ACCOUNT 777 Fraud from the Manager's Perspective Case Analysis 3 ANALYSIS REQUIREMENTS Case Analysis 3 builds on the New Day Products (NDP) scenario in Case Analysis 2. You are to make recommendations to NDP on Fraud Risk Governance and the development of a Fraud Risk Management (FRM) program, addressing the following aspects. Refer to the Anti-Fraud Playbook Play 1 and Play 2 (including Appendices A and C) for guidance. 1. Play 1: Understand Where You Are and Where You Want to Be (15 points) a. Assume NDP's current state in the Anti-Fraud Maturity Assessment Model is Ad Hoc. Recommend a goal state for NDP -for the Fraud Risk Governance FRM principle only - and explain why you believe your recommended state should be NDP's goal. b. Provide a recommended implementation timeline. c. You may choose to recommend different short-term and long-term goal states; however, explain your reasoning and incorporate both/all states in the implementation timeline. 2. Play 2: Create a Culture (15 points ) a. Define roles and responsibilities for the FRM program. Refer to the Case Analysis 2 requirements handout for the case scenario. In addition, below are some additional details about NDP's services as well as some insights about nonprofit organizations that may help you in addressing the above requirements. Recall that NDP is a nonprofit organization that provides employment and social services to people with disabilities in cooperation with private and public community organizations and businesses. Employment services include employment planning and employer-employee matching services. Employment planning programs assist participants with vocational decisions through standardized testing, situational assessments, and community-based job tryouts. Individually tailored programs culminate in a service report that details participants' vocational strengths and developmental needs and helps participants choose vocations. Matching services match participants' abilities to job requirements and provide additional assistance through on-site job coaching. Social services include a developmental disabilities program and adult living center. The developmental disabilities program teaches life skills that not only encompass social skills but more fundamental skills such as cooking. The program is tailored to each participant's needs, goals, preferences, and interests. The training is provided in context, whether at home or the workplace. Residents at the adult living center participate in the developmental disabilities program, but the adult living center also fosters greater community interaction and involvement. In addition to participating in arts, crafts, and games at the center, residents participate in trips to local events. The primary goals of nonprofit organizations generally focus on providing benefits to society. Nonprofit organizations are frequently funded by donations and government grants. Although donors and other funding sources do not usually expect monetary returns from investments of time and resources, they do expect the nonprofit to make measurable progress toward its mission. A nonprofit can generate income, but it must be recycled back into the organization to achieve the organization's objectives. A nonprofit's workforce often includes a large amount of volunteer efforts, often hindering nonprofits from attracting skilled employees. However, nonprofits can sometimes attract employees who are strongly motivated by the organization's mission, leading to a sense of community and motivations by intrinsic rewards. Nonprofits have no owners and are generally considered accountable to the public they serve and to the state agencies and tax authorities by which they are regulated. Much like for-profit organizations, nonprofits rely on boards of directors for financial and strategic oversight. Boards also help to develop and maintain operational policies in support of the organization's mission. GENERAL REQUIREMENTS Prepare a typewritten report of approximately 2-3 pages to address the analysis requirements. You should prepare this assignment from the perspective that the resulting report will go to NDP's Board of Directors. Your report should exhibit professional language, grammar, and organization. Responses should reflect application of critical thinking and logical analyses. Properly cite and provide a reference list for any outside sources, if appropriate (reference list does not count toward page count). Sample Fraud Policy Association of Certified Fraud Examiners Sample Fraud Policy BACKGROUND The corporate fraud policy is established to facilitate the development of controls that will aid in the detection and prevention of fraud against ABC Corporation. It is the intent of ABC Corporation to promote consistent organizational behavior by providing guidelines and assigning responsibility for the development of controls and conduct of investigations. SCOPE OF POLICY This policy applies to any irregularity, or suspected irregularity, involving employees as well as shareholders, consultants, vendors, contractors, outside agencies doing business with employees of such agencies, and/or any other parties with a business relationship with ABC Corporation (also called the Company). Any investigative activity required will be conducted without regard to the suspected wrongdoer's length of service, position/title, or relationship to the Company. POLICY Management is responsible for the detection and prevention of fraud, misappropriations, and other irregularities. Fraud is defined as the intentional, false representation or concealment of a material fact for the purpose of inducing another to act upon it to his or her injury. Each member of the management team will be familiar with the types of improprieties that might occur within his or her area of responsibility, and be alert for any indication of irregularity. Any irregularity that is detected or suspected must be reported immediately to the Director of , who coordinates all investigations with the Legal Department and other affected areas, both internal and external. ACTIONS The terms defalcation, misappropriation, and other fiscal CONSTITUTING irregularities refer to, but are not limited to: FRAUD - Any dishonest or fraudulent act - Misappropriation of funds, securities, supplies, or other assets - Impropriety in the handling or reporting of money or financial transactions - Profiteering as a result of insider knowledge of company activities - Disclosing confidential and proprietary information to outside parties - Disclosing to other persons securities activities engaged in or contemplated by the company - Accepting or seeking anything of material value from contractors, vendors, or persons providing services/materials to the Company. Exception: Gifts less than $50 in value. - Destruction, removal, or inappropriate use of records, furniture, fixtures, and equipment; and/or - Any similar or related irregularity OTHER Irregularities concerning an employee's moral, ethical, or IRREGULARITIES behavioral conduct should by resolved by departmental management and the Employee Relations Unit of Human Resources rather than the Unit. If there is any question as to whether an action constitutes fraud, contact the Director of for guidance. INVESTIGATION The Unit has the primary responsibility for the RESPONSIBILITIES investigation of all suspected fraudulent acts as defined in the policy. If the investigation substantiates that fraudulent activities have occurred, the Unit will issue reports to appropriate designated personnel and, if appropriate, to the Board of Directors through the Audit Committee. Decisions to prosecute or refer the examination results to the appropriate law enforcement and/or regulatory agencies for independent investigation will be made in conjunction with legal counsel and senior management, as will final decisions on disposition of the case. The Unit treats all information received confdentially. Any employee who suspects dishonest or fraudulent activity will notify the Unit immediately, and should not attempt to personally conduct investigations or interviews/interrogations related to any suspected fraudulent act (see REPORTING PROCEDURE section below). Investigation results will not be disclosed or discussed with anyone other than those who have a legitimate need to know. This is important in order to avoid damaging the reputations of persons suspected but subsequently found innocent of wrongful conduct and to protect the Company from potential civil liability. Sample Fraud Policy REPORTING Great care must be taken in the investigation of suspected PROCEDURES improprieties or irregularities so as to avoid mistaken accusations or alerting suspected individuals that an investigation is under way. An employee who discovers or suspects fraudulent activity will contact the Unit immediately. The employee or other complainant may remain anonymous. All inquiries concerning the activity under investigation from the suspected individual, his or her attorney or representative, or any other inquirer should be directed to the Investigations Unit or the Legal Department. No information concerning the status of an investigation will be given out. The proper response to any inquiries is: "I am not at liberty to discuss this matter." Under no circumstances should any reference be made to "the allegation," "the crime," "the fraud," "the forgery," "the misappropriation," or any other specific reference. The reporting individual should be informed of the following: - Do not contact the suspected individual in an effort to determine facts or demand restitution. - Do not discuss the case, facts, suspicions, or allegations with anyone unless specifically asked to do so by the Legal Department or Unit. TERMINATION If an investigation results in a recommendation to terminate an individual, the recommendation will be reviewed for approval by the designated representatives from Human Resources and the Legal Department and, if necessary, by outside counsel, before any such action is taken. The Unit does not have the authority to terminate an employee. The decision to terminate an employee is made by the employee's management. Should the Unit believe the management decision inappropriate for the facts presented, the facts will be presented to executive level management for a decision. Fraud Policy Decision Matrix