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Audit Buzz Newsletter
November 2023
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Engagement and Office Updates
In this issue of the Audit Buzz, we summarize the key take-aways from the November 1 Audit Committee meeting; explain the fraud triangle in the Knowledge Hive; and offer a training opportunity to Fairfax County Public Schools (FCPS) employees.
Prior editions of Audit Buzz are archived here on Office of Auditor General's (OAG) website.
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.
Current Engagement Update
At the November 1 Audit Committee meeting, we presented the following agenda items:
In addition to the ongoing Continuous Monitoring, we are currently conducting the Food and Nutrition Services and Facilities Maintenance audits.
Knowledge Hive
The Fraud Triangle, Explained
What drives people to commit fraud? This Knowledge Hive discusses the Fraud Triangle, a model developed to understand the underlying conditions that lead to fraud.
Source: Association for Certified Fraud Examiners
What is the Fraud Triangle?
The fraud triangle, as suggested by the name, indicates that there are three underlying components, when combined, that lead to fraud. They are Rationalization, Opportunity, and Pressure which are discussed further below.
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Rationalization - Have you ever thought that you should not do something because it doesn’t feel right but justified to yourself that it is ok because “Everyone is doing it?”. That is exactly what rationalization is. However, such thinking is like the saying “If your friends jump off a cliff, will you do that too?”, in that just because fraudulent behaviors are common practice, does not mean they are not harmful. Rationalization also incorporates the concept of cognitive dissonance, which occurs when we try to reconcile our thoughts and our actions when they do not align by either changing our beliefs, or changing our actions. For example, someone committing fraud may realize that their actions are not right, which contradicts their beliefs, but then modify their beliefs, thinking, “It is only a drop in the ocean; no one will notice”.
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Opportunity - If an organization does not have effective internal controls, or ways to enforce compliance, this can create a chance or opportunity for fraud to occur. One example of internal control is dividing up duties between different people to serve as a check. FCPS has numerous regulations and policies to create a system of internal controls that prevent fraud from occurring. However, just because a company or organization has internal controls, does not necessarily mean that fraud cannot occur. When OAG evaluates risk on findings in their audits, part of assessing whether the risk is high, moderate, or low involves the level of compliance with internal controls and whether they exist or are effective. OAG requires management to respond to these.
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Pressure/Incentive - Difficult organizational and life circumstances or desire for personal benefit may drive individuals to defraud an organization. For example, in the Wells Fargo fraud case, in which millions of account holders had accounts opened in their name and were charged fees without permission. One of the driving forces that led for this fraud to occur was pressure from management to sell, which spiraled out of hand. According to Association for Certified Fraud Examiners, 2022 Report to the Nations, in 39% and 25% of fraud cases analyzed, living beyond means and having financial difficulties were red flags, respectively.
What to do if you suspect fraud?
As we have mentioned before in previous editions of Audit Buzz, OAG has ways of reporting fraud that include the anonymous Fraud, Waste, and Abuse Hotline, as well as our email and online submission form. As always, if you have any questions or would like more guidance, feel free to reach out to OAG by calling our office or leaving a message.
Fraud, Waste, and Abuse Hotline:
(571) 423-1333 (anonymous voicemail)
InternalAudit@fcps.edu (email is not anonymous)
Did you Know?
OAG Outreach and Education: Continuing Professional Education (CPE) Opportunity
OAG is registered with the National Association of State Boards of Accountancy (NASBA) and serves as the sponsor for the FCPS Continuing Professional Education (CPE) programs, dedicated to support FCPS employees with complimentary CPE credits required by various certification agencies. OAG is pleased to offer a new NASBA training opportunity for FCPS employees to earn up to 3 CPE credits:
Course: The Family Educational Rights and Privacy Act (FERPA), Virginia Freedom of Information Act (VFOIA), and the associated risks, including reputational, operational and compliance implications to FCPS
Date: December 1, 2023
Time: 9:00 AM - 12:00 PM
This training is designed for all FCPS employees, which will cover (a) mandatory reporting requirements, (b) roles and responsibilities of various internal stakeholders, and (c) real-life scenario. The Office of Public Records and the Office of Auditor General, will be presenting and sharing their experience at this training.
FCPS employees may sign-up for the training on MyPDE.
Next Audit Committee Meeting
The next Audit Committee meeting is scheduled for December 6 at 4:30 PM. Please refer to BoardDocs for meeting information once it becomes available.
Fraud, Waste, and Abuse Hotline:
(571) 423-1333 (anonymous voicemail)
InternalAudit@fcps.edu (email is not anonymous)
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