Fraud Prevention/ Student Activity Account Best Practices November - - PDF document

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November 6, 2019

Fraud Prevention/ Student Activity Account Best Practices

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F ra ud Pre ve ntion Stude nt Ac tivitie s Cre dit Ca rds

Ag e nda

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Cr e sse y’s F r aud T r iangle

F r aud T r iangle Ne e d Oppor tunity Rationalize

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War ning Signs - Be havior al

Wa rning Sig ns / Re d F la g s

Annoye d by re asonable que stions Provide s unre asonable re sponse s E xc e ssive borrowing from c o- worke rs Nonre sponsive & de laying tac tic s Bragging on purc hase s / life style R e fuse time - off / promotions

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War ning Signs - Ge ne r al

Warning Sig ns / Re d F lags

We ak inte r nal c ontr

• ls

Unsuppor te d tr ansac tions / jour nal e ntr ie s / adjustme nts Une xpe c te d

• ve r

dr afts / de c line s in c ash balanc e s Photoc opie d

• r

missing doc ume nts T hings not making busine ss or c ommon se nse

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Ge ne ra lly Most Hig h- Risk Are a s

Cash

• E

a sie st to g ra b

• So me time s

po o r c o ntro ls

Cre dit Cards

• E

a sy to use , e a sy to a b use

• Co ntro ls,

Co ntro ls, Co ntro ls!

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F ra ud Sc he me s

Payroll

• E

mplo ye e fra udule ntly g e ne ra te s o ve rc o mpe nsa tio n o n his/ he r b e ha lf.

• Mo st c o mmo n pa yro ll fra uds:
• Gho st e mplo ye e ; F

a lsifie d ho urs a nd sa la ry

Che c k T ampe ring

• E

mplo ye e pre pa re s a fra udule nt c he c k fo r his/ he r o wn b e ne fit;

• r
• E

mplo ye e inte rc e pts a c he c k inte nde d fo r a third-pa rty a nd c o nve rts the c he c k

E xpe nse Re imburse me nt

• Misc ha ra c te rize d e xpe nse re imb urse me nts;
• Ove rsta te d e xpe nse re imb urse me nts;
• F

ic titio us e xpe nse re imb urse me nts;

• Multiple re imb urse me nts

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F ra ud Sc he me s (c ont’d)

Cash Re giste r

• Common at Sc hools
• In pra c tic e , e mplo ye e re mo ve s c a sh fro m re g iste r, the n
• E

nte rs re fund o r vo ids sa le to c o ve r up the ft.

Billing

• Most c ommon and c ostly disbur

se me nt fr aud.

• F

ra udste r pro vide s fa lse suppo rt;

• Invo ic e s, purc ha se o rde rs, purc ha se re quisitio ns, re c e iving re po rts,

e tc .

• Distric t issue s c he c k b a se d o n fa lse info rma tio n
• Purpo se fo r mo st b illing sc he me s is to g e ne ra te c a sh o r g o o ds fo r sa le
• Ca use Distric t to b uy g o o ds o r se rvic e s tha t a re :
• No ne xiste nt;
• Ove rpric e d;
• No t ne e de d b y the Distric t.

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• 1. F

ra ud Pre ve ntio n Pro g ram

• 2. Attitude

F ra ud Pre ve ntion

3. T e c hniq ue s

F ra ud Pre ve ntion

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F r a ud Pr e ve ntion:

• 1. F

r aud Pr e ve ntion Pr

• gr

am

Appropria te E thic a l T ra ining On-g oing Risk Asse ssme nt Prog ra m Writte n Polic ie s & Proc e dure s Inte rna l Controls Se g re g a tion of Dutie s a nd Re c onc ilia tion F air & Ba la nc e d Disc ipline Audit Committe e

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F r a ud Pr e ve ntion:

• 1. F

ra ud Pre ve ntion Prog ra m, c ont.

Do you ha ve a n e thic s polic y?

Is it c o mmunic a te d?

Do you ha ve inte rna l c ontrols?

Are the y e nfo rc e d?

Do you ha ve a n a udit c ommitte e ?

Do e s it rare ly me e t? Do the y pass o n tips re c e ive d?

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F r aud Pr e ve ntion:

• 2. Attitude

Attitude T he Importa nc e

• f E

xe rc ising Profe ssiona l SKE PT ICISM T rust but Ve rify!

= =

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F ra ud Pre ve ntion:

• 3. T

e c hnique s

Se g re g a tion of Dutie s

• Dispe rse c ritic a l func tio ns o f a pro c e ss to mo re tha n o ne pe rso n o r de pa rtme nt
• In g e ne ra l, the a ppro val func tio n, the a c c o unting / re c o nc iling func tio n, a nd the

a sse t c usto dy func tio n sho uld b e se pa ra te d a mo ng e mplo ye e s

• Co nside r se pa ra ting : c a sh re c ’ s, c a sh c o unts, b a nk de p’ s, re c o n’ s, po sting de p’ s
• Whe n no t fe a sible , a de ta ile d supe rviso ry re vie w o f re la te d a c tivitie s is re q uire d

Re c onc ilia tion

• Che c ks & Ba la nc e s
• F
• r e xample , mo nth-e nd re c o nc iliatio ns c o mpa ring le dg e rs to b a nk sta te me nts
• T

hink a b o ut yo ur o wn c he c kb o o k - c o mpa ring b a nk sta te me nts with re g iste r

Ove rsig ht

• Asking the rig ht q ue stio ns o f e mplo ye e s (inc luding fisc a l e mplo ye e s)
• If yo u do n’ t kno w/ unde rsta nd, a sk
• If no thing e lse , yo u will g a in a b e tte r unde rsta nding o f yo ur Distric ts func tio ns

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Stude nt Ac tivitie s

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Authority Administr ation Polic y De ve lopme nt

• Ge ne ral Stude nt and Distric t Manag e d Ac tivitie s
• F

und Raising Po lic ie s

• Purc ha sing Po lic ie s
• Do rmant F

unds

Ma na g e me nt of Stude nt Ac tivity Prog ra ms

• Stude nt Manag e d Stude nt Ac tivity Pro g rams
• Distric t Manag e d Stude nt Ac tivity Pro g rams

Stude nt Ac tivitie s - Age nda

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ORC § 3315.062 pe r mits a boar d of e duc ation to e xpe nd funds for stude nt ac tivity pr

• gr
• ams. T

his se c tions state s:

• T

he Bo ard o f E duc atio n o f any sc ho o l distric t may e xpe nd mo nie s fro m its g e ne ral re ve nue fund fo r the o pe ratio n o f suc h stude nt ac tivity pro g rams inc lude d in the pro g ram o f e ac h sc ho o l distric t as autho rize d by the its bo ard o f e duc atio n. Suc h e xpe nditure s sha ll no t e xc e e d five -te nths o f o ne pe rc e nt o f the bo ard’ s annual o pe rating budg e t.

Stude nt Ac tivitie s - Author ity

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ORC § 3315.062 furthe r sta te s:

• I

f mo re tha n $50 a ye a r is re c e ive d thro ug h a stude nt a c tivity pro gra m, the mo nie s fro m suc h a pro g ra m sha ll b e pa id into a n a c tivity fund e sta blishe d by the bo a rd o f e duc a tio n.

• T

he Bo ard o f E duc atio n shall a do pt re g ula tio ns g o ve rning the e sta b lishme nt a nd ma inte na nc e

• f suc h fund, inc luding a syste m o f a c c o unting

to se pa ra te a nd ve rify suc h tra nsa c tio ns a nd to sho w the so urc e fro m whic h the fund re ve nue is re c e ive d, the amo unt c o lle c te d fro m e a c h so urc e , a nd the a mo unt e xpe nde d fo r e a c h so urc e . E xpe nditure s fro m the fund shall b e subje c t to the appro val o f the bo ard.

Stude nt Ac tivitie s - Author ity

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Boar d of E duc ation

• Ado pt, b y re so lutio n in o ffic ia l b o a rd

minute s, rule s, re g ula tio ns, a nd po lic ie s to g o ve rn the e sta b lishme nt and

• pe ratio ns o f

stude nt ac tivity funds (F unds 200 a nd 300), a utho riza tio n o f re la te d o rg a niza tio ns, a s we ll a s the pa rtic ipa tio n o f stude nts and sc ho o l distric t e mplo ye e s in fund ra ising pro g ra ms

• f

the se re la te d

• rg a niza tio ns.

Stude nt Ac tivitie s - Administr ation

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T r e asur e r

• Re spo nsible

fo r e nfo rc e me nt

• f

ac c o unting pro c e dure s a nd inte rna l c o ntro l pro c e dure s

• Custo dian o f all funds (ORC 3313.51)
• Ma y de le g a te a n e mplo ye e to re c e ive

c usto dy o f stude nt a c tivity funds.

• T

he c usto dia n must de po sit mo nie s, with the tre a sure r

• r

pro pe rly de sig na te d de po sito ry, in a c c o rda nc e with distric t po lic ie s a nd ORC § 9.38.

Stude nt Ac tivitie s - Administr ation

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Supe r inte nde nt

• Re spo nsible fo r

administrating all bo ard po lic ie s, e xc e pt tho se re quire d

• f the tre asure r

Stude nt Ac tivitie s - Administr ation

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Pr inc ipa l

• Princ ipal o r autho rize d

administrato r is re spo nsible fo r the appro val o f re quisitio ns fo r the e xpe nditure o f funds a nd a ny o the r dutie s a s a ssig ne d by the supe rinte nde nt o f the sc ho o l distric t.

Stude nt Ac tivitie s - Administr ation

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Advisor

• Pre pa re

a nnua l budg e ts and purpo se c lause s

• f

the ac tivity g ro up

• Supe rvise the ac tivitie s o f the g ro up,

inc luding pre paratio n o f fund raising po te ntials, pro o fs o f c ash, and o the r appro priate do c ume ntatio n

• Any o the r dutie s as assig ne d by the

pro pe r administrative autho rity

Stude nt Ac tivitie s - Administr ation

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Ge ne r al Stude nt and Distr ic t Manage d Polic ie s

• F
• rmula te an o ve ra ll po lic y sta te me nt whic h

g o ve rns the ma nag e me nt a nd c o ntro l o f all stude nt manag e d stude nt a c tivity pro g ra ms.

• F
• rmula te an o ve ra ll po lic y sta te me nt whic h

g o ve rns the ma nag e me nt a nd c o ntro l o f all distric t ma na g e d stude nt a c tivity pro g ra ms.

• Guide line s

fo r e a c h a re inc lude d in a ma nua l o n the AOSinte rne t pa g e .

Stude nt Ac tivitie s –

Polic y De ve lopme nt

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Ge ne r al Stude nt and Distr ic t Manage d Polic ie s (c ont’d)

• T

he appro priate administrative pe rso nne l, a s a utho rize d by the bo a rd o f e duc a tio n sho uld de ve lo p a dministra tive g uide line s and o r an administrative handb o o k that addre sse s spe c ific rule s, re g ula tio ns, g uide line s, and pro c e dure s to b e fo llo we d in the ma na g e me nt a nd day-to -day o pe ratio ns o f stude nt and distric t manag e d ac tivitie s.

Stude nt Ac tivitie s –

Polic y De ve lopme nt

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• Cre ate fund raising po lic ie s.
• De ve lo p purc hasing

pro c e dure s.

• Are a s tha t sho uld be

addre sse d are inc lude d in manual o n AOS inte rne t pag e . Stude nt Ac tivitie s –

Polic y De ve lopme nt

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Dorma nt F unds

• E

ac h sc ho o l distric t sho uld ado pt a po lic y g o ve rning the dispo sitio n o f funds re maining afte r a spe c ific stude nt ac tivity g ro up is disso lve d.

• Appro priate me tho ds inc lude

autho rize d e xpe nditure s, do natio n o f re maining funds to ano the r stude nt ac tivity pro g ram, o r transfe r o f funds in ac c o rdanc e with le g al re quire me nts.

Stude nt Ac tivitie s - Polic y De ve lopme nt

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• F

und 200

• I

nc lude s tho se stude nt a c tivitie s whic h c o nsist

• f

a stude nt b o dy, stude nt pre side nt, stude nt vic e - pre side nt, stude nt tre asure r, a nd fac ulty a dviso r.

• T

he purpo se sho uld b e to pro mo te the g e ne ral we lfare , e duc a tio n, a nd mo rale

• f

the stude nts a nd to financ e the no rma l, le g itima te c o -c urric ula r a c tivitie s

• f the stude nt b o dy o rg a niza tio ns.

Stude nt Manage d Stude nt Ac tivity Pr

• gr

ams

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• F

und 300

• Usua lly inc lude a thle tic pro g ra ms but c o uld

a lso inc lude the band, c he e rle a de rs, flag c o rps, a nd o the rsimila rtype s o f a c tivitie s.

• T

he purpo se o f the pro g rams sho uld b e to pro mo te pa rtic ipa tio n in tho se ac tivitie s a sso c ia te d with the pro g ra ms. T his po lic y state me nt sho uld c re a te the pa ra me te rs within whic h a ll o f the se a c tivity pro g ra ms c a n a c hie ve this purpo se a nd

• pe ra te

e ffe c tive ly.

Distr ic t Manage d Stude nt Ac tivity Pr

• gr

ams

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Budg e ta ry Proc e ss

• T

he sc ho o l distric t is re quire d to inc lude a ll a c tivitie s re la te d to F und 300 in the ir fo rma l budg e tary pro c e ss. Stude nt Ac tivitie s

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Budge tar y Pr

• c e ss
• T

he sc ho o l distric t is also no w re q uire d to inc lude a ll a c tivitie s re la te d to F und 200 in the irfo rmal b udg e tary pro c e ss.

GASB 84: F iduc iar y Ac tivity

• E

ffe c tive F isc al Ye ar E nding 6/ 30/ 20

• Chang e in Stude nt Ac tivitie s Re po rting

Stude nt Ac tivitie s

NE W!

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Colle c tion a nd De posit of Cash

• E

a c h bo a rd o f e duc a tio n sho uld re vie w the struc ture a nd

• rg anizatio n o f the ir sc ho o l distric t

to de te rmine the mo st a ppro pria te pro c e dure s to imple me nt. T he po lic ie s and pro c e dure s sho uld be de sig ne d to e nsure ac c o unta bility

• ve rc a sh re c e ipts.

Stude nt Ac tivitie s

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Ne e d Mor e Info?

• Audito r o f Sta te Guide line s fo r Stude nt

Ac tivity Pro g ra ms – http:/ / www.o hio a udito r.g o v/ public a tio ns/ g uide line s_stude nt_pro g rams.pdf

Stude nt Ac tivitie s

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E nac te d House Bill 312 Cr e dit Car ds

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What was e ffe c tive date ?

No ve mbe r 2, 2018 E nac te d HB 312 - Cr e dit Car ds

Wha t is sc hool distr ic t ORC se c tion?

3313.311 & 9.21

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What doe s this HB do?

E nac ts base line c ontr

• ls and pr
• c e dur

e s r e gar ding c r e dit c ar ds for all gove r nme ntal e ntitie s thr

• ughout the State of

Ohio E liminate s the use of de bit c ar ds by gove r nme ntal e ntitie s Pr

• mote s

e nfor c e me nt

• f

c r e dit c ar d polic ie s and pr

• c e dur

e s

E nac te d HB 312 - Cr e dit Car ds

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Cr e ating a Cr e dit Car d Polic y

By F e br uar y 2, 2019 e ac h e ntity must adopt a wr itte n polic y for the use of c re dit c ard ac c ounts If your e ntity c urr e ntly doe s not use c r e dit c ards, you must adopt a polic y prior to using

• r ope ning

a c r e dit c ard ac c ount

E nac te d HB 312 - Cr e dit Car ds

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What must e ac h polic y inc lude ?

T he offic e r s or positions a uthor ize d to use a c r e dit c a r d T he type s of e xpe nse s for whic h a c r e dit c a r d ma y be use d T he pr

• c e dur

e for a c quisition, use , a nd ma nag e me nt of a c r e dit c a r d a c c ount a nd pr e se nta tion instr ume nts r e la te d to the a c c ount suc h a s c a r ds a nd c he c ks

E nac te d HB 312 - Cr e dit Car ds

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Wha t must e a c h polic y inc lude (c ont’d)?

T he pr

• c e dur

e for submitting ite mize d r e c e ipts to the tre asure r or c hie f fisc al offic e r, or the ir de signe e T he proc e dur e for c ar d issuanc e , re issuanc e , c anc e llation, and the proc e ss for re porting lost or stole n c ards T he e ntity’s c re dit c ard ac c ount(s) maximum limit(s) T he ac tions or omissions by an authorize d use r whic h would qualify as misuse of a c re dit c ard

E nac te d HB 312 - Cr e dit Car ds

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How doe s the HB de fine a c r e dit c ar d?

A bank, financ ial institution, or fina nc ia l de pository- issue d c ar d A stor e -issue d c r e dit c ar d (L

• we ’s, Home De pot, e tc .)

An affinity c r e dit c ar d (Online r e taile r s like Amazon, e Bay) Any ‘de bit’ or gift c ar d whic h is tie d to gr ant mone y Any othe r c ar d whic h allows the use r to pur c hase an ite m on c r e dit

E nac te d HB 312 - Cr e dit Car ds

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A c re dit c a rd is not:

A pr

• c ur

e me nt c ar d, a.k.a. P-Car d Gasoline or te le phone c ar d Any othe r c ar d whe r e me r c hant c ate g or y c ode s ar e in plac e as a syste m of c ontr

• l on the c r

e dit c ar d ac c ount

E nac te d HB 312 - Cr e dit Car ds

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E nac te d HB 312 - Cr e dit Car ds

XYZ City School District John Doe

Each credit card will now be required to at least have the name of the entity on the credit card. This could be in addition to the authorized user’s name being listed on the card.

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E nac te d HB 312 - Cr e dit Car ds

Prohibits the use of a debit card except for law enforcement purposes and debit/gift cards which are tied to grant moneys.

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Custody & Control Mode l

Whe n the tr e a sur e r ha s c ustody a nd c ontr

• l of a ll of

the c r e dit c a r ds and sig ns the m

• ut to

use r s a s tr a nsa c tions a r e ne e de d E a c h tr e a sur e r should a sse ss a n a ppr

• pr

ia te a mount

• f time for a c r

e dit c a r d to be sig ne d out. T he syste m should not be a buse d to c ur ta il the ne c e ssa r y c ontr

• ls be ing e na c te d into la w.

E nac te d HB 312 - Cr e dit Car ds

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Complia nc e Offic e r Mode l

Whe n the tr e asur e r or c hie f fisc al offic e r doe s not r e tain c ustody and c ontr

• l of

the ac c ount and r e late d c r e dit c ar ds and c he c ks. F

• r a sc hool distr

ic t, the boa r d appoints a c omplianc e offic e r in this instanc e , who may be an e xisting me mbe r of the staff. T he only r e str ic tions a r e that the c omplianc e offic e r ma y not use or author ize anyone e lse to use a c r e dit c ar d, and the tr e asur e r is not e ligible to be the c omplianc e offic e r . T he Supe r inte nde nt is able to use a c r e dit c ar d if the y a r e a ppointe d the c omplianc e offic e r , and an author ize d use r, but the y will be r e quir e d to have the ir c r e dit c ard tr ansac tion de tail r e vie we d and a ppr

• ve d on a monthly ba sis

with the tr e a sur e r or the ir de signe e , who shall sig n a n a tte sta tion sta ting the y ha ve r e vie we d the tr ansa c tion de ta il.

E nac te d HB 312 - Cr e dit Car ds

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46 E ve r y 6 months the Complianc e Offic e r must r e vie w # of c ar ds & ac c ounts issue d # of a c tive c ar ds & ac c ounts issue d Car d and ac c ount e xp. date s Ca r d & ac c ount c r e dit limits

E nac te d HB 312 - Cr e dit Car ds

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E nac te d HB 312 - Cr e dit Car ds

Cre dit Ca rd Re wa rd Re porting

Cr e dit c ar d re war ds ar e an e ffe c tive way to he lp r e duc e your monthly bill. T he ne w law pr

• vide s that the tr

e asur e r or c hie f fisc al

• ffic e r will annually file a r

e por t de tailing all r e war ds r e c e ive d by the e ntity as a r e sult of its c r e dit c ar d use . T he law was wr itte n broadly so e ac h e ntity c an be as gr anular with the ir data as the y would like .

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E nac te d HB 312 - Cr e dit Car ds

Credit Card Rewards

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E nac te d HB 312 - Cr e dit Car ds

The use of any card or account for expenses beyond those which are authorized by the board, constitute misuse of a credit card. A violation of such starts at a 1st degree misdemeanor, and can rise to a felony under Rev. Code Section 2913.21.

Fraud Prevention/Student Activity Account Best Practices

Lori Webb – LMWebb@ohioauditor.gov Alice Balestra – AMBalestra@ohioauditor.gov

88 E. Broad St. Columbus, Ohio 43215 Phone: (800) 282-0370 www.OhioAuditor.gov