downturn and strong internal controls are a key in deterring fraud. 

Fraud research has long held that three conditions are generally present when an employee chooses to commit fraud:  financial pressure, rationalization, and opportunity. As employees face their own personal financial pressures and then have total control of a financial process - you may unwittingly have placed them in a position which can have dire consequences for both them and your area.

In reviewing our own experiences with misappropriations here at AU the past ten years, every case had a common element: one employee with complete control of a financial process with little or no oversight from the supervisor.  As you evaluate personnel roles and make difficult decisions in the coming months, remember to keep this in mind.  Ultimately, as a manager and campus leader you are responsible for the internal controls under your purview.

As you scan the cases below, we again ask you to ask yourself: ''How can I prevent this from happening here?'' We urge you to share this material with your staff and colleagues.   If you have any comments, suggestions or thoughts regarding these issues, please let me know.

 

Sincerely,
M. Kevin Robinson, CIA, CFE
Executive Director, Internal Auditing


Information Security Related Events

Feb 10, 2009: A former University of Vermont student who placed hidden cameras, disguised as clock radios, in various bathrooms on campus, is getting a deferred sentence. (Link) (backstory link)

Feb. 9, 2009: James Wieland went to court Jan. 30 after being charged with aggravated criminal invasion of computer privacy at the University of Maine. Police say Wieland sent out e-mails to roughly 1,000 FirstClass accounts. More than 200 of the recipients downloaded a keystroke logging program via an attached file which appeared to be sent from an acquaintance of the recipient. (Link)

Feb. 5, 2009: Three computer savvy Florida A & M students have been charged with using their skills to hack into the school's computer system and changing grades and residency statuses of ninety students. (Link)

Jan 21, 2009: Sensitive personal information -- including Social Security numbers -- for 565 foreign students at Missouri State University was leaked this month when a university office sent an e-mail message with the data inadvertently attached. (Link)

Jan 20, 2009: Relations between a college administration and the student editors of the campus newspaper are often less than cordial, especially when the students make the administrators look bad. When a student at Western Oregon University came across a file on the campus network in 2007 that contained names, Social Security numbers, grade point averages, and other data from former students, he wrote it up. The school responded by (secretly) searching the newspaper's offices and eventually failing to rehire the paper's adviser. Another student was allegedly almost expelled. (Link)


 Misapproriation/Fraud/Ethics Events

Feb 12, 2009: Public Safety is currently investigating an attempted fraud involving staff and undergraduates in the math department, Princeton University officials confirmed Wednesday. ''The department received a report on Feb. 6 about an incident involving an individual who sent an e-mail on Feb. 2 ... seeking a math tutor for the individual's daughter,'' University spokeswoman Emily Aronson said in an e-mail. Two students responded to the individual, Aronson said, and on Feb. 5 each received a fraudulent check with instructions to return some of the money to the individual via a wire service.(Link)

Feb. 11, 2009: In a courtroom in South Carolina, Esther Elizabeth Reed's fantasies finally ended. The 30-year-old brunette, who has spent eight of the past ten years on the run, often entering Ivy League schools under adopted fake identities, and evading cops with an extraordinary web of deception, faces up to over four years in prison. (Link)

Feb 10, 2009: Former Western Kentucky University professor and ALIVE Center Director Katrina Phelps pleaded guilty Monday to one count of federal program fraud.
The federal investigation stemmed from a former WKU student who worked in the Kaleidoscope youth arts program and reported concerns about the use of grant funding in two federally funded community outreach programs that provided activities for at-risk youth during out-of-school hours. (Link)

Feb 9, 2009: The retrial of State Rep. Sue Schmitz on federal fraud and mail fraud charges is set to begin Tuesday morning in Decatur. The charges stem from a long-running criminal probe into Alabama's two-year college system that already has resulted in more than a dozen guilty pleas, convictions and indictments. Schmitz is accused by prosecutors of using her influence to get a two-year college job and then doing little or no work. (Link)

Feb 3, 2009: A investigation into a senior official at a University of Northern Iowa children's program found nearly $20,000 in improper charges, primarily related to trips to Europe, Jamaica and various U.S. cities. When asked to explain her actions, she told officials she had accidentally charged the expenses to the wrong credit card, Callahan said. She resigned from her position in July. (Link)

Feb 3, 2009: A former official at New York City's Touro College has pleaded guilty to charges of creating and falsifying student transcripts for money.(Link)

Jan 28, 2009: Jamal Nayfeh, the College of Engineering's associate dean, was suspended with pay after he allegedly bought a hi-definition projection system, 52-inch LCD television and a home entertainment system, among other items, in December 2008. University auditors found the purchase in January and alerted officials. Auditors requested a copy of the receipt for the items from Nayfeh and was given an ''altered receipt to make it appear that non-taggable business related items were purchased...rather than a home entertainment system,'' the affidavit shows.
(Link)

Jan 24, 2009: State examiners Friday reported that an Auburn University employee misused a purchasing card, costing the university more than $76,000. The report by the state Examiners of Public Accounts said the card was misused for vendor vouchers, travel vouchers and bookstore charges. (Link)

Jan 23, 2009: The United States Attorney's Office announced the arrest of a couple who had attempted to defraud Columbia of over $200,000 by submitting false invoices for expenses allegedly related to neuroscience research. (Link)

Jan 21, 2009: When the president of the University of Texas-Pan American announced her retirement on Tuesday, something else was retired too: an investigation into allegations that her dissertation contained dozens of instances of plagiarism. In her announcement, Blandina (Bambi) Cárdenas made no direct reference to the plagiarism allegations. ''The pressures of the last several months have seriously taxed my health and well-being and impaired my ability to lead the university with the intensity and focus I believe necessary. It is time for me to move on,'' she said. (Link)

Jan 18, 2009: ESU Foundation's most recent audit revealed gaps in oversight that could have permitted financial misdeeds - an account contrary to public statements by officials. The revelation is the latest development in a scandal that has included the ouster of the university's top fundraising executive and multiple investigations into allegations of sexual and financial misconduct on his part. (Link)


Compliance/Regulatory Failure Events

Feb 11, 2009: University of Texas officials said that they will strengthen their conflict of interest policy to keep researchers from getting too cozy with pharmaceutical companies, a response to federal scrutiny into the drug company relationships of some of their scientists. University of Texas officials said Wednesday that they will strengthen their conflict of interest policy to keep researchers from getting too cozy with pharmaceutical companies, a response to federal scrutiny into the drug company relationships of some of their scientists. (Link)

Feb 3, 2009: The settlement of a lawsuit filed by a former student who said she was raped in her dorm room will cost Arizona State University $850,000 and revamp the way the three state universities respond to complaints of sexual harassment and violence. (Link)

Jan 22, 2009: The Department of Health and Human Services will bar a former university scientist from receiving federal research money for five years, after concluding that he falsified data in several government-backed projects.(Link)

Jan 22, 2009: For the third time in 18 months, litigation has broken out between anthropologist Brigitte Kovacevich and Vanderbilt University, where she carried out her graduate studies under renowned scholar Arthur Demarest. Kovacevich filed suit this week against the university, claiming that Demarest, as its agent, has sabotaged her career in several ways because she resisted his sexual harassment. In her complaint, filed in Nashville's federal court, Kovacevich accuses Demarest of badmouthing her to the publisher that was bringing out a book she wrote and telling a March 2008 academic conference in Canada that she had plagiarized from him. (Link)

Jan 9, 2009: Luna Community College is being sued by the U.S. Department of Justice for allegedly discriminating against the college's former academic director. Charlene Ortiz-Cordova has accused the college's former president of sexual harassment, saying he allegedly touched her and made inappropriate comments between October 2005 and April 2006. (Link)


Other Events

Feb 12, 2009: A female student was walking on the University of Mississippi campus Tuesday afternoon when a man grabbed her and pulled her across the street toward his truck, reports indicate. Onlookers started blaring their horns and calling 911. Michelle Issacs, a Cobra Security guard hired by Ole Miss for traffic patrol, intervened, preventing the sophomore from being kidnapped, University Police Department Chief Calvin Sellers said. (Link)

Feb 11, 2009: An Illinois college newspaper editor and his paper's former adviser have filed suit against members of the college administration in Illinois district court, demanding the adviser's reinstatement and an end to threats of censorship and budget cuts. (Link)

Feb 11, 2009: Unless University of Wisconsin students specifically restrict access to their directory information, businesses such as credit card companies and lenders can get a list of every student's name, address, phone number and more from the university for a nominal fee. Some parents of Wisconsin college students questioned how student information was released after they received official-looking letters in recent weeks urging them to pay $49 to apply for financial aid. (Link)

Feb 8, 2009: Mere months ago, the University of Missouri routinely touted chemical engineering professor Galen Suppes for his innovative research into renewable energy.
Now the school considers him a renegade scientist trying to keep the university from getting its fair share of profits from his inventions. Missouri is suing the professor in federal court. (link)

Feb. 5, 2009: Be careful what you post on social networks. Dartmouth professor Reiko Ohnuma learned that lesson the hard way when a student visited her semi-public Facebook profile, took a screenshot, and posted it to the school newspaper's blog. (Link)

Feb 2, 2009: Associate professor Douglas Dohrman turned himself into the Texas A&M University Police Department on Thursday for charges of possession of child pornography. Authorities were notified by the University after a staff member became aware there was child pornography being shared over the network on Dohrman's iTunes. (Link)

Feb 1, 2009: Professors at the University of New Mexico have obtained enough petition signatures to call a general faculty meeting to consider a vote of no confidence in the university's president and other leaders. The petition effort, which comes as state lawmakers are setting next year's budget and figuring out how to close a $450-million gap this year, expresses concerns that actions taken by the university's president, David J. Schmidly, and others ''are undermining public support for the University of New Mexico, and thus have negatively affected the State Legislature's view of the university.'' (Link)


If you have any suggestions, questions or feedback, please e-mail me at robinmk@auburn.edu. We hope you find this information useful and would appreciate hearing your thoughts. Feel free to foward this email to your direct reports, collegues, employees or others who might find it of value. Back issues of this newsletter are available on our web site at http://www.auburn.edu/audit

If you have any suggestions for items to include in future newsletters, please e-mail Robert Gottesman gotterw@auburn.edu.

Department of Internal Auditing
Auburn University
304 Samford Hall
M. Kevin Robinson, Exec. Director
robinmk@auburn.edu
334.844.4389
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