Fraud, Waste & Abuse Reporting Hotlines - An Overview

This is an overview of Fraud, Waste & Abuse Reporting Hotlines, how they are used, examples, and why the Lake County (FL) School District needs one.   The District recently implemented an internal audit position which is one of several techniques used by organizations to prevent and detect fraud and mismanagement. 

Another common technique is to establish a Fraud, Waste & Abuse Reporting Hotline (phone and website) so that employees, vendors, citizens and others can report possible fraud and mismanagement issues with complete confidentiality.

I was in Baghdad, Iraq during most of 2004 and all of 2005.  I worked periodically with auditors in a special audit group.  The US Congress established a Special Inspector General for Iraq Reconstruction ( www.SIGIR.mil ) which had oversight over the $20-billion in reconstruction funds for Iraq.   That group, like many Federal agencies, established a Fraud Reporting Hotline (and website) where they received many tips for investigation.  Notice that they have a link to their Fraud, Waste & Abuse Hotline on the first page.

Additionally, I worked as an advisor to an Iraqi anti-corruption agency called CPI.  One of the 7 main initial tasks was to establish a country wide, publicized fraud reporting hotline, including phones and a website.   That program, including posters on government agency walls and notices in internal staff newsletters generated many tips leading to full corruption investigations.

Generally, a Fraud Reporting Hotline is a SEPARATE line and website not under the control of any internal department except either the Internal Audit Department or the Attorney's office.  All tips reported on the phone line or website are confidential, and investigated by internal audit and prioritized for action.  Funds and resources should also be dedicated to publicity for the hotline, including wall posters, notices in employee newsletters, press releases, etc.

Here are some links to some existing government hotlines in the US:

- Orange County, CA - I lived there and they showed up at the top of the list when I did a Google search on "audit fraud hotline".   Their hotline is at:

http://www.oc.ca.gov/audit/fraud.asp

- City of Cincinnati, Ohio hotline

http://www.cincinnati-oh.gov/cityfinance/pages/-11160-/

- Orange County, FLORIDA's hotline

http://www.occompt.com/auditfraud.html

- State of Virginia (a "Commonwealth")

http://www.doa.virginia.gov/DSIA/Fraud_and_Abuse_Hotline.cfm

- El Paso, Texas Independent School District - this link leads to Board minutes - skip down to the section on "Fraud Policy" which also describes a planned hotline that was then implemented in 2005.

http://www.episd.org/finance/docs/budget_review/minutes/Approved%20Nov%2004%20BRC%20Minutes.pdf#search=%22audit%20fraud%20school%20district%20hotline%22

Additionally, there are third party firms that provide hotline services so they are confidential and outside the normal administrative staff control.

Recommendation:

To help detect and prevent fraud, waste and abuse, Lake County School District needs to implement a full Fraud, Waste & Abuse Reporting Hotline with confidential phone line and website.  Funding for publicity should be included.  Procedures should be written on how the "tips" are to be handled and acted on.  Research on websites like those above should result in identifying all the tasks needed to implement a proper hotline.  The phone line and website should be controlled by either the internal audit or legal counsel's office.  It should be established by the end of 2006.

Finally, here is an article about the State of New York's Fraud hotline.  Notice there are TWO examples of School District frauds caught through tips to the hotline.  In one case, an employee was stealing school computer equipment and selling them on ebay.  In the other, a High School Principal was submitting bogus requests for expense reimbursements.

from:  http://www.northcountrygazette.org/articles/082406CorruptionHotline.html

Hotline Created To Report Government Fraud, Corruption

New Yorkers can now call a new toll-free hotline, 1-888-OSC-4555, to report allegations of fraud, corruption or abuse of taxpayer money, New York State Comptroller Alan Hevesi has announced. New Yorkers can also continue to report allegations of malfeasance online at www.osc.state.ny.us. The hotline is staffed by experienced investigators, including former law enforcement personnel from the Investigations Division of the State Comptroller's office, from 9 a.m. to 9 p.m. Monday through Friday. The division investigates allegations of fraud relating to State agencies, public authorities, local governments, school districts and vendors doing business with the State. The division works closely with local and federal prosecutors, the office of the state attorney general, and other appropriate authorities to ensure that wrongdoing is exposed and those responsible are brought to justice. Since Comptroller Hevesi created the division in 2003, out of more than 500 complaints received or findings reported by the Comptroller's audit divisions, 90 matters have been referred to law enforcement officials for potential prosecution. These referrals have resulted in 44 arrests, guilty pleas, or convictions. Many of these cases resulted from complaints provided by concerned citizens or whistleblowers. For example: --Wrongdoing of Official in Oswego County: A highway superintendent in Schroeppel who submitted false vouchers, forged documents, and misused town equipment and material for his own personal use, was arrested by the State Attorney General's office in 2004 following an extensive investigation by the Comptroller's office. The investigation stemmed from a complaint received by the Comptroller's office. --Fraud at a School District in Westchester County: Following an anonymous e-mail complaint, investigators found fraudulent invoices that were submitted by a high school principal and former secretary to the superintendent at the Katonah-Lewisboro School District for a program that reimburses employees for health, educational and other expenses. Both employees pleaded guilty to attempting to defraud the government. --Theft at a Long Island School District: In August 2006, the Suffolk District Attorney arrested and charged a technology consultant for stealing computer equipment from the Sachem Central School District in Suffolk County. The arrest originated from an anonymous complaints sent to the Comptroller's office that alleged that he was stealing equipment from the district and and selling it on eBay. Investigators from the Comptroller's office conducted an undercover sting operation and bought a computer online and found that it matched a serial number of one that had been purchased for the school district. "Whistleblowers have played a key role in giving us leads to pursue wrongdoing. I commend these brave people who have done the right thing and helped us make sure that those committing bad deeds are punished," Hevesi said. Callers are not required to identify themselves and may make anonymous complaints. In all cases, investigators will keep the identity of reporting individuals confidential. Via the Internet, the public can also send in referrals by clicking on the "Stop Fraud" icon at the Comptroller's website at www.osc.state.ny.us. The web site includes the email and contact numbers for key Investigation Division personnel, as well as an online complaint form. Concerned citizens can also e-mail the Comptroller's office at [email protected] or write to Office of the State Comptroller, Investigations Division 14th Floor, 110 State Street, Albany NY 12236. "While I believe that most individuals working on behalf of taxpayers are honest, there are some who are not. We are putting people on notice: If you engage in criminal activity at the expense of our taxpayers, you will get caught," Hevesi said. Click here to go to the OSC Division of Investigations homepage