THE GOVERNANCE OF
FRAUD RISKS IN MEDICAL
AID SCHEMES
Pontso Nyathi
Senior Manager: Forensic
Services
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance - Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance- Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
Introduction
 The Council for Medical Schemes (CMS)
conducted a survey of governance process
amongst Trustees
 The study reinforced the view that sound
governance of medical schemes was critical
to:
•
Successful operations
•
Best interests of members
 There however continues to be unacceptable
high level of governance failures?
2
 Governance failures often results in the total
collapse of the medical scheme or the
medical schemes facing severe difficulties /
intervention by Curator
 Governance failures undermine the
objectives of the CMS being to protect the
interest of the beneficiaries of medical
schemes.
 CMS has issued recommendations to improve
governance and reduce the risk of failure
3
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
Governance Principles
Corporate Governance –Principles
 Strategic direction, Executive action and
Supervision thereof depend on:
 Board composition
 Behaviour of individual directors
 Functioning of the Board
 Use of Board Committees
 Proper assessment of risk
 Sound internal controls,
Wixley and Everingham-Corporate Governance 2005
5
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance - Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance - Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
Governance –Challenges
GOVERNACE -CHALLENGES
Why strengthen governance processes???
•
Collapse of medical schemes due to governance failures
•
Lack of ethical leadership
•
Weaknesses in the leadership of Trustees
•
Insufficient knowledge and experience of BoT
•
Dominance of related party transactions
•
Spread of conflict of interest
•
Poor Financial oversight ( resulting in misuse of member funds, poor
assessment of claims, this resulting in excessive contribution increases)
12
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance - Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
Fraud risk governance
interventions
• Medical scheme Act
• Scheme rule
CONTENTS
Introduction
Governance –Principles
Responsibilities of the Board of Trustees and other Executives
Governance - Challenges
Provisions pertaining to Fraud Risk Governance
Fraud Risk Governance questions to answer
1
Fraud Risk Governance
questions to answer
FRAUD RISK GOVERNANCE QUESTIONS BOT
Are appropriate processes followed to appoint the BoT ( particularly probity
and background checks? ( structure and composition of the board)
Is the BoT independent of management?( executive management of scheme)?
Is fraud risk considered adequately with the governance of risk?
Are BoT members aware of position of the scheme on actual or potential
conflict of interest and acceptance and offering of business courtesies?
Does the scheme have framework to address ethics and other business
17
conduct standards of BoT
FRAUD RISK GOVERNANCE QUESTIONS AUDIT COMMIT TEES
Does the BOT and other governance structures have the appropriate blend of
skills to discharge its responsibilities?
Is the audit committee appropriately alerted to fraud reports and other
whistle blower reports?
Is the audit committee appropriately apprised of how fraud reports are being
addressed and the outcome of investigations conducted?
Has the audit committee approved the fraud risk management plan,
corresponding internal controls in place and is regular feedback being
provided on implementation thereof?
18
FRAUD RISK GOVERNANCE QUESTIONS RISK
Do we understand how fraud risk identification, assessment and response is
managed in our organisation?
How do we know that the biggest fraud risk exposures for our organisation
are being adequately managed?
When last did we participate in a fraud risk assessment activity?
How often have we considered the same fraud risk -related issue in the various
management and governance meetings?
Is ICT fraud risk actively considered in our risk management process?
Do we have a fraud risk management plan?
20
COMPLIANCE WITH LAWS, RULES
AND STANDARDS
Compliance should form an integral part
of the risk management process
Implement an effective compliance
framework and processes
24
FRAUD RISK GOVERNANCE QUESTIONS
COMPLIANCE
What are the key anti-fraud statutory and regulatory obligations to which our
scheme need to comply?
Are we in compliance with these requirements? How have we received this
assurance and are we satisfied that the assurance is credible?
When last did we consider compliance at the BoT?
How are we apprised with changes in the legal and regulatory landscape?
Do we have sufficient evidence to defend our organisation in court or prove
to CMS that we have complied with a specific provision
Does our disclosure on the effectiveness of compliance reflect the actual
position n the scheme
25
INTERNAL AUDIT
There is an effective risk based internal audit
 Evaluating the company’s governance processes
 Objective assessment of the effectiveness of risk management and
the internal control framework
 Analysing and evaluating business process and associated controls
 Adhere to the IIA Standards and Code of ethics
Should follow a risk based approach to its plan
 Informed by the strategy and risks of the company
 Assess the company’s risks and opportunities
26
QUESTIONS FOR MANAGEMENT –
INTERNAL AUDIT
When last was an objective assessment as to whether internal audit has the
appropriate level of technical and analytical skills required to address the
fraud risk management requirements of our business?
Is there sufficient assurance of our ethics and fraud risk management
programmes?
What were our most recent fraud loss events and what comfort did internal
audit provide us on these?
28
Closing remarks
Fraud Risk Governance considers more than
simply Fraud Prevention or Fraud Risk
Management in isolation. It, more holistically,
incorporates and compliments the organisations
Corporate Governance framework
32
When governance fails
Fraud occurs
Peter Goss
FURTHER QUESTIONS/
COMMENTS?