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Audit Buzz Newsletter
September 2020
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In this issue of Audit Buzz, we highlight the Construction Contract Management audit, which was presented at the September 23, 2020 Audit Committee meeting. We also summarize the status of current engagements and introduce a new topic into the Knowledge Hive: Fraud, Waste, and Abuse. Lastly, we offer you some information to keep you in the know, including a couple of breakfast (or all-day) related National Days, and information on the next Audit Committee meeting.
As always, we appreciate the cooperation and courtesies extended to our staff by FCPS management and staff during all past, current, and future audit engagements.
Engagement and Office Updates
Construction Contract Management
OAG presented the results of the Construction Contract Management audit at the September 23, 2020 Audit Committee meeting. This audit was performed in accordance with the FY 2020 OAG Audit Plan.
The objectives of the audit were to perform the following:
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Review contract and procurement administration and management processes of FCPS Office of Design and Construction Services.
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Confirm that contract administration and management processes are being followed.
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Evaluate vendor compliance with contract terms and conditions.
As a result of this audit, OAG identified eight findings and made 16 recommendations. Management concurred with the findings and recommendations and is in the process of implementing corrective actions.
Click here to read the full Construction Contract Management audit report.
Current Engagement Update
- One FY 2020 performance audit is currently in process, Procurement and Contract Management. This audit was delayed due to COVID-19, but is expected to be presented at the October 14, 2020 Audit Committee meeting.
- OAG is currently performing the Local School Activity Funds (LSAF) audit for the year ended June 30, 2020. The purpose of this audit is to verify local school financials and year-end cash reporting are not materially misstated and to review selected revenue and expenditure transactions for compliance testing. To address the challenges presented by COVID-19, the LSAF audit will be completed 100% remote this year.
- OAG is beginning the planning phase of both the Fidelity of Implementation of School Board Actions audit, as well as the Hiring and Onboarding Practices audit. These audits are being performed in accordance with the FY 2021 OAG Audit Plan.
- OAG has also been serving as the project liaison for a comprehensive program review of FCPS’ special education. We are still in the process of evaluating proposals to identify the best qualified vendor for the review, which is slated to kick-off in Fall 2020. Be on the lookout for more updates in the future.
Knowledge Hive
In the prior two issues of Audit Buzz, we learned about what Internal Controls are, (i.e. the checks and balances to manage risks and increase the likelihood that objectives and goals are achieved,) as well as why they are important. Catch up by reviewing prior editions of Audit Buzz, which are archived on the Auditor General - Communications webpage.
In this issue, we will learn about one of the possible outcomes which could occur when internal controls do not work as intended or are manually overridden - Fraud, Waste, or Abuse. Specifically, we'll focus on how FCPS defines fraud, waste, and abuse, provide information on the various ways it can be discovered, highlight ways to report suspected instances at FCPS, and also highlight OAG's upcoming offering of Fighting Fraud – Understanding the Mindset of a Fraudster.
Fraud, Waste, and Abuse
FCPS is entrusted with a budget of over $3B each year, thus, it is critical to ensure funds are spent on areas that they are designated for, with no tolerance for fraud, waste, and abuse. At FCPS, one of the safeguards in place is Policy 1107, which defines fraud, waste, and abuse, and also provides guidance on the expectations for reporting suspected instances.
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Fraud is an intentional act of deception, misrepresentation, or concealment in order to gain something of value. Acts of fraud could result in a tangible or intangible benefit to individuals, others, or FCPS or could cause detriment to others or FCPS. B.
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Waste means the intentional or unintentional, thoughtless or careless expenditure, consumption, mismanagement, use, or squandering of resources owned or operated by FCPS to the detriment or potential detriment of FCPS. Waste also includes incurring unnecessary costs because of inefficient or ineffective practices, systems, or controls.
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Abuse involves behavior that is excessive, deficient, or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances. Abuse also includes misuse of resources, authority, or position for personal interests.
At OAG, we are charged with examining reports of fraud, waste, or abuse which could adversely impact FCPS. Regulation 1410 governs the protocol which OAG and other departments follow during a review.
Someone may ask, how does OAG identity these “leads” or “insights” that something wrong may be taking place? Is it by the audits that we conduct?
You may be surprised that audits are not the most effective way to identify fraud, waste, or abuse. In fact, according to figures published by the Association of Certified Fraud Examiners (ACFE) in its annual Report to the Nations, internal audits account for only 15% of discovered fraud cases. Instead, the most effective way is through tip reporting – see something, say something. According to the ACFE, tip reporting is by far the leading method of detecting fraud, with 43% of cases being identified in that manner. Further, of all of the instances of fraud report by tips, exactly half were reported by employees, while 22% were reported by customers (in FCPS' situation, this could include parents and students!)
At FCPS, suspected instances of fraud, waste, or abuse can be reported through various channels:
Suspected instances of fraud can be reported through the communication channel which is most comfortable for you. Protecting FCPS' resources and reputation is every employee's responsibility.
Lastly, we would like to share with you one more statistics from ACFE related to fraud awareness training for employees:
As you can see from the chart above, employee fraud awareness training increases the likelihood of fraud detection by tip.
OAG will be providing our first certified fraud training on October 9 (Friday) from 9am to 12pm. During the training, you will learn about “Fighting Fraud – Understanding the Mindset of a Fraudster.” Participants will obtain three hours of NASBA certified professional education (CPE) for participating. Space is limited so please register today at MyPDE (Note: Open only to FCPS employees).
Did you Know?
National Coffee Day
September 29 is National Coffee Day! Pour yourself a cup (or maybe even two if you need something to wash down the pancakes you indulge upon during National Pancake Day Saturday, September 27).
Next Audit Committee Meeting
The next Audit Committee meeting is scheduled to occur virtually at 4:30 PM on October 14, 2020.
An agenda will be available on BoardDocs prior to the meeting.
Fraud, Waste & Abuse Hotline:
(571) 423-1333 (anonymous voicemail)
InternalAudit@fcps.edu (email is not anonymous)
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