Internal Auditing

Case in Point:
Lessons for the pro-active manager

June 2009
Vol. 1 No. 6
Quotable...

"The cost of greatness is responsibility."

-- Sir Winston Churchill

"Internal Control" -- the mere mention of the term prompts you toward inspiration, motivation, and generally positive thoughts. Well, probably not. In fact, you probably think of how boring the topic is, and if so, you are completely normal. In my view, as auditors, we have done a really poor job explaining what internal controls are and why they are important. Yet internal controls are very important to your operation and not nearly as complicated as we auditors sometimes make them.

You use internal controls every day in your personal life. Do you lock your house before coming to work? If so, then you are using an internal control to safeguard the assets you own. Do you keep your PIN number secret? If so, you are using internal controls. In fact, the bank gives you internal control suggestions when they tell you not to write the PIN on your card and to destroy the mailing with the PIN. All these simple things make a lot of sense, and most of the time the internal controls needed in your area will too. Evaluating what could go wrong (or cause us not to achieve some objective) and then thinking of ways we can reduce that risk are at the heart of good internal controls.

As a manager, the internal controls in your area belong to you. Part of fiduciary responsibility is ensuring strong internal controls are in place to prevent fraud, compliance failure, or other problems. Each month in this publication you read of internal control failures. We hope you can learn from these events throughout higher education so you can be a pro-active risk manager here at Auburn University. So, once again we suggest you ask the question, "What can I do to prevent this from happening here?" We also suggest that you share this with your staff and emphasize the importance of strong internal control and pro-active risk management.

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


Information Security Related Events

June 12, 2009: Oregon Health & Science University is contacting 1,000 patients after a physician's laptop was stolen from a car parked at the doctor's Washington County home. (link)

June 12, 2009: Kirkwood Community College has issued an alert to around 16-hundred people because of a potential data breach. Officials say earlier this month, someone took a storage device from a counselor's office in Iowa City. That device contained names and social security numbers for participants in the PROMISE JOBS program. (link)

June 5, 2009: Corrupted-Files.com offers a service -- recently noted by several academic bloggers who have expressed concern -- that sells students (for only $3.95, soon to go up to $5.95) intentionally corrupted files. Why buy a corrupted file? Here's what the site says: "Step 1: After purchasing a file, rename the file e.g. Mike_Final-Paper. Step 2: E-mail the file to your professor along with your 'here's my assignment' e-mail. Step 3: It will take your professor several hours if not days to notice your file is 'unfortunately' corrupted. Use the time this website just bought you wisely and finish that paper!!!" (link)

June 5, 2009: Virginia Commonwealth University has notified more than 17,000 current and former students that their names, Social Security numbers and test scores may have been exposed after someone stole a computer from the school library. The desktop computer was stolen in mid-April, and the person who took the machine admitted taking it, the university said Friday. VCU police think the person got rid of the computer shortly afterward and it was highly unlikely that the data was accessed. But university officials still planned to contact government agencies and credit-reporting companies. (link)

June 3, 2009: The University of Illinois has restricted access to its student-information system following a News-Gazette report that found legislators attempted to influence the admissions process on campus. (link)

June 1, 2009: ''I regret to inform you that a UNLV computer was compromised and may have allowed possible loss of some of your personal data. We have reported this incident to the information security officer and a full investigation is underway…''
The College of Sciences recently sent this statement in a letter to about 20 students as officials became aware of a virus affecting a computer in the college. (link)

May 30, 2009: A former University of Arkansas for Medical Sciences housekeeping employee is charged in the theft of a camera and a computer that contained personal information of thousands of current and former employees. "We feel confident that that information wasn't accessed," said Leslie W. Taylor, UAMS associate vice chancellor for communications and marketing. "There were multiple passwords you had to have to get on it." (link)

May 22, 2009: A Ball State University official said Thursday that an iWeb server breach earlier in the week happened because a user failed to properly secure his or her account. As a result, someone uploaded a malicious script to the server. (link)


Misapproriation/Fraud/Ethics Events

June 9, 2009: The former director of admissions for Touro College was found guilty Tuesday of altering student transcripts and selling degrees as part of a pay-to-pass scam. A Manhattan jury convicted Andrique Baron of all 36 counts, which included taking bribes and hawking degrees to students, as well as to nonstudents who never set foot in a classroom. (link)

June 6, 2009: How many members of the National Academy of Engineering are on the faculty at the University of Southern California? This might seem like a straightforward question, but it's anything but when you add in the politics of rankings. USC's Viterbi School of Engineering maintains a list of 34 faculty members it says are in the academy. And when reporting to U.S. News & World Report, which uses NAE members on the faculty as one criterion in its rankings of top engineering graduate schools (where USC landed at No. 7), Southern California claimed 30 members. (link)

June 5, 2009: Alabama two-year college officials used public money to pay for relatives and friends to attend Broadway shows and sporting events and to dine at upscale restaurants in New York City during bond rating trips from 2003 to 2005, the Securities and Exchange Commission said Thursday. (link)

June 5, 2009: An Owings Mills woman was sentenced to a year in prison Wednesday after she pleaded guilty to stealing more than $450,000 from the University of Maryland, Baltimore, according to the Maryland Attorney General's Office. (link)

June 4, 2009: "Wow, think her bosses at Clemson knew she was giving that talk?" one audience member said to another as they walked out of Catherine E. Watt's presentation about the South Carolina university's approach to the U.S. News rankings Tuesday at the Association for Institutional Research annual conference. Judging from the combustible reaction, it's safe to say not. (link)

May 15, 2009: A businessman accused of selling human body parts donated to UCLA's medical school in a scandal that tarnished the reputation of the university's willed-body program was found guilty Thursday of conspiring to commit grand theft, embezzlement and tax evasion. Los Angeles County prosecutors said Ernest V. Nelson, 51, cut up heads, torsos and other parts from donated corpses and sold them without UCLA's permission to medical and pharmaceutical research companies, collecting $1.5 million between 1999 and 2003. (link)


Compliance/Regulatory Failure Events

June 10, 2009: Phillip Jones, former UI Dean of Students and Vice President for Student Services, claims the UI wrongfully terminated him, did not follow due process in his termination, and made false and defamatory statements against him. In November, Jones filed a wrongful termination claim with the State Appeals Board, which is necessary to proceed with a lawsuit. (link)

June 8, 2009: The former provost at Florida Gulf Coast University last week sued the university, alleging gender discrimination, sexual intimidation and retaliation by top-level officials – including the university’s former president. The federal lawsuit is the latest in a string the university has faced in recent years, mostly pertaining to gender equity disputes in the athletic department. (link)

June 8, 2009: N.C. State University Chancellor James L. Oblinger resigned this morning after days of shifting explanations about a deal he cut for former provost Larry Nielsen when Nielsen stepped down last month. Both men are at the heart of a controversy about how former state first lady Mary Easley gained a job at the university in 2005, then an 88-percent pay hike last year to a $170,000 salary. In his resignation letter Oblinger said the university would be releasing e-mails that showed he was involved in her hiring, something he had denied. (link)

May 21, 2009: Recordings of a May 5 closed-door meeting released Wednesday by the Colorado State University governing board all but confirm that board members violated state open-meetings laws, first in discussing the candidacy of Joe Blake, a member of the board, and then again in making the decision that he would be their choice as sole finalist for the university’s new standalone chancellor position. (link)


Other Events

June 16, 2009: A student at San Jose State University says he routinely placed the answers to his computer science homework online, provoking a debate with his professor about whether the practice constituted cheating or even copyright violations. While the copyright question remains unanswered by San Jose officials, the university’s office of judicial affairs has affirmed that Kyle Brady didn’t cheat by posting answers online after assignments were due. That’s something of a victory for Brady, who says the back-and-forth with his professor over the issue got quite heated. (link)

May 31, 2009: Two prominent higher-education experts are warning that the financial structure of colleges and universities may be the next “bubble” to burst in America. The result could be mergers, closures and even bankruptcies of smaller colleges that have spent too much and taken on too much debt based on a shaky system of student loans paying for ever-rising tuitions, say Joseph Marr Cronin, former secretary of education in Massachusetts, and Howard E. Horton, president of Boston’s New England College of Business and Finance. (link)

May 27, 2009: A Jamaican police report sums up what happened on the last night of Jenee Klotz's semester abroad her junior year of college: She was robbed, sexually assaulted and stabbed while walking back to her host family's home. She says she spent nine hours in a Kingston hospital, and the next morning, the program's academic director dropped her at the airport — still wearing pajama bottoms and with dried blood on her neck and chest. (link)

May 28, 2009: A former Brevard Community College student who pleaded guilty today to setting off a bomb to get out of class will serve four years of probation and 15 consecutive weekends at the Brevard County jail work farm. (link)

May 27, 2009: Harvard University is embroiled in a scandal involving drugs, murder and allegations of racism after a man was shot dead on campus. The murder last week of Justin Cosby, an alleged drug dealer, has stunned America’s oldest Ivy League institution. The expulsion of a female student believed to be linked to the killing has added to the university’s problems after she claimed that she was being targeted because she was black and poor. (link)

May 26, 2009: State colleges and universities, battered by declining endowments and state funding cutbacks, are facing a new and potentially far more troubling financial challenge. Out-of-state students, who pay a huge tuition premium to attend, are doing something no one ever thought they would: They're staying home. (link)

May 20, 2009: College students and faculty members with a concealed handgun license would be able to pack their firearms on campus under a bill that the Senate tentatively approved on Tuesday. The measure, passed on a 20-10 vote, was offered by a state senator who said he wants to give Texas students protection against mass shootings such as occurred at Virginia Tech University in 2007. Sen. Jeff Wentworth, R-San Antonio, said the right-to-carry measure also would protect students from other life-threatening situations. (link)

May 19, 2009: Five months after Brandeis University faced a firestorm of criticism for its plan to close the Rose Art Museum and sell off its collection, the school is in the midst of another controversy with a wealthy donor’s family. Sumner Kalman, the great nephew of a 1950s Brandeis benefactor, has filed suit to prevent the school from demolishing the Kalman Science Center. The building was named for Julius Kalman, who left nearly $2 million to the school when he died in the 1950s. (link)

May 17, 2009: In the old days, college students might turn to classmates for help during all-night cram sessions before final exams. Now their study buddies are just as likely to be commercial Web sites with step-by-step solutions to textbook problems, copies of previous exams, reams of lecture notes, summaries of literary classics, and real-time help with physics, math and computer science problems. (link)

May 15, 2009: The beer standoff at the new Gophers stadium is coming to a head.
In a bill passed Wednesday in the Legislature, lawmakers said that if the University of Minnesota is going to sell beer in the stadium's premium seats, it will have to be sold everywhere -- from the luxury suites to the cheap seats. (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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