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Internal Auditing

Case in Point:
Lessons for the pro-active manager

July 2012
Vol. 4 No. 7
Quotable...
''If that is the culture at the bottom, God help the culture at the top''

-- Former FBI Director Louis Freeh discussing the Penn State situation where employees feared reporting criminal activity

By now we've all been exposed to numerous stories, commentaries, and opinions regarding the events that occurred at Penn State University. Perhaps the overriding lesson we should ultimately learn from this terrible case is the importance of developing a strong ethical tone throughout the organization, one in which employees are encouraged to report wrongdoings. Ironically, in the Penn State case, the desire to avoid bad publicity for the University ultimately resulted in just that as well as in unprecedented penalties that will affect the institution and its athletic programs for many years.

One of the contributing factors to the Penn State events, noted by the Freeh report, is the tone presented to the employees by the Penn State University management. The Freeh report indicates even employees in one of the lowest levels of employment at Penn State were unwilling to do the right thing in reporting the wrongdoings witnessed in the shower room due to the tone at the top which caused them to fear for their jobs (pp. 62, 65-65). As we try to digest and make sense of the Penn State events, I have already noted amazing changes being made by managers. Since the Penn State events have been made public, one of our departmental directors asked me to speak at their monthly staff meeting. The staff included numerous administrators and personnel, and I spoke regarding the importance of proactively managing risk and where to report issues or problems. The director then spoke to his staff, informing them that if they felt uncomfortable about any events or if they felt something was wrong they should report it to their supervisor. He also noted if they felt uncomfortable talking to their supervisor, they should report the issue to someone up the chain of command which could include reporting to Internal Auditing directly or through the anonymous reporting system. The director also emphasized his desire to maintain an ethical workplace and to ''always tell the truth'' and to ''treat other people like you'd want to be treated.'' This remarkable moment was highly encouraging and I hope more of these types of meetings will become commonplace at our institution and within our industry.

Once again, I ask you to review the events happening in our industry and determine where high risk areas may exist. Also consider if improved oversight is required in these areas. Proactive prevention is preferred to crisis and scandal and will do more to prevent bad publicity than any alternative.

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


Information Security & Technology Events

July 24, 2012: Oregon State University is notifying approximately 21,000 current and former students and employees that some of their personal information was copied without permission by a contracted vendor who was upgrading software in the cashier's office. OSU officials say they don't believe the information, which includes some Social Security numbers, was taken with malicious intent, but say the university is notifying students and employees, who may wish to monitor their credit reports. (link)

July 20, 2012: The group NullCrew has claimed that it hacked into Yale University's network and stole user names, passwords, social security numbers, addresses, and phone numbers of 1,200 students and staff. (link)

July 9, 2012: For several years Google has been making steady inroads on the virtual infrastructure of college campuses. Now the company is angling to make inroads on colleges' physical infrastructure by extending Street View, its massive visual mapping project, to include campus walkways. (link)

July 3, 2012: At least 16 people have reported that their credit cards might have been compromised at Olympic College. (link)

June 29, 2012: Students and staff at USC are being advised to check their credit card statements for unauthorized charges after a security breach was discovered at some campus food outlets, including dining halls and a Starbucks. (link)

June 26, 2012: University of Florida officials are notifying 220 former law school students and applicants who had sought a roommate online in the early 2000s through the Levin College of Law that their Social Security numbers were accessible on the Web. (link)

June 26, 2012: San Jose State University officials are denying a computer hacker's claims he stole a wealth of sensitive personal data from its largest student-run campus enterprise. (link)


Fraud & Ethics Related Events

July 26, 2012: A report by a special faculty committee looking into the academic fraud scandal at UNC-Chapel Hill found an athletics program divorced from the faculty, academic counselors for athletes improperly helping them enroll in classes and poor oversight of faculty administrators who have wide latitude in running their departments. (link)

July 24, 2012: Reversing course, the University of Texas plans to have an independent group of researchers review a study about fracking that came under public scrutiny this week after disclosure that the study's lead author is a paid board member of a company that engages in the practice. (link)

July 24, 2012: The president of Brookdale Community College (NJ), with a $216,000-a-year salary, charged personal hotel stays, clothing, electronics, alcohol, groceries and more to his school account, sometimes altering receipts or lying about the reason for the charges on Brookdale's expense reports. (link)

July 22, 2012: A prominent UC Davis neurosurgeon was banned from performing medical research on humans after he and an underling were accused of experimenting on dying brain cancer patients without university permission. (link)

July 17, 2012: Under pressure from state authorities, the University of Illinois plans to rebid a multimillion-dollar contract with BLDD Architects of Champaign because of concerns about a potential conflict of interest, Chancellor Phyllis Wise said Monday. (link)

July 16, 2012: Prosecutors have filed felony charges against Utah State University's former director of enrollment services in connection with the misuse of more than $200,000, much of it earmarked for scholarships. (link)

July 16, 2012: Jury selection began today for four men accused of stealing a jaw-dropping $5.7 million from Columbia University -- simply by altering an accounts payable routing code. Prosecutors say the massive pile of cash was transferred via computer, in 56 payments, within only two months in the Fall of 2010, with the help of two insiders -- a pair of employees of the university's accounts payable department. (link)

July 13, 2012: When Eastern Michigan University President Susan Martin was arrested for suspicion of drunken driving in 2005, she told the arresting officer to call the police chief and expected to be driven home, documents released Friday show. (link) (link)

July 12, 2012: The former director of information technology for Wright State University's Boonshoft School of Medicine pleaded guilty to misdemeanor theft, Thursday, admitting that he used his position to buy two-way radios and resold them for profit. (link)

July 11, 2012: University of Hawaii officials have placed athletic director Jim Donovan and Sheriff Center manager Rich Sheriff on an indefinite paid administrative leave while an investigation of the canceled Stevie Wonder concert takes place. The school has contacted the FBI about the missing money from the concert fiasco. UH said it put down a $200,000 deposit from athletic department funds on the planned Aug. 18 concert. The event was to have been a benefit for UH athletics. (link)

July 11, 2012: More than 100 Tennessee State University students initially marked ''incomplete'' in two fall courses saw those marks changed to letter grades, but university faculty and leaders disagree on who made those changes and whether they were ethical. (link)

July 9, 2012: A woman who pleaded guilty in April to stealing $463,636 from the University of Louisville Equine Industry Program was sentenced Monday to 37 months in prison. (link)

July 3, 2012: Vanderbilt University did millions of dollars' worth of business with companies and other entities with ties to university trustees and officers, according to its most recent tax return, which covers the fiscal year ending June 30, 2011. (link)


Compliance/Regulatory & Legal Events

July 28, 2012: A Michigan State University ordinance that led to the conviction of a student who confronted a parking employee over a ticket was ruled unconstitutional Friday by the state Supreme Court. In the 5-2 decision, the court said that the ordinance "criminalizes a substantial amount of constitutionally protected speech." (link)

July 28, 2012: Half of the felony charges stemming from a 2008 lab accident that killed UCLA research assistant Sheri Sangji were dropped Friday when the University of California regents agreed to follow comprehensive safety measures and endow a $500,000 scholarship in her name. (link)

July 26, 2012: An 82-page report, released Tuesday by the State Auditor's office, found several examples of ''inappropriate'' spending by North Dakota State University and University of North Dakota of some of the millions of dollars they collect through student fees each year, in addition to a general lack of transparency in how this revenue is used. (link)

July 25, 2012: The U.S. Supreme Court has scheduled oral arguments for Oct. 10 in a case challenging the use of affirmative action in undergraduate admissions at the University of Texas. (link)

July 24, 2012: State Farm is pulling its ads from Penn State football broadcasts, while General Motors is reconsidering its sponsorship deal and Wall Street is threatening to downgrade the school's credit rating, suggesting the price of the sexual abuse scandal could go well beyond the $60 million fine and other penalties imposed by the NCAA. (link)

July 23, 2012: The NCAA imposes a $60 million fine, equivalent to the approximate average of one year's gross revenues from the Penn State football program, to be paid over a five-year period beginning in 2012 into an endowment for programs preventing child sexual abuse and/or assisting the victims of child sexual abuse. (link)

July 18, 2012: The U.S. agency charged with overseeing the student visa system has inadequate processes in place to investigate, identify and combat fraud, the Government Accountability Office said in a report to Congress Tuesday. (link)

July 17, 2012: University of Louisville's law school promised incoming students about $2.4 million more in scholarship money than they were supposed to get over the next three years because of an apparent mistake by its admissions director, who resigned Monday. (link)

July 12, 2012: Joe Paterno and other top Penn State officials buried child sexual abuse allegations against Jerry Sandusky more than a decade ago to avoid bad publicity, according to a scathing report Thursday that exposed a powerful "culture of reverence'' for the football program and portrayed the Hall of Fame coach as more deeply involved in the scandal than previously thought. (link)

July 11, 2012: U.S. Department of Justice investigators will interview Missoula police Wednesday and Thursday about 518 sexual assault reports, ranging from misdemeanors to rape, over the past four years, Chief Mark Muir said Tuesday. The DOJ interviews are part of a wide-ranging investigation -- that followed reports in December of sexual assaults involving University of Motana students -- into how such cases are handled in Missoula and at UM. (link)

July 11, 2012: The Alabama Supreme Court on Wednesday reopened a lawsuit over whether Alabama's prepaid college tuition program can pay less than full tuition for students. The court, in a 7-0 decision, told a lower court to look at whether states officials can retroactively apply a new law passed by the Legislature to allow reduced tuition payments. (link)

July 6, 2012: It's a modest sum of money when measured against the billion-dollar-plus resources of a state university system. Even so, the nearly $6 million sent to a foundation account at California University of Pennsylvania has added to the friction between the State System of Higher Education -- which last week pledged greater fiscal oversight -- and one of its member schools. (link)

July, 5, 2012: Syracuse University's prompt response to allegations of sexual abuse against an assistant basketball coach was done in good faith but was flawed because, among other things, there was no direct contact with law enforcement, a special committee of the university's board of trustees said in a report released Thursday. (link)

July 1, 2012: A student has sued Western Nevada College and one of its instructors, alleging her civil rights were violated in a human sexuality class. (link)


Campus Life & Safety Events

July 31, 2012: Last week, University of Colorado Denver officials assured reporters that students and faculty were free to talk about the former graduate student charged with killing 12 people at a movie theater. Then top school officials sent an email thanking people for refusing to talk. (link)

July 29, 2012: A Kent State University sophomore was arrested and charged with inducing panic and aggravated menacing for threatening the school in a public Twitter message, a campus police spokesman said Sunday. (link)

July 13, 2012: Campus police at the University of Texas in Austin are sending out an alert to parents of UT students about anonymous phone calls claiming to have kidnapped their son or daughter. (link)

July 11, 2012: The president of Florida A&M University e-mailed his resignation to trustees on Wednesday, the same day the parents of a university band member who died in a hazing incident last fall filed a lawsuit against Florida A&M. (link)

July 7, 2012: A construction crane at the University of Texas at Dallas collapsed Saturday afternoon, killing two construction workers. The crane, which had been used to build the new Arts and Technology Building, was being dismantled when it fell into the building, said Katherine Morales, the university's communications director. (link)


Other News & Events

July 29, 2012: Once the bills for consultants, meals, meetings and other expenses were added up, the price tag for Rutgers University's latest presidential search came in at $226,532, campus officials said. The state university spent more than six months looking for a new leader before selecting former Thomas Jefferson University president Robert Barchi this spring. (link)

July 27, 2012: Moody's Investors Service's U.S. Higher Education Mid-Year Outlook, released Thursday, paints a grim picture for higher education in which existing challenges of heightened competition for students, declining revenue sources, and backlogged maintenance get worse, while new problems emerge. (link)

July 24, 2012: Moody's Investors Service has placed the Aa1 revenue bond rating of Pennsylvania State University (Penn State) on review for possible downgrade in the wake of several significant events affecting the future credit position of the university. The rating action affects approximately $1 billion of debt. (link)

July 23, 2012: An analysis of nearly 1,700 public and private nonprofit colleges being unveiled this week by Bain & Company finds that one-third of the institutions have been on an "unsustainable financial path" in recent years, and an additional 28 percent are "at risk of slipping into an unsustainable condition." (link)

July 23, 2012: Thomas Babel, vice president for regulatory affairs at DeVry Inc., predicted that financial aid would move from a school-based system to a student-based one, in which students would receive grants and loans for units they accumulated in a variety of settings. If higher education's delivery model changes, he said, and students turn to providers who help them piece together a program from multiple institutions, those providers will also be the source of student services like financial counseling. (link)

July 22, 2012: The finances of many of the nation's institutions of higher education are starting to wobble. If they continue to deteriorate, the fallout won't be confined to college campuses. (link)

July 18, 2012: A dozen major universities announced that they would begin providing content to Coursera, an innovative platform that makes interactive college classes available to the public free on the web. Next fall, it will offer at least 100 massive open online courses -- otherwise known as MOOCs-- designed by professors from schools such as Princeton, CalTech, and Duke that will be capable of delivering lessons to more than 100,000 students at a time. (link)

July 16, 2012: College students are increasingly paying for their own higher education, according to a new study from college financing company Sallie Mae. The company, which teamed up with Ipsos Public Affairs, released its annual "How America Pays for College" report Monday. Among the key findings are that the current crop of college students are responsible for paying larger shares of their education, while their parents are picking up smaller portions of the tab. (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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