Presentation

CIFAL PRESENTATION

Date: 13 JUNE 2012

Place : Durban

Ugu District Municipality

Whistle Blow and Fraud Presentation

AGENDA

• Introduction • Definition of Fraud• Fraud Triangle• Definition of Corruption • Types of Fraud and Corruption• Dealing with Fraud • Fraud Red Flags• Legal Framework • Protected disclosure Act• Questions

Introduction and Fraud Definition

Introduction

The purpose of this presentation is to provide Ugu District Municipality employees and other stakeholders with the essential information regarding Ugu District Municipality anti-corruption campaign.

Definition of Fraud

Fraud is an unlawful and intentional making of misrepresentation

which cause actual or and potential prejudice to another person.

Fraud Triangle

PressureOpportunity Rationalisation

Definition of Corruption

Definition of Corruption

Corruption is a conduct or behaviour where a person accepts or agreeor offers any gratification for him/herself or for another person wherethe purpose is to act dishonestly or illegally.

Examples of CorruptionBriberyExtortionAbuse of powerConflict of interestFavouritismNepotismFavouritism etc.

Dealing with Fraud

Preventative• Fraud Risk Assessment• Internal Control• Fraud Awareness Training• Fraud Hotline• Fraud Prevention plan• Pre-employment Screening• Management Commitment

Dealing with fraud (continue)

Fraud Detection• Internal Audit• External Audit• Incident/Exception Reports• Whistle Blower

Fraud Response• Investigation • Reviewing of system and procedure• Disciplinary Hearing• Asset Recovery• Providing Information to third parties

Fraud Red Flags

Employees Red FlagEmployees lifestyle changes: expensive cars, jeweleries etcSignificant personal debt and credit problemBehavioral changes: drugs, alcohol etcRefusal to take vacation leaveLack of segregation of duties

Management Red FlagReluctance to provide informationManagement engage in frequent dispute with auditorsManagement decision are dominant by individual and small groupWeak internal controlDecentralization without adequate controlFrequent change of External AuditorsCompany assets sold under market valueContinuous rollover of Loans

Red Flags (continue …)

Payroll Inconsistence overtime hours workedOvertime charged during a slack period Overtime charged for employees who normally do not worked overtimePayroll budget variation Employees with statutory deduction only

PurchasingLack of physical securityVendors without physical addressPurchases that bypass normal procurement proceduresHigh purchase from new vendorPurchases from vendors who are not on approved list

Red Flags (continue)

Change in Behavior

Borrowing money from co-workersGambling beyond the ability to stand the lossExcessive drinkingProviding unreasonable responseCarrying unusual some of moneyCreditors or collectors appearing at the work place

Cash or Accounts Receivable

Excessive number of void transactionUnauthorised Bank AccountDiscrepancies between bank deposits and posting

Other Fraud Signals Supporting document not found when requested

Using of duplicate invoice

Usage of pro forma invoice

Cash Lobbing

Increase in customer complaints

Cancellation of cash transaction

Criminal records

Failure to discipline violators

IT SHOULD BE NOTED THAT RED FLAGS ARE WARNINGS THAT

SOMETHING WRONG COULD TAKE PLACE. LITLE FRAUD

SOON BECOME LARGE.

Legal Framework

Corruption Act, 94 of 1992.

Protected Disclosure Act.

Code of Conduct.

Anti-Fraud and Corruption Policy of Ugu District Municipality.

Access to Information Act.

Corporate Governance.

Aunt-Money Laundering Act.

Financial Intelligent Centre Act.

MFMA.

PFMA

KING 3

Protected Disclosure Act

The protected Disclosure Act,26 0f 200 makes provision for the

protection of employees who make a disclosure that is protected in

terms of this act. Any disclosure made in good faith and sustainably in

accordance with any procedure prescribed by the employee’s employer

for reporting is considered a protected disclosure under this Act. An

employee making protected disclosure is protected from victimisation.

It should be noted that this Act does not protect false disclosure.

Thank You