State Agency - NASACT



TOPIC: Fraud Investigative UnitsOFFICE: AuditorSTATE: NCDATE: 09/26/2017QUESTION / ISSUE: The North Carolina Office of the State Auditor is interested in information concerning how other states operate fraud investigative units.?Specifically, NC OSA is interested in the following questions:How is your fraud investigative unit organized? (i.e., # of investigators, # of supervisors, # of investigative staff per supervisor, reporting hierarchy, etc.)Do you conduct investigations under professional standards, and if so what are those standards? (Yellow Book, Office of Inspector General, etc.)Do you operate a Hotline for receiving tips and if so how many calls do you receive in a year?How many cases do you have open at a time?How many cases do you investigate in a year?How do you plan your investigations?How do you measure performance (e.g. do you use budgets, milestones, deadlines, other metrics)?StateCommentsDelawareWe do not have a separate investigative unit currently. Our audit staff perform investigations as well as other types of engagements. We currently have: 1 senior audit manager, 4 audit managers, 4 audit supervisors, and 8 staff members. The audit staff are not assigned as teams but assigned to projects based on individual availability.Yes, as applicable, we use Yellow Book and the Council of the Inspectors General on Integrity and Efficiency’s Quality Standards for Investigations and Quality Standards for Inspection and Evaluation.Yes, 75-100.Average 2-3.Average 5-6.We document the investigative plan, determining independence, etc., very similar to the way we document Yellow Book engagements. We research criteria, regulations, processes, data, etc., and determine procedures based on the allegations.We use milestones and deadlines. We were using budgets but did not adhere to them because of difficulties encountered during the engagements. We found it was almost impossible to set a budget because we could never know exactly what we were walking into or what we would find that would lead down many different paths.IndianaPrior to April 2014, fraud investigations were performed and supervised by the same staff that performed and supervised financial and compliance audits. In 2014, the State Examiner reorganized the agency and created a unit within the agency whose main purpose was to perform special investigations, primarily fraud investigations. This unit was entirely staffed from within the agency, although a staff member with a background in law enforcement was added in the central office and eventually given the title of director of special investigations. Nearly all of the staff chosen for this unit were long-time employees who had participated in prior fraud investigations. The main benefit of adding a staff member with a law enforcement background was the added perspective brought to a group made up entirely of accountants, especially for investigations likely to end up in criminal prosecutions. The members of this unit were removed from performing audits and provided with training specific to performing special investigations.Currently, the special investigations unit consists of 15 examiners supervised by 4 district coordinators and the director of special investigations who reports to one of two deputy state examiners. We have not formally stated that we will conduct our investigations under a set of uniform professional standards. We do have internal policies and procedures, and we, of course, must adhere to legal standards established by state law. In addition, our investigative staff as well as some central office staff completed CFE training and received their certifications this past summer.We do not operate a telephone hotline that we advertise as such. Our agency is responsible for financial and compliance audits of all governmental units and are referenced quite frequently in the media and even in local board meetings. The public is generally aware of our existence and our mission. As a result, we do receive phone calls at our main office number from concerned citizens with questions and/or allegations. Our website allows for submission of fraud concerns related to any governmental unit. Submission may be anonymous.Additionally, state law requires that “All erroneous or irregular variances, losses, shortages, or thefts of local government funds or property shall be reported immediately to the state board of accounts.” We receive over 100 calls/submissions per year.On average, we have 15-20 open cases at any given time.On average, we investigate 50-75 cases per year.Generally, a district coordinator will try to determine how many staff members will be needed for a special investigation. He or she will then meet with the assigned staff and together they will map out a strategy for the investigation. This strategy is subject to change depending on the nature of the investigation and new information obtained during the course of the investigation. We also often coordinate our investigations with the state police, local police agencies, local prosecuting attorneys, and the FBI. The needs of those agencies may affect the scope and direction of our investigations.Most of the time, we have a fairly high degree of certainty that fraud has occurred before we open an investigation. Often, the question before us is: “How far back do we take our investigation?” We do have certain measures that are used for determining how much additional time and resources we will commit to an investigation. In general, we want to keep the cost of our investigation below the likely amount of loss. We also consider the likelihood of recovery based on financial condition of the target and official bond or employee dishonesty insurance coverage. Another factor we consider in potential criminal cases, is whether the amount of loss has reached the felony theft thresholds in state law.The ultimate measure of performance is whether our investigation ends in a successful criminal prosecution and/or civil judgment, and a perception in the public square that local government officials will be held accountable.MichiganThe Michigan Office of the Auditor General (OAG) created the Fraud Investigative Services Team (FIST) and began administering a fraud, waste, and abuse hotline in March 2017. FIST is organizationally located in the OAG's Executive office, and is led by the Chief Investigator who reports directly to the Auditor General. FIST is also comprised of an Investigative Audit Manager and an Investigative Analytics Audit Manager, who both report to the Chief Investigator. ?As we continue to raise the awareness of our existence and demand for our services grows, we anticipate recruiting additional investigative audit staff. We are exploring the feasibility of conducting our "investigative audits" under the Quality Standards for Inspection and Evaluation developed by the Council of Inspectors General on Integrity and Efficiency (CIGIE).Several factors led us to the CIGIE standards. CIGIE defines "inspections" to include evaluations, inquiries, and similar types of reviews that do not constitute an audit or a criminal investigation. The OAG does not have law enforcement authority, or the authority to conduct criminal investigations. Our investigative audits consist primarily of inquiries and the examination of selected financial records and other documentation, the scope of which is typically significantly less than that of financial or performance audits as defined by Government Auditing Standards. CIGIE standards indicate that other uses of inspections and evaluations include but are not limited to measuring performance; determining compliance with applicable law, regulation and/or policy; and assessing allegations of fraud, waste, abuse, and mismanagement. ?Yes, we administer a fraud, waste, and abuse hotline. Complainants may report fraud/waste/abuse allegations to us online, via telephone, or by completing a form and mailing it to us. We have received 20 complaints through our hotline since March. ?We currently have 4 open cases.?To be determined, as we have been in existence for just over 6 months. ?Once we have determined that we are going to investigate a complaint, we prepare an investigation plan that is ultimately approved by our Chief Investigator. Our considerations when preparing the investigation plan include the nature of the allegations, parties involved, applicable laws and policies, proposed investigation methodology, anticipated evidence, and timeframe for the investigation. We have attached our investigation plan template for your review.Although not yet formalized, we anticipate establishing metrics related to budgets, timeframes, and milestones. We also anticipate metrics related to the percentage of allegations substantiated, investigations resulting in disciplinary action, investigations resulting in legal action, and recovery of fraud losses.\sMississippiWe have a director who is an at will appointee of the state auditor. There is a deputy director, two managers, four supervisors and about ten field staff. There are also three administrative staff members.Our investigators are certified law enforcement officers and are not bound by Yellow Book or OIG standards.We have an 800 number, and take complaints by mail and online. This unit also receives audit referrals from other staff. They get hundreds of citizen complaints every year.It varies, usually under 100.It also varies. Some can take months, others just an hour or plaints are prioritized by the director.There is not a formal process for this. They are managed on a case by case basis.MontanaWe do not really have a unit. I am the administrator who answers the phone and manages our database. We have a team of auditors and audit managers (2 financial compliance auditors, 1 financial compliance manager, 1 information systems auditor, 1 information systems manager, 1 performance audit manager, and myself) who will be an integral part of the changes we are putting into place. Currently when a report is made the legislative auditor, deputies, and I decide the course of action, and the allegations are reviewed, analyzed and verified by me, an assigned auditor, or financial audit team during a routine audit.Our statute allows us to review, analyze and verify the information. We do not use the term investigation so currently if audit work is done it is done under the Yellow Book. We are looking into using a different set of standards (OIG) to do work in response to hotline submissions that are worked outside the scope of an audit.We have a 1-800 number, a dedicated email, and an online fillable form. We enter into the database both fraud, waste, and abuse allegations and penal violations (agencies are required to notify us and the attorney general when they have a theft or suspected theft of state money or property under their control). We get approximately 60 submissions of each type each fiscal year.All the penal violations remain in open status unless we are notified that the item was returned or restitution is paid; this hardly ever occurs. The fraud, waste, and abuse allegations where audit work is done may remain open through an audit. Currently that might number 10-15 but we are looking to change the process so that submissions are actively worked to resolution within 30-60 days.We do some work over all submissions, but maybe only 5 or so result in any substantive audit hours being dedicated to the allegations.It is an ad hoc process, and not very effective; unless they are done within the scope of a routine financial compliance audit.Unfortunately, we do not have any performance measures unless they are done within the scope of a routine financial compliance audit.New MexicoOur office has a Special Investigations Division which investigates allegations of financial fraud, waste and abuse.We have 4 auditor investigators, 2 supervisors, and 1 manager. Most of the work performed by our Special Investigations Division is done in accordance with the AICPA Consulting Standards.We use a third-party hotline provider that has capabilities for calls and website reporting. We average 275-300 tips per year.We typically have about 100 cases open at a time. In general, about half of those are considered active with fact finding and document review occurring.We address all the tips we receive in some manner. Our response can range from acknowledgement and communication with the complainant through the hotline, to more in-depth fact-finding, to a formal investigation resulting in a written report. In general, approximately 10 tips per year result in formal investigations with written reports.Planning for formal investigations expected to result in written reports includes preliminary fact finding followed by consultation within the engagement team and input from the executive management team. The executive team approves the audit plan before the start of fieldwork.We use a variety of performance metrics including the # of tips received, the number of cases closed, and the volume and timeliness of correspondence sent to complainants, agencies, and others including oversight agencies, law enforcement, and district attorneys.OklahomaThe Oklahoma State Auditor and Inspector’s (SA&I) fraud investigative unit currently consist of two auditors and one audit manager. The unit has dropped from six full-time auditors to two in just little over a year. We currently utilize auditors from other divisions in the office as needed. Currently we have four active auditors engaged in investigations.The audit manager reports to the deputy state auditor who reports to the state auditor.SA&I does not conduct investigative audits under professional standards.SA&I does utilize a hotline for fraud tips, but currently only receives approximately five to six calls, or “tips”, per year through that process. The SA&I investigative unit cannot initiate audits through tips, calls, or citizen complaints. Our unit can only perform audits when requested through the following means: Governor requestAttorney general requestDistrict attorney requestBoard request, from a board that oversees or funds the entity to be auditedCitizen petitions, a petition process requiring 10% of the registered voters of the subdivision being auditedThe SA&I investigative unit normally has four to six cases open, or working, at one time. There are usually two or three in the final reporting stage, four to six active working cases, and anywhere from eight to ten cases pending.We usually investigate, or report on, approximately 15 cases a year: this can vary depending on the size of the entity and the magnitude of the allegations, objectives, and findings.Each investigation is unique, resulting in a different approach to planning for each type of engagement. Attorney general and district attorney requests are usually specific by design and the request itself usually defines our objectives for that engagement. Before an audit plan is prepared SA&I staff meet and discuss details with a representative of the Attorney General’s Office or District Attorney’s Office, or other local law enforcement, if they have already become involved.A citizen petition also is required to define the objectives before presenting the petition for signatures to the public. Once a petition is verified, SA&I staff meets with the “petitioners” to discuss the concerns defined in the petition. SA&I staff also meets with the entity’s (city, town, school, agency, etc.) board members, officials, and personnel, to obtain a better understanding of the allegations before preparing a final audit plan.A unique audit plan is prepared for every engagement. The plan will document each overall objective and then define the steps necessary to answer each question relative to that objective. Our audit plans are very “fluid” and can change almost daily. Audit plans are also written with the final reporting process in mind.Most investigative reports are posted on our website and are public documents under Oklahoma’s Open Record Act. Occasionally an investigation is reported on through a lesser means, such as a letter to the applicable board or director.SA&I’s audit workpapers are also subject to open records request. An exception is investigations requested by our attorney general. The Attorney General’s Office has the right to hold our report as criminal investigation work and not release the work papers or the report to the public.Our formal measurement of performance is based on the number of reports issued in a given year. Informally, we measure our performance on whether we were able to successfully respond to the audit objectives and give requestor(s) of the audit a viable basis for resolution to their concerns. We also consider meeting deadlines, which are occasionally imposed and are important to the requestor’s ongoing investigation.UtahWe currently have an audit manager who reports to the state auditor. One audit supervisor and 2 staff level investigators. We are looking to hire one more staff level. We receive and handle many different types of complaints. They are not all strictly fraud allegations. We also look into waste, abuse, and certain non-compliance issues that don't rise to the level of fraud.We do not cite standards in our reports, however, we provide CPE training on standards and employ them in our work. Emphasis is on Yellow Book, however, we also are aware of CIGIE and plan to implement those standards as well.Yes. We have email and a dedicated phone line. We receive approximately 70-80 complaints per year.We screen and prioritize our complaints (low, med, high). We may never get to the low priority cases and therefore, they stay on our log and are technically 'open' for quite some time. We currently have approximately 30-40 complaints on the log that are in process or not started yet.It varies depending on the size and complexity of the case. It also depends if you count the ones that we screen and decline. I estimate that we dispose of approximately 60-70 complaints per year. Some of these are declined after doing initial work to evaluate the complaint. Some can be resolved through some other means and a full investigation and report is not issued. We issue approximately 10 reports with findings and recommendations per year after conducting full investigations into complaints.It depends on the nature of the complaint. We are very collaborative and tend to brainstorm a lot, especially on bigger projects. For bigger projects, we sketch out a basic audit plan based on the complaints received. However, we know that things will likely change as we start looking into matters so we stay flexible and amend the planned testwork as needed.We don't currently use time budgets, but there is some desire to move in that direction. The challenge that we have is that this is a very dynamic environment and it is difficult to predict the scope of a project when you begin.VermontWe do not have a fraud investigative unit within the Vermont State Auditor’s Office.Not applicable (see Q1)Our website has a prominent section for reporting allegations of fraud, waste, and abuse to us () via phone or email. We receive approximately 6-7 emails or calls in a given month. When we receive an allegation, someone from our office is assigned to perform due diligence concerning the allegation. If it is determined that the allegation has substance, we refer the issue to the appropriate authority (e.g., Attorney General’s Office, human services fraud investigation unit, Medicaid program integrity unit, human resources investigative unit). We send a response to the individual submitting the allegation (if not anonymous) on the action we took and follow up with the organization to whom we made the referral to check that an action has been taken. Our website also contains information on reporting certain types of fraud directly to the responsible organization.N/AN/AN/AWe do not have specific performance measures regarding this topic. However, our annual performance report contains a summary of the actions we took regarding information provided by whistleblowers and other complainants’ (see pages 10, 17 in ).VirginiaOur office is staffed by teams with specialty areas (budgeting, capital assets, data analysis, etc.). There are staff on the various specialty teams that have their CFE and we have one audit manager who coordinates the staff with CFEs. They are available to go do work on the frauds when necessary. In addition, we might involve staff in an investigation who have worked on the particular agency in the past even if they do not have a CFE. In many cases, the internal auditors at an agency will do an investigation and provide their results to us and we are not directly involved.Generally, no. We typically gather the information needed for the State Police or other authorities to charge and try the individual.The Office of the State Inspector General operates the State Fraud Hotline in Virginia. The State Auditor’s Office has no involvement with the Hotline.We had 28 new frauds reported to us in FY2016, and closed out 27 frauds. There were 19 active cases remaining at the end of FY2016. I do not yet have the stats accumulated for FY2017.See #4 above.We coordinate with the State Police and the Office of the State Inspector General.Not measured other than the metrics of new reports, closed reports, and active cases remaining. ................
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