Fraud Prevention Plan(5)-Final from Henry Hardoon at

8/9/2019 Fraud Prevention Plan(5)-Final from Henry Hardoon at www.hhassociates.co.uk

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Paul Lower and Henry Hardoon 2010

FRAUD DETECTION & CONTROL

FRAUD PREVENTION PLAN


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FRAUD PREVENTION PLAN

Henry Hardoon ACA, FCCA, FAIA, CMC, APM, MIIT

Chartered Accountant & Chartered Management Consultant


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There is no cookie-cutter fraud response strategy that is

appropriate for every business.

The diversity of fraud risks associated with different business

environments and situations requires that fraud risk responsesbe appropriate for the specific business operations, business

environment, and fraud experience.

It is a plan that enables an organsisation to respond

appropriately if the need arises.

FPP - Intro


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The use of the plan should enable the Organisation to:

prevent further loss

establish and secure evidence necessary for disciplinary and

criminal action

assign responsibility for investigating the incident

establish circumstances in which external specialists should be

involved

establish lines of communication with the police

FPP - Purpose


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The use of the plan should enable the Organisation to:

keep all staff with a need to know suitably informed about the

incident and the organisation's response

recover losses

deal with requests for references for employees and students

disciplined, dismissed or prosecuted for fraud

review the reasons for the incident, the measures taken toprevent a recurrence, and any action needed to strengthen

future responses to fraud.

FPP Purpose cont


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Consider that the ideal fraud opportunity might include any of

the following factors:

A weakness in the internal control system or the ability to

easily override the control system (i.e., an opportunity).

Pressures or incentives to commit fraud sufficient to overcome

the pressures or incentives not to commit fraud.

Perceived reward for fraud is relatively high.

Perceived risk of detection is relatively low.

Potential penalty, if caught, is perceived as being small or

relatively inconsequential.

Defining FPP


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Therefore, an effective fraud response plan should:

Limit fraud opportunities by establishing strong internal

controls andlimiting overrides of those controls.

Managepressures and incentives inherent in the businessprocess (to the extent this is possible).

Focus fraud prevention and detection efforts on risks where

potential financial loss is the greatest or where cumulative

losses from smaller frauds may be significant.

Foster a strong perception of detection through proactive

fraud identification, detection, and investigation efforts.

Respond to identified fraud by consistently applying a zero-

tolerance policy.

Defining FPP cont


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Initiating action

Notification of suspected fraud

Prevention of further loss

Establishing and securing evidence

Recovery of losses

Reporting financial fraud to the Audit Committees

Reporting lines

Responsibility for investigation

Review of the fraud response plan

FPP Elements


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Initiating action

Suspicion of fraud or irregularity may be captured through a

number of means, including the following:

the operation of proper procedures

the requirement on all staff under the Law (if relevant) to report

fraud

the public disclosure policy ('whistle-blower's charter')

planned audit work

FPP Elements cont


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All actual or suspected incidents are reportable immediately to

the senior designated official. There will be special

arrangements for other staff levels.

The Senior designated official will determine whether to

investigate a suspected incident under the Organisations

Disciplinary Procedure or this Fraud Response Plan. Normally,

the senior designated official of the Organisation will determine

that an investigation will take place under the Organisations

Disciplinary Procedure for 'minor' losses or infringements, and

the Fraud Response Plan will be used for major suspected

wrong doing.

FPP Elements cont


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If the investigation of an incident is to take place under the

Fraud Response Plan, the senior designated official will decide

on the initial response and take such steps as are necessary

to:

Prevent further loss/damage

Establish and secure evidence

Notify the necessary individuals, committees, and outside

authorities

Recover any loss

FPP Elements cont


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Setting up of fraud response group (The Fraud ResponseGroup will advise the Senior designated official of the

Organisation and the Director of Finance on the necessary

measures to enable the formulation of a plan of action. This

will normally include an investigation, led by the Senior

designated official of the Organisation).

FPP cont


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A Fraud Response Group will support the senior designatedofficial of the Organisation, and may include as relevant:

Deputy Principal forStrategy and Resources

A solicitor recommended by the legal advisor

Director of Finance

Group Management Accountant (where necessary)

Group Financial Accountant (where necessary)

Director of Human Resources (where relevant)

FPP cont


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Establishing and securing evidence thesenior official will

Maintain familiarity with the Organisations disciplinary

procedures, to ensure that evidence requirements will be met

during any fraud investigation following consultation with the

senior staff

Establish and maintain contact with the police. Ensure that

staff involved in fraud investigations are familiar with and follow

rules on the admissibility of documentary and other evidencein criminal proceedings.

To ensure interviews with suspects must be conducted under

rules defined in the Police

FPP cont


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Recovery of losses

Recovering financial losses is a major objective of any fraud

investigation.

The Director of Finance shall ensure that, in all fraudinvestigations, there is the quantification of the amount of any

loss. The Organisation will seek the repayment of losses in all

cases.

FPP cont


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Recovery of losses

Where the loss is substantial, the Organisation Solicitor will

immediately obtain legal advice about the need to freeze the

suspect's assets, through the court, pending conclusion of the

investigation. The Organisation Solicitor will also seek legaladvice about prospects for recovering losses through the civil

court, where the perpetrator refuses repayment. The

Organisation would normally expect to recover costs in

addition to losses.

FPP cont


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Prevention of further loss

Where initial investigation provides reasonable grounds for

suspecting an individual, or a group of individuals, of fraud, the

Senior designated official of the Organisation will decide howto prevent further loss/damage, taking advice from the Fraud

Response Group.

This may include suspension of appropriate staff. It may be

necessary to plan the timing of suspension to prevent the

suspects from destroying or removing evidence that may be

required to support disciplinary or criminal action.

FPP cont


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Notification of suspected fraud to othersenior staff

FPP cont


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Reporting financial fraud to the AuditCommittees

The Senior designated official of the Organisation shall report

any incident to the Chair of the Finance and Audit Committees.

The Senior designated official of the Organisation shall

promptly report any significant variation from the approved

fraud response plan, together with reasons for the variation, to

the chair of both the Finance and the Audit Committee.

FPP cont


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Reporting financial fraud to the AuditCommittees

On completion of a special investigation, a written report shall

be submitted to the Audit Committee containing:

A description of the incident, including the value of any loss,

the people involved, and the means of perpetrating the fraud

The measures taken to prevent a recurrence

Any action needed to strengthen future responses to fraud,

with a follow-up report on the actions taken.

FPP cont


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Reporting lines

The Fraud Response Group shall provide a confidential report

to the Chairman of Court and the Chairman of the Audit

Committee, external audit and the Director of Corporate

Communications at least monthly, unless the report recipientsrequest a lesser frequency.

FPP cont


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Reporting lines -The scope of the report shall include:

quantification of losses/damage

progress with recovery action

progress with disciplinary action

progress with criminal action

estimate of resources required to conclude the investigation

actions taken to prevent and detect similar incidents.

The individual(s) under investigation will be informed of the

outcome, when the report has been completed.

FPP cont


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The Senior designated official of the Organisation shall

normally lead all special investigations. Where appropriate, the

Senior designated official of the Organisation may delegate the

conduct of the investigation to the Director of Finance or otherstaff.

FPP cont


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In undertaking any investigation under the Fraud Response

Plan, the investigation will follow those principles and

procedures detailed in the Organisations disciplinary

procedures.

Those charged with the investigation will have unrestricted

right of access to all vouchers, documents, accounts, computer

data, and any other information. This includes the right to

verify assets and have direct access to any employee or

person responsible for the administration or management of

Organisation resources with whom it is felt necessary to raise

and discuss such matters. All managers are required to co-

operate with requests for assistance in respect of any

investigation.

FPP cont


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Responsibility for investigation cont

All investigations shall be completed in a timely manner.

Some special investigations may require the use of technical

expertise that the Organisation does not possess. In thesecircumstances, the Fraud Response Group may approve the

appointment of external specialists to lead or contribute to the

special investigation.

Any disciplinary action arising from the investigation will follow

the procedures set out in the appropriate Organisation

disciplinary procedures.

FPP cont


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Review of fraud response plan

There will be a review of this plan by the Senior designated

official of the Organisation and Director of Finance for fitness

of purpose at least annually, or after each use. The audit

committee will approve any change to the plan.

FPP cont


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Thank you !Thank you !

Fraud Prevention Plan(5)-Final from Henry Hardoon at

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