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Internal Auditing

Case in Point:
Lessons for the pro-active manager

October 2012
Vol. 4 No. 10
''All of us are watchers--of television, of time clocks, of traffic on the freeway--but few are observers. Everyone is looking, not many are seeing.''

-- Peter M. Leschak

I recently read that most fiduciary breeches are a result of a lack of prudence. The article went on to state that managers are often unaware they have a fiduciary responsibility. This comment reminded me of similar situations we frequently encounter within higher education where someone fails to exercise proper oversight responsibilities. In the worst incidents of neglect we see occupational fraud and compliance failures occur simply because a manager failed to exercise oversight and their fiduciary duty.

To put this in even simpler terms -- a leader, manager, supervisor, director, dean, etc. - failed to pay attention to what was occurring in their area of responsibility. Admittedly, it is easy after the fact to point out that closer attention should have been paid to transactions, accounts, or systems that have been compromised. However, we would be remiss not to occasionally stress the importance of oversight and its relation to fiduciary responsibility. Proper oversight and attention to what is happening is critical for strong internal controls. It does not mean we don't have good or trustworthy employees but rather is a key component of controls and risk mitigation.

pru-dence (noun) 1. the quality or fact of being prudent. 2. caution with regard to practical matters; discretion. 3. regard for one's own interests. 4. provident care in the management of resources; economy; frugality.
A fiduciary is someone who has a responsibility to take care of something for another. This responsibility could be of money or in some sense of a program or department or even institution. The term ''fiduciary'' comes from a Latin term - fiduciarius, meaning "(holding) in trust"; from fides, meaning "faith", and fiducia, meaning "trust." In the case of higher education we are responsible to many stakeholders, including taxpayers, students, regulatory authorities, donors, alumni, and others. Maintaining fiduciary responsibility and taking care of these things entrusted to us are vitally important to our long-term success as an industry and as an institution.

The areas where we have fiduciary responsibility are vast and diverse, as are the risks we face; however, paying attention to what is occurring in our industry and proactively working to reduce our risks is something we suggest you do each month in your leadership role. As you examine the current events across our industry, think of those actions you can take to prevent the problems you see occurring at other institutions; we believe that's good management and good business.

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

Information Security & Technology Events

Oct. 30, 2012: For college athletes, social media use tends toward the extreme: It's either a blessing or a curse. But such positive tweets are rarely the ones that stick with people --- it's the mistakes that fans never forget. That's part of the reason University of Michigan's athletic department formalized its social media practices this fall. (link)

Oct. 15, 2012: Hundreds of thousands of past Florida college and university students have not yet been notified that hackers may have accessed their sensitive identifying information, including dates of birth and Social Security numbers. (link)

Oct. 12, 2012: An ongoing investigation into what officials call "a criminal act of computer trespass" reveals that the personnel records of at least 8,500 current and former University of Georgia employees apparently were accessed by an intruder, UGA Vice President for Information Technology Timothy M. Chester announced today. (link)

Oct. 10, 2012: The Northwest Florida State College hacking incident has widened to include the personal information of about 200,000 students from across the state. (link)

Oct. 9, 2012: A University of Texas at Austin student is accused of launching a cyber-attack that shut down the university's computer system during spring registration, investigators said. (link)

Oct. 7, 2012: Hackers stole the names, addresses, phone numbers, email addresses and passwords of more than 600 Ohio State College of Dentistry affiliates in a recent data breach, and Oct. 1, that information was released on the Internet. (link)

Oct. 3, 2012: Records stolen from 53 university databases including the University of Michigan, New York University, Princeton and Harvard were made publicly available yesterday, after hacker group leader 'DeadMellox' tweeted a link to the release posted on Pastebin. The group claimed to have released just a fraction of what they managed to obtain in campaign "Project WestWind", but it still apparently amounted to 120,000 sets of data. (link) (link)

Sept. 28, 2012: The Social Security numbers of about 9,100 University of Chicago employees were printed on a postcard mailed earlier this week to faculty and staff, the university disclosed today. (link)

Fraud & Ethics Related Events

Oct. 27, 2012: Two San Mateo County Community College District employees have been arrested for allegedly buying computer equipment and software with district money and reselling them for profit, according to the San Mateo County District Attorney's Office. (link)

Oct. 24, 2012: A University of Iowa hospitals IT employee defrauded her employer of more than $272,000 over a decade, according to a 206-page state audit released today. Jennifer Whitmore-Meier, who worked in the department of orthopedics and rehabilitation, committed most of the financial fraud by using hospital funds to purchase 852 technology items that she sold on eBay for more than $200,000. The items included 288 monitors and 76 Apple Time Capsules, the audit said. (link)

Oct. 23, 2012: A recent audit of the University of Missouri's athletic department finances uncovered dozens of questionable personal charges made to university credit cards, including two totaling more than $7,600 at a Las Vegas strip club. (link)

Oct. 17, 2012: A federal jury in Charlottesville, Va., has awarded $819,000 to an academic whistle-blower who charged he was retaliated against after he complained his mentor at the University of Virginia had misappropriated National Institutes of Health Funds. (link)

Oct. 9, 2012: A former Vanderbilt employee and his partner pleaded guilty to stealing at least $530,000 from Vanderbilt University as well as to aggravated statutory rape charges. Less than a month before their scheduled trial date, Jason Hunt and Samuel ''Cole'' Wakefield entered guilty pleas on numerous criminal count following a 60-count indictment handed down earlier this year including various charges of theft, credit card fraud, forgery, aggravated statutory rape. (link)

Oct. 5, 2012: Jack Gillean, University of Central Arkansas' former chief of staff, was charged Friday with commercial burglary over accusations that he helped a student steal academic tests from professors' offices. (link)

Oct. 3, 2012: A panel of state lawmakers says a botched Stevie Wonder concert and its fallout have cost the University of Hawaii $1.1 million.(link)

Oct. 3, 2012: Police arrested and detained a Kansas State University custodial employee, on campus and charged him with felony theft and misdemeanor theft. Several thousands of dollars worth of property believed to belong to Kansas State University was recovered, as were drugs, currency and a firearm. The investigation is ongoing, and additional charges are expected. (link)

Oct. 2, 2012: The Auburn University Medical Clinic is at the center of a massive internal theft investigation. Detectives confirmed that a former East Alabama Medical Center employee, 49-year old Karen Wingard, has been arrested and charged with first degree theft after allegedly stealing about $100,000 while working on campus at the AU Medical Clinic. (link)

Oct. 2, 2012: A security guard at Case Western Reserve University has been arrested for allegedly stealing from the university. The security worker has been charged with grand theft, aggravated theft and petty theft. This, after computers started disappearing. (link)

Oct. 1, 2012: Research misconduct, rather than error, is the leading cause of retractions in scientific journals, with the problem especially pronounced in more prestigious publications, a comprehensive analysis has concluded. (link)

Sept. 30, 2012: Rather than selling a book or offering help from admissions consultants with essays, Wordprom.com lets applicants buy essays from people who were recently admitted to top business schools. (link)

Compliance/Regulatory & Legal Events

Oct. 30, 2012: The NCAA passed a package of sweeping changes Tuesday intended to crack down hard on rule-breaking schools and coaches. Under the new legislation, approved by the 13-member board of directors, programs that commit the most egregious infractions could face postseason bans of two to four years and fines stretching into the millions, while coaches could face suspensions of up to one year for violations committed by their staffs. The board also approved measures to expand the penalty structure from two tiers to four, create new penalty guidelines and speed up the litigation process. (link)

Oct. 30, 2012: West Virginia University is being sued by a former employee who claims he was subjected to a hostile work environment after a supervisor was fired for racially harassing him. (link)

Oct. 29, 2012: A college soccer player for UC Santa Barbara managed an impressive trifecta during a 2-1 overtime loss to conference rival UC Davis on Sunday. In addition to collecting a yellow card in overtime and a red card after UC Davis' game-winning goal, defender Peter McGlynn also found himself the recipient of a pair of handcuffs following his arrest for punching the game's referee. (link)

Oct. 26, 2012: An investigation is continuing into the separate discoveries of three cats on the University of Montevallo campus killed under unusual circumstances that are causing a stir in the Shelby County community. (link)

Oct. 24, 2012: A gender discrimination lawsuit against the University of Missouri was resurrected yesterday when Missouri's Western District Court of Appeals reversed a summary judgment entered by Boone County Circuit Judge Jodie Asel last year. Loreen Olson's lawsuit against MU and Michael O'Brien, dean of the College of Arts and Science, "is alive," her attorney, George Smith, said. "All parts of the case are alive."(link)

Oct. 24, 2012: Southeast Missouri State University followed protocol and did nothing wrong by admitting a former student from Bangladesh who was charged last week with trying to blow up the Federal Reserve building in New York, school officials said. (link)

Oct. 23, 2012: In winter 2011 University of Michigan President Mary Sue Coleman learned that at least eight officials failed to timely report a pediatrician caught looking at child pornography while at work. The six-month reporting lapse occurred because of a variety of reasons, including poor decisions by university attorneys and the misconception that hospital security acted as police. (link)

Oct. 19, 2012: Two University of Tennessee athletic department workers and one former department employee have filed a lawsuit indicating the university set up a "testosterone wall" that prevented female employees from earning equal pay. (link)

Oct. 19, 2012: The University of Michigan made sweeping changes to its public safety department Friday after a report of child pornography found at the unversity's Ann Arbor hospital went uninvestigated for six months. (link)

Oct. 18, 2012: An audit conducted by the state of California found that six institutions did not fully comply with the Clery Act -- a federal law that requires colleges and universities to report on incidents of crime on their campuses and to publicize their campus security policies. (link)

Oct. 18, 2012: A sharply divided federal appeals court on Wednesday refused to reconsider a March ruling that revived a lawsuit by a former graduate student against the University of Oregon. And the dissenting judges on the appeals court say that the refusal could endanger academic freedom and leave faculty members vulnerable to litigious graduate students. (link)

Oct. 17, 2012: Nine current and former Northern Illinois University employees were charged with felonies Tuesday in an alleged scheme to sell university scrap materials and deposit the proceeds in a private bank account.(link)

Oct. 15, 2012: A former Yale security educator hired to work on Title IX gender equality compliance is suing Yale, charging ''unlawful retaliation,'' including her dismissal, for her efforts. The civil action, filed in Connecticut federal court, seeks at least $10 million in damages. (link)

Oct. 12, 2012: Opponents and supporters of same-sex marriage are urging Gallaudet University to reinstate an administrator placed on paid leave after she signed a ballot petition calling for a vote on the issue in Maryland. (link)

Oct. 9, 2012: A Wilton man is accused of downloading child pornography on a work computer while employed as the deputy chairman of the criminal justice program at United Tribes Technical College in Bismarck. (link)

Oct. 5, 2012: A former Wesleyan University student who was assaulted two years ago during a Halloween fraternity party filed a federal lawsuit Friday accusing the school of failing to protect her from dangers at the fraternity, which she claims was known on campus as the "Rape Factory." (link)

Oct. 4, 2012: A dean at North Carolina Central University has been arrested on a charge of assaulting a colleague. The arrest warrant states that Wooden, 34, ''unlawfully and willfully'' assaulted a woman Sept. 24 ''by grabbing her forearm and shoving her against a cabinet, causing scratches and bruises on the forearm and upper left shoulder.'' (link)

Oct. 4, 2012: Seven athletes on the women's track team at Mt. San Antonio College are accusing a former coach of sexual harassment. (link)

Oct. 2, 2012: Mike McQueary, a former Penn State assistant football coach who was a star witness in the Jerry Sandusky trial, wants millions of dollars in damages from Penn State for allegedly ruining his reputation and branding him as part of a cover-up, according to the whistleblower lawsuit he filed against the university today. (link)

Oct. 1, 2012: A math professor at Michigan State University allegedly stripped naked, ran naked through his classroom and screamed "There is no f*cking God!" before police apprehended him, according to several reports. (link)

Sept. 30, 2012: The University of Iowa College of Law rejected a prominent Republican anti-abortion activist for a job because she performed poorly in an interview, not because of her conservative politics, state lawyers argued Friday. (link)

Sept. 29, 2012: The University of Colorado professor whom Aurora theater shooting suspect James Holmes allegedly threatened appears to be Holmes' psychiatrist, according to a court filing made public Friday.In the filing, prosecutors assert that Holmes and Dr. Lynne Fenton ended their doctor-patient relationship after Holmes made threats to someone, who reported those threats to the CU police. (link)

Sept. 28, 2012: Students at Armstrong Atlantic University confessed to stealing copies of the student newspaper after a front-page photo depicted them fighting at an event Tuesday night, the paper's editor says. (link)

Sept. 27, 2012: California will become the first state to mandate financial protections for student athletes who suffer career-ending injuries in some of the state's top college sports programs under a bill Gov. Jerry Brown announced signing Thursday. (link)

Campus Life & Safety Events

Oct. 31, 2012: Colleges up and down the East Coast will remain closed on Wednesday, some without power, as they clean up the mess left by Hurricane Sandy, which unleashed high winds, heavy rain, and more than a foot of snow on various parts of the region. (link)

Oct. 30, 2012: A Boston University fraternity has been suspended while the school and campus police investigate allegations that its members participated in hazing. (link)

Oct. 29, 2012: Just when you thought the Texas A&M-Texas rivalry was fading into the distance, a fan visits their rivals campus and vandalized buildings. At least that was the case this weekend at the University of Texas when students awoke to spray painted Aggie phases throughout their campus. (link)

Oct. 27, 2012: A Folsom Lake College student remains in custody -- his bail set at $1 million -- after his arrest Thursday for bringing a loaded handgun onto campus, college officials said. (link)

Oct. 26, 2012: This year has brought news of student athletes charged with sex crimes at Boston University and at Temple, along with countless other less publicized cases. There have been claims that Wesleyan University tolerated a fraternity house where the abuse of women was common. A gang rape at the University of Massachusetts was reported just this week. Dana Bolger, an Amherst College junior who said she was raped, helped create a Web site credited with raising awareness about sexual violence at the school. But none has generated more soul searching, or scrutiny from beyond, than a woman's wrenching account, published in a campus newspaper last week, of being raped in May 2011 by a fellow student at Amherst College and then being treated callously by college administrators. (link)

Oct. 24, 2012: A man with a knife caused a stir this afternoon at the main library on the University of Arizona Campus. Campus police received calls just before 12:30 p.m. reporting a man holding a knife was on the third floor of the library, said Sgt. Juan Alvarez, spokesman for the UA Police Department. (link)

Oct. 23, 2012: No meetings, no practices and no games. That's the word from Eastern Kentucky University about the men's rugby team. The interim suspension comes after an allegation of hazing. (link)

Oct. 18, 2012: As a result of several hazing allegations and investigations, the University of Alabama has suspended several fraternity privileges and all pledgeship activities as of 1 p.m. on Thursday. UA Media Relations says the university has issued interim suspensions to one former member of Pi Kappa Alpha and two active members who engaged in hazing activities at an off-campus location. Students may not attend classes or participate in UA activities until they have appeared before Judicial Affairs and a decision is made on whether they can be reinstated and return to campus. (link)

Oct. 15, 2012: Less than 20 minutes after a Rust College professor was booked into the Marshall County Jail for rape, he posted a $25,000 bond and headed home. (link)

Oct. 13, 2012: A flier posted in the men's restroom at a Miami University freshman co-ed dorm offered pointers on the ''Top Ten Ways to Get Away with Rape,'' from slipping roofies into a girl's drink to drug her to slitting her throat so she can't identify her attacker. (link)

Oct. 10, 2012: Texas Southern University has suspended, revoked scholarships and permanently kicked out of the school's renowned band 10 students involved in hazing. (link)

Oct. 8, 2012: People under the age of 25 experience stalking at the highest rates. And when students do report being stalked, 80 percent of the time they choose to contact campus police – not city or state law enforcement. (link)

Oct. 8, 2012: Following the West Virginia Universy football team's victory over the University of Texas on Saturday, a crowd of about 1,000 people gathered in the student-dominated Sunnyside area of Morgantown, dozens of fires were set and police and firefighters were pelted with bricks and bottles. (link)

Oct. 7, 2012: A day after a naked student at the University of South Alabama was fatally shot in the chest by a campus security guard, his mother and friends are asking why no other means were used to subdue the 18-year-old. (link)

Oct. 3, 2012: A group of University of Colorado regents has asked the university's attorney to draft a policy requiring school officials to notify the board of potential scandals, a move prompted by the child sex abuse case at Penn State.(link)

Oct. 2, 2012: Alexander P. Broughton, the University of Tennessee student at the center of last month's infamous alcohol enema incident, said today he had never heard of ''butt-chugging'' before he woke up in hospital.(link)

Oct. 2, 2012: Ten football players at North Dakota State pleaded guilty Tuesday to misdemeanor election fraud and were sentenced to community service for faking signatures on ballot measure petitions they were hired to collect. (link)

Sept. 29, 2012: Facing heightened scrutiny from concerned alumni and the Dallas County district attorney, Southern Methodist University announced that it will form a task force to evaluate how it handles sexual assault reports. (link)

Other News & Events

Oct. 30, 2012: In a letter posted on LSU's athletic website Wednesday, Athletic Director Joe Alleva apologized for the decision to edit Christian crosses painted on a group of LSU students out of a recent promotional photo the university sent out. (link) (link)

Oct. 23, 2012: University of Kentucky President Eli Capilouto has refused a faculty group's request to end a little-known perk for administrators that has cost about $1.5 million since 2006. Capilouto did pledge Monday to stop the extra retirement benefit for future administrators, but that concession did not placate rank-and-file workers worried about layoffs and other budget cuts. Under the policy, which has been around since the 1970s, UK pays the equivalent of 15 percent of administrators' salaries directly into their retirement accounts. For everyone else, UK matches an employee's 5 percent retirement contribution with a 10 percent allocation. (link)

Oct. 23, 2012: People for the Ethical Treatment of Animals filed a formal complaint Tuesday with the University of Colorado's animal experimentation oversight committee, urging the campus to replace classroom experiments that involve creatures with computer simulations. (link)

Oct. 19, 2012: A cartoonist for the Arizona Daily Wildcat - a student newspaper that serves the UA - was fired Wednesday after authoring a comic strip that caused anger among readers who called it homophobic. (link)

Oct. 8, 2012: Opposition is growing among Indiana University faculty and staff to a proposal to lease campus parking spaces in exchange for a multimillion-dollar payout. A petition drive is circulating among IU employees who oppose the idea of leasing the university's Bloomington and Indianapolis parking operations to a private operator. (link)

Oct. 6, 2012: Ohio State third-string quarterback Cardale Jones made his feelings about attending classes clear Friday on Twitter. "Why should we have to go to class if we came here to play FOOTBALL, we ain't come to play SCHOOL classes are POINTLESS," he wrote. (link)

Oct. 5, 2012: Nearly 50 members of Florida A&M University's famed marching band had GPAs last fall that were below a 2.0 -- the minimum grade-point average required to participate in student organizations on campus. Twelve had cumulative grade-point averages of 1.0 or below, with some as low as a 0.14, according to public records obtained. (link)

Oct. 5, 2012: Falling enrollment among graduate-school programs in the United States could hurt colleges' credit because those declines are likely to stifle tuition-revenue growth, Moody's Investors Service said. (link)

Oct. 3, 2012: New Mexico State University is paying for former president Barbara Couture's $453,092 "golden parachute" with savings accumulated from as many as 15 vacant administrative positions, officials said. Meanwhile, Couture's payout- - a condition of her separation agreement with the university -- is drawing criticism from state lawmakers who feel that legislation is needed to stop golden parachutes for highly paid employees who resign or are fired from state institutions. (link)

Oct. 2, 2012: An Alabama man pleaded guilty Tuesday to obscenity charges and faces a two-year prison sentence for rubbing his genitals on an unconscious LSU fan in a Bourbon Street restaurant after the BCS national title game in January. (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 https://www.auburn.edu/administration/oacp.

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

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