Download - Values and Ethics as a Public Sector Fraud Control Financial Management Institute June 17 2009
Values and Ethics as a Public Sector Fraud ControlFinancial Management Institute
June 17 2009Allen Tait, CA, CFI
Senior Investigations ManagerOntario Internal Audit Division
Ministry of Finance
2
Objective of Session
• Discuss theoretical concepts• Review case studies• Presentation designed to foster debate• Presentation not designed to provide a “one size
fits all” answer
3
Terminology
• Values: something of importance (individually subjective)
• Ethics: code of behavior (organizational influence, personal interpretation)
• Fraud: defined by Criminal Code of Canada
4
Public Service – Unique Characteristics
• Regulatory function• Mandatory service provider• Monopoly• Client service expectations (taxes v prices)
5
Impact – Public Service and Ethics
• High client service expectations (monopoly and taxes paid)
• High level of ethics expected• COI double standard – preferred vendors private
sector – OK; public sector - scandal• Lack of perspective – Corporate upscale lunches
OK; public sector expense coffee –scandal
6
Sources of Public Sector Fraud Risk
• Internal• External
7
Types of Fraud Risk
• Monetary• Information• Granting of rights and approvals (i.e. zoning)
8
How are Values and Ethics Used as a Fraud Control in this Environment?
• Senior management has responsibility to set and meet ethical principles
• Provides staff with guidance• Sound ethics should support staff to develop
values consistent with ethical principles• Actions should satisfy staff as taxpayer, not as
employee
9
Specific Measures
• PSOA provides whistleblower process• OPS provides training and a supportive culture• Central functions (OIAD, Controllership, IT
Security, HR) provide training and proactive fraud detection services
• Investigative protocols exist – fact gatherers, have cleared wrongly accused as well as helped victim Ministries address wrong doing
10
Case Study One – Not Petty
• Year end cheque to replenish petty cash cleared 10 days after year end
• Clerk could not balance• Put in own money to cover, did not tell supervisor• Fraud – no• Principle – employee “my error so I pay” – ethical• Supervisor – non disclosure = deception = not ethical
employee
11
Case Study 2 – How to Procure an Investigation of Your Actions
• Multi year project• Technically complex• Limited number of qualified providers
12
Case Study 2 – Project Management Decisions
• Required annual budget approval for subsequent years
• Multi milestones established within each year – prudent project management
• Distinct projects put out for tender – competitive price/avoid technical dependence
13
Case Study 2 – Decision Impact
• Experience heavily weighted criteria• Same vendor won all tenders• DOA circumvented by design of milestones• Technical dependence created
14
Case Study 2 - Rationale
• Work was good • Prices were reasonable for industry• New supplier could not have assumed work mid
stream• Above 3 points validated• Nothing wrong except optics
15
Case Study 2 – However…
• Why was personal relationship not disclosed?• Why were competing bids not from legitimate
alternate vendors?• Why was project split at a consistent threshold
just below a higher DOA?• Is this more than optics?
16
Case Study 3 – Classic Conundrum
• Generalization 1: a majority of the public expect government regulation to protect natural resources
• Generalization 2: the public has a growing acceptance of targeted government revenue generation to reduce general government expenditures
• Generalization 3: a model of regulation and revenue generation is laudable
17
Case Study 3 – Setting the Stage
• Natural attractions require infrastructure to support tourism
• Tourism is good for the economy• Private sector investment needed• Public sector must regulate development• Public sector needs to generate revenue
18
Case Study 3 - Issue
• Public sector rejects a private sector proposal to protect the natural attraction
• Private sector disputes decision – alleges suppression of competition
• Public sector announces revenue generation program
• Private sector alleges abuse of regulatory authority to harm private sector
19
Case Study 3 - Result
• Inherent conflict created by merging of 2 individually supportable public sector goals
• Virtually any decision of this type will be disputed by a party based on their value (protection or profit)
20
Conclusions
• Public Sector works in a challenging environment
• Regulatory powers will continue to be required• Values and Ethics can help manage fraud risk• Values and ethics will not resolve all challenges
21
Case Study 1 – Conclusion
• Demonstrates subjectivity of values on perceptions
• Common set of facts, 2 different interpretations• Difference – penalty v disclosure
22
Case Study 2 – Conclusion
• Decision justified on selective facts• Decision questionable in relation to all facts• Difference of opinion on values and ethics• Fraudulent acts may exist
23
Case Study 3 - Conclusion
• Personal value decisions can lead to difference of opinion on ethics of decision made
• Questionable ethics not a fraud by definition
24
Overall Conclusions
• Values can be personal and subjective• Articulation of values helps interpretation of
public sector decisions• Ethics an important reference to support values • Important tools to aid in fraud prevention,
however, challenges will remain
25
Questions?