The Arizona Auditor General’s office recently issued the first part of a three part series fraud alert discussing what public officials can do to help prevent fraud within their organization. The fraud alert series will focus on the fraud triangle elements of opportunity, pressure and rationalization.
The recently issued alert discusses the first element, opportunity, and the ways public officials can limit the opportunity to steal at their organization. There are two main things that public officials can do. First, establish internal controls and oversight that segregate duties, require independent review of work performed and restrict access to resources to only those that should have such access.
The second way that public officials can help limit the opportunities to steal is to create a culture that places an emphasis on accountability. This can be accomplished by doing such things as establishing a whistleblower hotline and requiring employees to acknowledge and document their understanding of how to report fraud as well as the consequences for committing fraud. In addition, if fraud occurs, the organization should not try to hide the fraud but should report it to the appropriate law enforcement officials.
The element of opportunity is the part of the fraud triangle the management has the greatest ability to influence. By strengthening internal controls and creating a strong ethical culture, public officials can help to reduce the possibility of fraud in their organizations.
By Jeffery W Patterson, CPA