Internal Auditing

Case in Point:
Lessons for the pro-active manager

May 2010
Vol. 2 No. 5
Quotable...

"Don't get yourself in certain circumstances or instances, because it's not a good feeling to be sitting in that chair where you've got 12 people that are in control of your life. You have an opportunity to be in control of your life for yourself by the decisions that you make."

-- Puff Daddy

West’s Encyclopedia of American Law defines conflict of interest this way: ''A term used to describe the situation in which a public official or fiduciary who, contrary to the obligation and absolute duty to act for the benefit of the public or a designated individual, exploits the relationship for personal benefit, typically pecuniary.'' Conflicts of interest can occur in a variety of ways within higher education. One way which brings particular concern in our industry is when a faculty member or employee owns a private company that is related to the work they do for their institution. Such situations can create the appearance of improprieties even when there are none. That makes full disclosure and transparency in these situations essential for the faculty member or employee to allow the institution to pro-actively manage the conflict.

This month's happenings across higher education include an event that occurred recently at the Georgia Institute of Technology where it appears conflicts of interest were taken to a level of abuse that may include misappropriation of funds from their employing institution. On May 17th the Georgia Bureau of Investigation, after working with Georgia Tech Internal Auditors, executed search warrants on the campus of Georgia Tech and also at the homes of some employees. At issue is whether Georgia Tech funds were misappropriated for the benefit of a business owned by two of the employees. As of now, four employees have been suspended, one of which is a prominent faculty member and part owner of the business. While no one has been charged at this time, it will be interesting to follow this case as it develops. The lesson for us from this event is to remember how important it is to keep our dealings above board at our institution and to be aware of the consequences of choices that blur ethical lines.

As always, we encourage you to read these events with a view to pro-actively managing similar risks here at Auburn University. We also encourage you to share this with your staff and colleagues. As we seek to fulfill our mission here, our greatest likelihood of success is when we take a pro-active approach to managing those things that can derail us whether it is ethical, compliance, or other risks.

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


Information Security Related Events

May 25, 2010: A thief has stolen personal information regarding more than 500 surgical patients of Loma Linda University Medical Center, according to hospital officials. (link)

April 29, 2010: Congressman Edward Markey (D-MA) sent a letter today to the head of the Federal Trade Commission (FTC) calling for an investigation into the, "retention of documents on the hard drives of digital copy machines..." (link)


Misappropriation/Fraud/Ethics Events

May 26, 2010: A half-dozen individuals intentionally diverted thousands of basketball and football tickets for personal profit, according to a University of Kansas report released today. (link) (link)

May 25, 2010: The news release called John D. Mazzuto one of the “greatest supporters” of the Yale University baseball team. Manhattan prosecutors said Tuesday that Mr. Mazzuto’s support of his alma mater was illegal. (link)

May 24, 2010: The former president of Peru State College apparently used about $43,400 from a university-related account to pay personal bills, State Auditor Mike Foley said Monday.(link)

May 21, 2010: Months after Chancellor Rosa Perez went on sick leave amid a financial scandal, the San Jose/Evergreen Community College District Board is tightening its oversight of campus administrators and will ask the county's district attorney to investigate whether Perez broke the law. (link)

May 21, 2010: A King County judge Friday said University of Washington can fire assistant research professor Andrew Aprikyan over allegations of academic misconduct. Aprikyan had been under investigation for seven years after allegations he had committed academic misconduct in his published work on blood disorders.(link)

May 17, 2010: Georgia Bureau of Investigation agents and police served search warrants early Monday on the offices and homes of four Georgia Institute of Technology employees, including a prominent professor. (link)

May 17, 2010: A former Harvard University senior is facing 20 criminal charges for allegedly creating a fraudulent life history that led to his admission to Harvard, and for using forged academic materials from Harvard when he applied for the prestigious Rhodes and Fulbright scholarships. (link)

May 14, 2010: At the University of Colorado system's main office, the results of a recent audit are becoming more apparent. Hundreds of dependents of CU employees had been receiving health care coverage for which they were not eligible. That information could help the university save up to $4 million a year. (link)


Compliance/Regulatory Events

May 26, 2010: A Laramie County Community College CARE Team report found that a student on a trip to Costa Rica in 2008 should have been sent home after displaying suicidal behavior. Instead, administrators, including Hammon, assigned students on the trip the task of caring for the student. (link)

May 25, 2010: Miami University officials said Tuesday they have repaid $5 million in gifts made by Tom Petters, a Minneapolis businessman who was convicted of fraud in December. (link)

May 24, 2010: The discrimination case brought against Quinnipiac University by female athletes got bigger Monday. U.S. District Judge Stefan R. Underhill made it a class action case ruling that "all present, prospective and future female students at Quinnipiac University who have been harmed by and want to end" sex discrimination in the allocation of athletic opportunities, financial assistance or benefits provided to varsity athletes may seek to join the case. (link)

May 20, 2010: Virginia Tech denies that it violated federal law by failing to issue a timely safety alert when a student went on a shooting spree in April 2007. (link)

May 19, 2010: The Internal Revenue Service has opened examinations of over 30 colleges and universities as part of an ongoing investigation into the business activities of tax-exempt academic institutions. (link)

May 16, 2010: A 21-year-old Kennesaw State University student, an illegal immigrant, has become a reluctant participant in a national debate that shows no sign of abating. Cobb County — Georgia, too — finds itself on a national stage where the immigration saga plays out in headlines and arrests. (link)

May 7, 2010: International students at the University of Arizona already comply with federal law, but they are worried Arizona might demand more, and some are wondering about their decision to come to Arizona. (link)

Apr. 30, 2010: A fraternity's Wayne State University chapter has been suspended and could have its charter revoked following allegations that a 22-year-old pre-medical student was hazed so cruelly he wound up in a hospital for nearly two weeks. (link)


Other News & Events

May 24, 2010: A plan to build a road through the University of Miami's arboretum has provoked protests, and might be reworked to minimize the impact on the valued preserve of trees. (link)

May 17, 2010: An internal report criticized FIU for failing to quickly get the word out that a student had been stabbed to death on campus, but praised first responders for acting rapidly. (link)

May 11, 2010: Nationwide, about a third of first-year students in 2007-08 had taken at least one remedial course, according to the U.S. Department of Education. At public two-year colleges, that number rises to about 42%. (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 forward this email to your direct reports, colleagues, 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 at 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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