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FRAUD, WASTE, AND ABUSE

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FRAUD, WASTE, AND ABUSE MASSACHUSETTS WORKFORCE PARTNERS MEETING MARCH 3, 2010 Deval L. Patrick, Governor Timothy P. Murray, Lieutenant Governor – PowerPoint PPT presentation

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Title: FRAUD, WASTE, AND ABUSE


1
  • FRAUD, WASTE, AND ABUSE
  • MASSACHUSETTS WORKFORCE PARTNERS MEETING
  • MARCH 3, 2010

Deval L. Patrick, Governor Timothy P. Murray,
Lieutenant Governor Joanne F. Goldstein,
Secretary, EOLWD
2
Why talk about Fraud, Waste, and Abuse?
  • With the passage of the American Recovery and
    Reinvestment Act (ARRA) came unprecedented levels
    of transparency and scrutiny.
  • It is critical that everyone receiving ARRA
    funding ensure that they have the proper
    mechanisms in place to prevent fraud, waste, and
    abuse.
  • Training is an essential part of that effort.

3
Todays Objectives
  • After todays presentation, you should be able
    to
  • Demonstrate a heightened sensitivity and
    awareness of fraud and misconduct risks.
  • Identify potential areas of your programs which
    may be susceptible to fraud and misconduct risks.
  • Describe effective Fraud Risk Management
    strategies.
  • Identify available resources to help prevent,
    detect, and respond to fraud.

3
4
All Fraud, Waste, and Abuse Has the Same Pattern
5
Pressure/Motivation
  • There is a will to commit fraud, waste, and/or
    abuse
  • External pressures
  • Budgetary pressures
  • Financial need
  • Being a team player

6
Opportunity
  • There is minimal oversight or lack of controls
    within the organization
  • Lax controls
  • Poor oversight
  • Lack of guidance

7
Rationalization
  • Individuals who commit fraud, waste, and abuse
    view it as an accepted practice or part of their
    rights as a contractor or employee
  • Had to spend it or lose it.
  • No personal gain for the organization.
  • No one cares.
  • I didnt know.

8
What is Fraud?
  • There are a number of different definitions, but
    fraud is largely a deliberate deception to secure
    an unfair gain. This could be a monetary,
    contractual, or other type of advantage that is
    unlawful.

9
Red FlagFraud, Waste, and Abuse Indicators
  • Red flag indicators are activities that may
    indicate trouble in any process. These are best
    described as clues or hints that something
    outside the norm has occurred and that a closer
    look at an area or activity is required. These
    indicators include, but are not limited to, the
    following.

10
Procurement Risks and Red Flags
  • Bribery and Kickbacks
  • Bid Rigging and Collusion
  • Conflicts of Interest

11
Bribery and Kickbacks
  • In bribery and kickback schemes, a contractor or
    subcontractor pays a fee to the government
    employee for being awarded the contract.
    Indicators include, but are not limited to
  • Purchase amount exceeds needs
  • Short list of vendors
  • Poor quality performance

12
Bribery and Kickbacks (continued)
  • A public official or employee who has a lifestyle
    that dramatically exceeds his or her salary
  • A contracting employee who insists contractors
    use a certain sub-contractor or broker
  • A contracting employee who shows a keen interest
    in the award of a contract or purchase order to a
    particular contractor or vendor

13
Bid Rigging and Collusion
  • In bid rigging and collusion, contractors
    misrepresent that they are competing against each
    other when, in fact, they have agreed to
    cooperate on the winning bid to increase job
    profit. Indicators include
  • Apparent connections between bidders common
    addresses, personnel, or telephone numbers
  • Unusual bid patterns too close, too high, round
    numbers, or identical winning margins or
    percentages

14
Bid Rigging and Collusion (continued)
  • Bid prices dropping when a new bidder enters the
    competition
  • Different contractors making identical errors in
    contract bids
  • Losing bidders hired as subcontractors
  • Losing bidders submitting identical line-item bid
    amounts on non-standard items

15
Conflicts of Interest
  • In fraud involving conflict of interest, a
    public official misrepresents that he or she is
    impartial in business decisions when he or she
    has an undisclosed financial interest in a
    contractor or consultant. These indicators
    include, but are not limited to
  • Unexplained or unusual favoritism shown to a
    particular contractor or consultant
  • A public official disclosing confidential bid
    information to a contractor or assisting the
    contractor in preparing the bid

16
Conflicts of Interest (continued)
  • A public official having discussions about
    employment with a current or prospective
    contractor or consultant
  • A close socialization with and acceptance of
    inappropriate gifts, travel, or entertainment
    from a contractor or the ability to purchase such
    items at below fair market value
  • A vendor or consultant address being incomplete
    or matching an employees address

17
Contract Performance Risks and Red Flags
  • Fraudulent Billing
  • Ghost Employees
  • Falsified Wages

18
Fraudulent Billing
  • Fraudulent invoices
  • Mischaracterized expenses (personal vs. business)
  • Overstated expenses/inflated billing
  • Double billing
  • A refusal or inability to provide supporting
    documentation

19
Ghost Employees
  • No evaluations, raises, or promotion over an
    extended period
  • Terminated employees still on payroll
  • Employees with duplicate addresses, checking
    accounts, or social security numbers
  • Employees with no withholding taxes, insurance,
    or other normal deductions
  • Unusual number of employee with P.O. Boxes or
    Drop Boxes for home addresses, or lack home
    addresses

20
Falsified Wages
  • Large or unusual overtime payments to selected
    employees
  • Large or unusual hours worked in a pay cycle
  • Unauthorized alterations to timecards and other
    source records
  • Timecards are filled out by supervisors, not by
    employees

21
Effectively Managing Fraud Risk
  • Control Your Environment
  • Management sets the tone
  • Clear rules and procedures for work performance
    and employee behavior
  • Risk Assessment
  • Ongoing process to identify where the
    organization may be vulnerable to fraud, waste,
    and abuse
  • Appropriate Oversight
  • Finance and Audit Committee
  • Internal Control Plan
  • Independent Auditors

22
Managing Fraud Risk (continued)
  • Division of Responsibility
  • Different people handle authorizing transactions,
    recording them, and implementing them
  • Multiple signatories
  • Employee Complaint Mechanism
  • Fraud Prevention Education
  • Performance Measurement
  • Reporting

23
What to Do If You SuspectFraud, Waste or Abuse
  • If you have evidence of Fraud, Waste or Abuse
    activity, go to www.mass.gov/recovery and click
    on the Fraud report button

24
Whistleblower Protections
  • ARRA provides protection for employees of
    non-federal employers who receive recovery funds,
    including state and local governments,
    contractors, subcontractors, and grantees.
  • You cannot be discharged, demoted, or otherwise
    discriminated against as a reprisal for making a
    protected disclosure.
  • For more information, go to the federal recovery
    website www.recovery.gov.
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