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Fraud Prevention

As a Tufts University employee, you are responsible for ensuring departmental funds, property and equipment are safeguarded from loss. One important underlying concept which must be accepted is the reality that a fraud is possible in your organization. If you do not believe fraud is possible, you will not identify it even if it is clearly evident. Very often fraud symptoms are viewed as administrative errors because individuals cannot conceive of the existence of fraud particularly in organizations where there is a longtime affiliation with co-workers.

What is fraud?

Fraud is a deliberate act (or failure to act) with the intention of obtaining an unauthorized benefit, either for oneself or for the institution, by using deception or false suggestions or suppression of truth or other unethical means, which are believed and relied upon by others. Depriving another person or the institution of a benefit to which he/she/it is entitled by using any of the means described above also constitutes fraud.

Fraud takes many forms. Some examples include: embezzlement, kickbacks, theft, fraudulent financial reporting, environmental crimes, software piracy, bid rigging, computer-related crime, identity theft, credit card fraud, check fraud, fraudulent workers compensation claims, ghost employee schemes, expense report schemes, “dummy” vendors, unreported conflicts of interest, etc.

What makes fraudulent activity more likely to occur?

The risk of employee fraud occurring in an organization is contingent upon a combination of factors:

  • Motive – usually caused by personal financial pressures
  • Opportunity – caused by poor internal controls
  • Rationalization – the mindset of the fraudster that justifies the fraud

By removing one or more of the factors, management reduces the likelihood of fraudulent activity occurring.

Who is responsible for fraud prevention?

Management. While AMAS is responsible for independently evaluating the adequacy of the existing system of internal control through analysis and testing, university management is responsible for maintaining an adequate system of internal control designed to prevent or detect improper operating activities.

How can I decrease the risk of a fraud occurring in my organization?

There are two approaches to help reduce fraud risk: prevention and detection. The preferred approach is to prevent illegal and inappropriate acts from occurring in the first place.

The following procedures should be adopted to help reduce the risk of fraudulent activity occurring within your organization:

  • Establish a positive internal control environment. A genuine interest and concern related to implementing sound internal controls should be conveyed to all personnel. The major tenets of an internal control system include: (1) separation of duties; (2) physical safeguards over assets; (3) proper documentation; (4) proper authorizations; (5) adequate supervision; and (6) independent validation of transaction accuracy.
  • Identify university assets for which you have responsibility. Examples include: budgeted funds, supplies, computers, office and lab equipment, petty cash, and amounts collected as revenue.
  • Identify the risks associated with safeguarding these assets. Ask yourself: (1) How could they be improperly used or stolen? (2) If these assets were misused or stolen, how would I know? (3) What internal controls (policies and procedures and/or checks and balances) exist to prevent or detect any inappropriate use or loss of assets? (4) What additional controls are necessary to ensure that assets are adequately protected from loss?

How can I determine if our organization’s activities are governed by good internal controls?

Utilize our internal control self-assessment questionnaire to determine how well you have incorporated internal controls related to several administrative activities shared by many University organizations. Keep in mind that any new or existing internal controls should be reasonable in relation to the risk involved and costs to implement and administer them.

What role do internal auditors play in detecting and investigating suspected fraud?

Many of AMAS’ audit programs contain specific fraud detection procedures. Two department members have been designated Certified Fraud Examiners by the Association of Certified Fraud Examiners. We are familiar with many aspects of white-collar crime and related audit detection techniques.

What if I suspect or observe improper employee business conduct at the University?

As a member of the Tufts community, you are expected to report a suspected fraud to the Director of Audit & Management Advisory Services (AMAS). If the suspected fraud is initially reported to a supervisor, chairperson, director, dean, vice president, or other responsible person, that person is to report the instance to the Director of AMAS. Suspected research misconduct should be reported to the Associate Provost for Research. Any theft of physical assets should be reported to Tufts Police at 617-627-6911.

It is the policy of Tufts University that any person is free to lawfully disclose whatever information supports a reasonable belief of suspected employee misconduct. The University is committed to protecting employees from interference when they make such disclosures.

Situations may exist where members of our community feel uncomfortable discussing these matters with their colleagues or supervisors. To assist with these particular situations, the University has selected EthicsPoint, Inc. to provide you with simple, risk-free ways to anonymously and confidentially report activities that may involve unethical or otherwise inappropriate activity or behavior in violation of Tufts University’s established policies and Business Conduct Policy. You may access this service by clicking on the Tufts University Anonymous Reporting Hotline link or dialing toll-free 1-866-384-4277.

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