Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling Fraud ASMC Conference Orlando,Florida June 3, 2010 KPMG FORENSIC SM

Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling FraudASMC Conference

Orlando,Florida

June 3, 2010

KPMG FORENSICSM

© 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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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.


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Sample Antifraud Program Elements

Prevention Detection Response

Board/audit committee oversightExecutive and line management functions

Internal audit, compliance, and monitoring functions

Fraud and misconduct risk assessment

Code of conduct and related standards

Employee and third-party due diligence

Communication and training

Process-specific fraud risk controls

Hotlines and whistle-blower mechanisms

Auditing and monitoring

Proactive forensic data analysis

Internal investigation protocols

Enforcement and accountability protocols

Disclosure protocols

Remedial action protocols

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Antifraud Program ObjectivesAntifraud Program Objectives

Prevent fraud and

misconduct

Detect occurrence

Respond appropriately

once discovered


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GAO Summary Report Graphic


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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


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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.”


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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


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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


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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


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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


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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.


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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.


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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

Documents

Humanitarian Assistance Authorities: When Disasters and Crises Strike: Tackling Fraud ASMC Conference Orlando,Florida June 3, 2010 KPMG FORENSIC SM