Department of Defense Support for Foreign Disaster Relief – Schwartz

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KPMG FORENSICSM
Humanitarian Assistance Authorities: When
Disasters and Crises Strike: Tackling Fraud
ASMC Conference
Orlando,Florida
June 3, 2010
Fraud Risk Management
Three core objectives:
 Prevent instances of fraud and misconduct from occurring in the
first place
 Detect instances when they do occur and
 Respond appropriately and take corrective action when
instances arise.
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
2
Sample Antifraud Program Elements
Prevention
Detection
Response
Board/audit committee oversight
Executive and line management functions
Internal audit, compliance, and monitoring functions
Fraud and misconduct risk assessment
Hotlines and whistle-blower mechanisms
Internal investigation protocols
Code of conduct and related standards
Auditing and monitoring
Enforcement and accountability protocols
Employee and third-party due diligence
Proactive forensic data analysis
Disclosure protocols
Communication and training
Remedial action protocols
Process-specific fraud risk controls
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Antifraud Program Objectives
Prevent
fraud and
misconduct
Detect
occurrence
Respond
appropriately
once
discovered
4
GAO Summary Report Graphic
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
5
Hurricanes Katrina and Rita – January 2007

"Prevention Is the Key to Minimizing Fraud, Waste and Abuse in Recovery
Efforts“ – GAO.

“A fundamental concept -- that fraud prevention is the most effective and
efficient means of minimizing fraud, waste, and abuse.”

At a minimum, include the following preventative controls:
1. Validate data against other government or third party sources
2. Inspection and physical validation prior to payment
3. System edit checks to identify problems before payment
4. Provide fraud awareness training
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
6
Hurricanes Katrina and Rita – January 2007 – Lessons
Learned

"These examples highlight lessons learned with respect to the importance
of federal and state governments establishing effective prevention
programs in order to minimize such fraud, waste, and abuse.”

“An effective program would include fraud prevention controls, fraud
detection, monitoring adherence to controls throughout the entire program
life, collection of improper payments, and aggressive prosecution of
individuals committing fraud.”

“These controls are crucial whether dealing with programs to provide
housing and other needs assistance, or other recovery efforts.”

“With effective planning, relief agencies should not have to make a choice
between speedy delivery of disaster recovery assistance and effective
fraud prevention.”
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
7
King Report August 2006

"An Examination of Federal 9/11 Assistance to New York: Lessons
Learned in Preventing Waste, Fraud, Abuse and Lax Management“ –
House Committee on Homeland Security, Peter King, Chair.

The major systemic problems, common to disaster response, identified by
the Subcommittee include:
1.
Lack of information sharing and cooperation
2.
Inadequate verification prior to disbursing funds
3.
Duplicative payments
4.
Relaxed or ineffective controls
5.
Weak oversight of procurement
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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King Report August 2006 – Best Practices
1.
Private integrity monitors
2.
Database searches to screen contractors
3.
Mandatory regular audits
4.
Dedicated temporary oversight office
5.
Full-time Independent Coordination Agency that prevents fraud
6.
Temporary Fraud Prevention Task Force
7.
Fraud awareness training
8.
Fraud tip lines
9.
Controlled electronic access to disaster sites
10. Contractor employee screening
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Anti-Fraud, Waste and Abuse Tasks
1.
Assess policies, procedures and processes from anti-fraud, waste, and
abuse perspective and embed anti-fraud components in each.
2.
Develop recommendations on application and data verification processes
and procedures.
3.
Develop fraud deterrence procedures for application process, e.g.
•
Require personal appearance by the applicant at an intake center to
sign the original application
•
Require government issued photo ID
•
Take a digital picture and thumbprint of each applicant while at the
intake center
•
Verification of identity through state driver's license records,
commercial data bases and credit checks
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Anti-Fraud, Waste and Abuse Tasks
4.
Verification of program eligibility and information provided by applicants,
third parties and external sources, including:
•
real property records
•
tax assessor and homestead exemption records
•
mortgage company records
•
insurance company records
•
utility company records
•
FEMA claims/payment records
•
SBA claims/payment records
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Anti-Fraud, Waste and Abuse Tasks
5.
Use data mining and data analysis tools and techniques to identify
anomalies for follow up, e.g. multiple applications associated with a single
address, invalid social security numbers, and property damage estimates
following an inappropriate pattern.
6.
Analyze paper application files for anomalies, through data analytics
supplemented by judgmental sampling.
7.
Liaison with Federal, State and local law enforcement authorities;
membership in Hurricane Fraud Task Force.
8.
Conduct select internal controls, including IT controls, assessments and
testing.
9.
Develop and deliver anti-fraud awareness training to program personnel.
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Anti-Fraud, Waste and Abuse Tasks
10.
Assist with development of content for anti-fraud brochures and posters,
including hotline information.
11.
Assist in developing standards of ethical conduct, conflict of interest
policies, investigative protocols, whistleblower and hotline procedures, and
process to refer matters to local, state and federal authorities, i.e., a
compliance program.
12.
Develop anti-fraud, waste, and abuse program focused on the property
damage evaluation process.
• Track overall statistical trends and ratios on pre-storm value and
cost of repair by individual and geography, and test based on
random and judgmental sampling.
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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Contact Information
Michael B. Schwartz
Principal
KPMG LLP
700 Louisiana, Suite 3100
Houston, Texas 77002
(713) 319-2258
[email protected]
www.us.kpmg.com
© 2009 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the U.S. KPMG and the KPMG logo are registered trademarks of KPMG
International, a Swiss cooperative.
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