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Cornell Hotline

Fraud

What is a financial irregularity?

Financial irregularity as defined in University Policy No. 3.6 and 3.6.1, Financial Irregularities states:

An intentional misstatement or omission of information related to financial transactions that is detrimental to the interest of the university. Includes embezzlement, fraud, and the falsification of records to misappropriate assets.

The Association of Certified Fraud Examiners estimates that a typical organization loses 5% of its annual revenues to fraud. For US organizations that works out to more than $652 billion annually!

The Association of Certified Fraud Examiners defines occupational fraud as: "The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets."

All occupational fraud schemes have four key elements in common. The activity:

  • Is clandestine;
  • Violates the perpetrator's fiduciary duties to the victim organization;
  • Is committed for the purpose of direct or indirect financial benefit to the perpetrator; and
  • Costs the employing organization assets, revenue or reserves.

Possible red flags that indicate fraud.

Red Flags do not indicate guilt or innocence but merely provide possible warning signs of fraud.

Personal Red Flags:

  • Living beyond ones means
  • Person is a dissatisfied employee
  • Never takes vacation or sick time
  • Close relationship with vendors and customers
  • Works excessive overtime
  • Dominant personality

The researchers concluded the most common reason employees committed fraud had to do with motivation - the more dissatisfied the employee, the more likely he or she will engage in criminal behavior. (Source: Journal of Accountancy February 2001)

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Examples of Fraud.

Forms of fraud that the Audit Office has seen on Cornell's Ithaca Campus:

  • Personal purchases on the procurement card;
  • Inappropriate charges to a travel or accounts payable voucher;
  • Theft of university assets;
  • Theft of cash from deposits;
  • Falsifying time card with time not worked;
  • Misrepresenting information on admission application or financial aid application;
  • Failure to report or properly manage a conflict of interest or conflict of commitment; and
  • Unauthorized acceptance of funds.

Forms of fraud that the Audit Office has seen on Cornell's Medical College campus:

  • Theft of university assets;
  • Medical billing fraud;
  • Personal purchases on the procurement card;
  • Inappropriate charges to a travel or accounts payable voucher;
  • Falsifying HR records to obtain a salary increase and payment for time not worked;
  • Inappropriate and/or fictitious charges on research studies;
  • Improper use of university assets;
  • Abuse of power; and
  • Fraudulent collection of unemployment while working.

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What to do if you suspect a financial irregularity.

University Policies No. 3.6 and 3.6.1, Financial Irregularities requires any member of the university community to report instances of suspected or proven financial irregularities to the unit head who then should notify the University Audit Office. Alternatively, the person who uncovers the alleged irregularity may choose to go directly to the University Audit Office to report it. The University Audit Office has the responsibility for initiating investigation into the matter. Reporting to the University Audit Office should be made at:

Ithaca campus: (607) 255-9300
Medical College campus: (212) 746-1897

Or:

Email at audit@cornell.edu

Cornell Hotline at (866) 293-3077, www.hotline.cornell.edu

The unit head should take no action to resolve the irregularity before consulting with the University Audit Office.

Please note that the investigating and reporting will be handled in a confidential manner by all involved parties.

For more information concerning University Policies No. 3.6 and 3.6.1, Financial Irregularities please see:

http://www.dfa.cornell.edu/treasurer/policyoffice/policies/volumes/finance/irregularities.cfm

For the Medical School please see:

http://www.dfa.cornell.edu/treasurer/policyoffice/policies/volumes/finance/irregularitieswcmc.cfm

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