state of georgia office of inspector general fraud risk within state government
TRANSCRIPT
STATE OF GEORGIAOFFICE OF INSPECTOR GENERAL
Fraud Risk WithinState Government
Agenda
History of Offices of Inspectors GeneralCost/Benefit of Inspectors GeneralAuthority of the State of Georgia OIGDefine Fraud and Introduce Fraud TriangleEffects of the RecessionExplain the relationship between fraud and
the recessionPreventing Occupational FraudTakeaways
A Brief History of the Inspector General…
Baron Friedrich Wilhelm August Heinrich Ferdinand von Steuben (September 17, 1730 – November 28, 1794)
Inspector General Act of 1978
Statutorily established the Federal Inspectors General (IG)
Independent and objective units within most agencies
Combat waste, fraud, and abuse in programs and operations through audits, investigations, inspections and evaluations
Are IG’s Worth Keeping Around?
FY 2013 Approximate Savings = $51.8 Billion Audits - $37 Billion Investigative
Receivables and Recoveries - $14.8 Billion
FY 2013 Aggregate Budget =$2.5 Billion
FY 2013 Return on Investment = $21
State of Georgia OIG
Established via Executive Order in 2003Mission is to promote accountability and
integrity in state governmentConducts administrative and criminal
investigations of fraud, waste, abuse and corruption within the Executive Branch of state government
Provides free fraud awareness training to state employees
State of Georgia OIG Authorities
Authorities include: Authority to enter upon the premises of any state
agency at any point without prior announcement Question any state employee serving in or anyone
transacting business with a state agency Inspect and copy any books, records, or papers in the
possession of a state agency, unless otherwise prohibited by law
Is the State IG Worth Keeping Around?
Fiscal Year
Fraud Identified
Annual Operating
Budget
Return on Investment
2012 4,638,950$ 565,487$ 720%2013 828,373 555,303 49%2014 6,246,393 565,991 1004%
Totals 11,713,716$ 1,686,781$ 594%
What is Fraud?
Any intentional or deliberate act to deprive another of property or money by guile, deception or other unfair means.
- Association of Certified Fraud Examiners
A Focus on Fraud
Organizations lose, on average, 5% of annual revenue
Median Loss is $145,000/Government is $64,000
Fraud Schemes typically last 18 months before detection
Approximately 95% of perpetrators have never been charged or convicted of a fraud-related offense
Why Does Fraud Occur?
Opportunity
PerceivedFinancialPressure
Rationalization
Fraud Triangle
Pressure Created: The “Great Recession”
The “Great Recession” occurred between 2007 and 2009
8.7 Million Jobs LostConsumer spending
experienced the most severe decline since WWII
Median household income dropped 2.6%
Opportunity Created: Labor Market Slack
Primary Internal Control Weaknesses
Lack of Internal Controls – 32.2%Lack of Management Review – 20%Override of Existing Internal Controls –
18.9%Poor Tone at the Top – 8.4%Lack of Competent Personnel in Oversight
Roles – 7.1%
ACFE Study on the Recession and Fraud
ACFE Study on the Recession’s Impact:1. Fraud has increased since the recession
A. 55% of Respondents reported an increase in fraud occurrences
B. 49% reported an increase in dollar losses
2. Increase in fraud stems from increased pressure3. Employees pose the greatest threat to organizational
resources in the current economy4. Fraud levels are expected to continue rising5. Labor reductions are leaving holes in internal control
systems6. Companies have not cut spending on anti-fraud
controls
Preventing Occupational Fraud
Understand why fraud occursHonestly assess your vulnerabilitiesInstitute and maintain strong internal
controlsEducationCreate effective hotline for tipsEffective employment policiesLeadership counts
Takeaways
The State OIG is here to HELP your agencyFraud could occur in any agency/departmentRemain vigilant at all timesDO NOT substitute trust for strong internal
controlsReport red flags/anomalies for further review
immediatelySet a good tone at the top/leadershipEducate/Train your employees on fraud
awarenessAlways encourage strong employee morale
Contact Information
Office of the State Inspector General2 Martin Luther King, Jr., Drive, S.W.
1102 West TowerAtlanta, Georgia 30334
Web: www.oig.ga.govEmail: [email protected]
Telephone: 404-656-7924Toll Free: 866-HELP OIG or 866-435-7644
Fax: 404-657-9716
Who Has the First Question?