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Internal Auditing

Case in Point:
Lessons for the pro-active manager

September 2011
Vol. 3 No. 9
Quotable...

"Gee, there is something wrong with just about everything, isn't there, Dad?"
-"Beaver" (Theodore Cleaver)

"Just about, Beav!"
- Dad (Ward Cleaver)

-- "Leave It To Beaver," television series 1957 - 1963.



Fraud and ethical issues are a common theme each month in our newsletter.  This month is a sobering reminder that fraud and ethical issues can occur at any level of an organization.  Former University of Central Arkansas president Lu Hardin was sentenced to five years of probation and 1,000 hours of community service in relation to his guilty plea on fraud charges.  Hardin, 60, pleaded guilty earlier this year to falsifying a document that persuaded trustees to give him early access to a $300,000 bonus so he could pay off gambling debts. 

Fraud research reveals that three conditions are generally present when a person commits fraud against his or her employer:  Pressure, Opportunity, and Rationalization.   These three factors are often referred to as the ''fraud triangle.''  In Hardin’s case the pressure apparently came from debts associated with a gambling addiction.  Pressure can come from a wide range of sources, be it credit card debt or simply maintaining a high standard of living.  Opportunity refers to the ability to process a transaction, to access funds, or even to access inventory.  Rationalizations can be easily developed if the other factors are present.  Anything from, ''I'm only borrowing,'' to ''they don't pay me enough,'' have been used by many fraudsters.

The best way to prevent fraud is to raise your level of perception of detection.  Employees rarely will commit fraud if they believe they will be caught.  That is why ensuring you monitor what is occurring in your operations is so important.  It is also why one person should never have total control of a process.  One person with total control of a process who then has the pressures mentioned earlier can result in life-changing decisions being made.

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


Information Security Related Events

Sept. 26, 2011: Thousands of students at Florida International University are hoping their personal information is not used against them after being informed of a possible security breach of the university's computer system. (link)

Sept 26, 2011: Harvard University's home page was hacked earlier today in what was described as a "sophisticated" attack that briefly defaced the site with a message accusing the U.S. of supporting the uprising against Syria's president. (link)

Sept. 22, 2011: Almost a year after one of the largest security breaches in higher education history, an entire department at Ohio State remains silent, stories don't line up, a top information technology official has retired and many questions remain unanswered. (link)

Sept. 22, 2011: The University of Texas at San Antonio is informing 688 students and prospective students who either enrolled in or applied to courses in the Honors College that an unauthorized user may have gained access to information about them. Those affected have been notified by personal letter. (link)

Sept. 16, 2011: Multiple zero-day security vulnerabilities have been found in the world’s most popular educational software - holes that allow students to change grades and download unpublished exams, whilst allowing criminals to steal personal information. (link)

Sept. 9, 2011: A medical privacy breach led to the public posting on a commercial Web site of data for 20,000 emergency room patients at Stanford Hospital in Palo Alto, Calif., including names and diagnosis codes, the hospital has confirmed. The information stayed online for nearly a year. (link)

Sept. 9, 2011: The Indiana University School of Medicine is warning thousands of people that their medical records could have been breeched after someone stole a laptop back in August. (link)

Sept. 9, 2011: Data from independent research, Effective Management of Safe & Secure Openings & Identities, shows 82 percent of public, private and 2-year specialized colleges and universities believe they are not very effective at managing safe and secure openings or identities. Only 18 percent believe they are very effective at granting or denying access to appropriate individuals or knowing who goes where. (link)

Sept. 1, 2011: California's current governor, Edmund G. “Jerry” Brown, Jr. (D), signed into law S.B. 24, which adds some additional protections to the state's current data breach notification requirements. (link)

Sept. 1, 2011: According to a report issued by the Digital Forensics Association last month "The Education sector, despite a small bump in 2008, has maintained the position of the least amount of records disclosed for almost every year in the study. This is remarkable, given that Educational institutions have a high number of highly desirable records from an identity thief’s point of view. Social Security Numbers (SSNs) are frequently part of the student’s records, and financial aid information almost always requires either an SSN or some other type of desirable data. (link)


Misappropriation/Fraud/Ethics Events

Sept. 29, 2011: The former chancellor of City College of San Francisco has pleaded guilty to felony charges of misusing public funds.As part of a plea deal, Philip Day admitted last week to diverting nearly $100,000 in college funds to campaign for community college bond ballot measures. It is illegal to use public money for political purposes.(link)

Sept. 28, 2011: The letter ‘T’ is disappearing from signs all over campus, costing the school more than $100,000 in repairs. Officials at the school in Atlanta are asking students to knock it off. (link)

Sept. 27, 2011: "Colleges look for the best and brightest students, yet these six defendants tried to cheat the system and may have kept honest and qualified students from getting into their dream school." (link)

Sept. 26, 2011: Drake University’s former director of student accounts pleaded guilty Monday of embezzling more than $10,000 from the university over a period stretching at least five years. Harlan admitted Monday that ''I took money that I did not have the right to take,'' apparently as part of a scheme that involved creating credits in the accounts of former Drake students. Those accounts then were settled through what Drake officials have described as a petty cash fund. (link)

Sept. 26, 2011:Former University of Central Arkansas president Lu Hardin said Monday that he was hooked on the slots the first time he played them more than a decade ago, and that his gambling compulsion and mounting debts led him to lie to school trustees to tap into bonus money he had been promised. (link)

Sept. 25, 2011: According to the affidavit, investigators found that about $45,800 in university funds had been deposited in Bernier’s account between February 2005 and September 2010. A review of Bernier’s use of her University of Vermont credit card turned up four purchases totaling $587.18 for items including groceries and clothing “with no known business purpose.” (link)

Sept. 20, 2011: Prosecutors in Utah claim a former employee of an online university cashed three checks totaling more than $500,000 that she wrote to herself in 2010. Shelley Ann Wilkinson, 44, forged the signatures of the chief financial officer and another employee at the Western Governors University that authorized the checks, according to charges filed last week in 3rd District Court in Salt Lake City. (link)

Sept. 15, 2011: A former Hawaii Pacific University administrative assistant pleaded not guilty today to a second-degree theft charge of stealing at least $13,000 from the school parking fees. (link)

Sept. 14, 2011: A Fayetteville, Ga., man is accused by authorities of stealing more than $400,000 in an alleged sports travel scheme involving several colleges across the country. According to federal prosecutors, Brannan operated a company called Transports Athletics that allegedly arranged travel overseas for university sports teams. (link)

Sept. 14, 2011: A former West Liberty University employee faces embezzlement charges involving the unauthorized use of a state purchasing card. (link)

Sept. 13, 2011: A Missoula judge on Monday set forth the details of a sentence he intends to foist upon a former University of Montana employee who embezzled $300,000 from the university. Christine Bitterman, 49, who in August pleaded guilty to five counts of felony theft for bilking her former employers at UM's Residence Life office, will be sentenced Oct. 11 to 20 years in the state Department of Corrections with 15 years suspended. (link)

Sept. 13, 2011: A former Oklahoma State University employee accused of embezzling more than $80,000 has an October court date. Prosecutors allege that Low used a university credit card to make personal purchases from July 2008 through February 2010. (link)

Sept. 9, 2011: A former office manager at New Jersey City University in Jersey City was sentenced to three years in state prison today for helping her husband steal $486,578 from the school's Student Government Organization, the Attorney General's Office said. (link)

Sept. 7, 2011: A former Westminster College employee was in court Wednesday on charges of three counts of theft by deception. Former student employment supervisor Mary Jane Hake, 39, of Youngstown, who was responsible for preparing time sheets and paychecks pleaded guilty to stealing checks totalling $11,265. (link)

Sept 6, 2011: Recently released from prison, Miller Beckham III was looking for some cash. He thought he'd hit the jackpot when he found a cache of documents that detailed medical and other personal information of several Xavier University athletes. Beckham told XU officials he'd gladly return the documents - for $20,000. (link)

Sept 3, 2001: An investigation by Montana State University into allegations against MSU Orchestra conductor Shuichi Komiyama has concluded that he had an intimate relationship with a female student and violated university policies against sexual harassment and gender discrimination. (link)

Sept. 2, 2011: Greg Winslow, a former men's basketball coach at Ventura College who was found guilty of misappropriation of public funds, will have to pay $45,000 in restitution — hundreds of thousands of dollars less than what the college initially asked for. (link)

Sept 2, 2011: The man in charge of the University of Central Arkansas is no longer the college president. On Friday afternoon, the board of trustees approved the resignation of President Allen Meadors. It comes after controversy over a $700,000 gift to the school to renovate the president's home. (link)


Compliance/Regulatory Events

Sept. 30, 2011: A whistleblower leaked graphic photographs and an eyewitness account of alleged animal mistreatment and killings by Princeton University’s Primate Neuroethology Laboratory yesterday as part of a campaign headed by Stop Animal Exploitation Now (SAEN). (link)

Sept. 29, 2011: A formal discrimination complaint against Colorado Mountain College, which asks the school to place three faculty members on leave during an investigation into a recent incident, is now in the school's hands. Aspen resident Channing Seideman, who has epilepsy, claims that certain CMC faculty members inappropriately handled a seizure she had during class. (link)

Sept. 28, 2011: Two former college football players who suffer from the residual effects of head injuries filed a class-action lawsuit today against the National Collegiate Athletic Association (NCAA), accusing the governing body of neglecting to protect student-athletes from concussions and their aftermath. (link)

Sept. 28, 2011: An Ohio University student says he was a victim of team hazing, which landed him in the hospital with a head injury. Pending an investigation the OU men's soccer club has been suspended from playing or practicing. (link)

Sept. 27, 2011: Vanderbilt University’s review of student organizations’ obedience to its nondiscrimination policy has some students, professors and outside advocates saying the university itself is the one doing the discriminating. (link)

Sept. 21, 2011: Edward Larkin, the University of New Hampshire professor who exposed himself to a woman and her daughter in Milford in 2009, will not be teaching or have contact with students when he returns to campus for the spring 2012 semester. (link)

Sept. 20, 2011: The University of Florida plans to repay more than $192,000 in grant funding to the National Institutes of Health because of prematurely destroyed records, possibly falsified overtime hours and questionable charges found through internal audits of a university institute. (link)

Sept. 14, 2011: Today the ACLU filed suit in federal court to stop Linn State Technical College, a public college in Missouri, from drug testing all of their incoming students with no suspicion of wrongdoing. (link)

Sept. 6, 2011: The family of a Yale University student murdered by a co-worker in a campus research facility two years ago filed a wrongful death lawsuit on Tuesday against the university, accusing Yale of failing to protect women and tolerating aggressive male behavior. (link)

Sept. 2, 2011: The Obama administration is holding colleges' feet to the fire when it comes to how they handle reports of sexual violence and harassment. (link)


Other News & Events

Sept. 22, 2011: A longtime adviser to Gov. Rick Perry, upset over his abrupt firing at a Texas university, admitted Thursday he told staff he would surrender his office keys only if "anyone is man enough to take them" — all while brandishing a pocketknife in what police called a "nonthreatening" way. (link)

Sept. 22, 2011: Pale, thin and dressed in a red jail uniform, a Harvard University-educated biology professor pleaded not guilty by reason of insanity to capital murder charges Thursday in the slayings of three colleagues killed during a faculty meeting at the University of Alabama in Huntsville. (link)

Sept. 20, 2011: Labeling over-involved mothers and fathers of college students “helicopter parents” is common. I’ll be the first to admit I’ve been guilty of it on occasion. But the term, albeit clever, is usually derisive and does little to help the students whose parents are hovering, to say nothing of the college and university administrators who serve them and those to whom the moniker applies. (link)

Sept. 19, 2011: As college freshmen say goodbye to high school and living under their parents’ roof, they should also shed some of their social media habits. (link)

Sept 15, 2011: The University of Iowa is apologizing for a joke on a school Twitter feed that appeared to refer to Republican presidential candidate Michele Bachmann as a cougar. (link)

Sept. 15, 2011: Maryland State Police announced Friday that a 19-year-old student at Bowie State University has been charged with murder in the fatal stabbing of her roommate on campus. (link)

Sept. 14, 2011: The IRS Notice issued today provides guidance on the treatment of employer- provided cell phones as an excludible fringe benefit. The Notice provides that when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require recordkeeping of business use in order to receive this tax-free treatment. (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.

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

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