Auditor with a Badge Auditor-Controller 1 OFFICE

Auditor with a Badge Auditor-Controller 1

OFFICE OF COUNTY INVESTIGATIONS Maria Santana, Senior Investigator, CFS Jim Christensen, Senior Investigator, CFE 2

MISSION • The primary mission of OCI is to ensure public trust in County government by providing a mechanism for reporting, investigating and where appropriate prosecuting fraud, theft, waste, abuse and inefficiency in government. OFFICE OF COUNTY INVESTIGATIONS 3

AUTHORITY Penal Code Section 830. 13 P. O. S. T. Certification Board of Supervisors Policy 9. 040 Centralized Reporting and Investigation of Fraud L. A. County Fiscal Manual Countywide Guidelines for Handling Suspected Employee Misconduct OFFICE OF COUNTY INVESTIGATIONS 4

OCI - WHO ARE WE ? ? • • 12 Investigators 4 Support Staff 1 Ombudsman 3 HIPAA OFFICE OF COUNTY INVESTIGATIONS 5

RESPONSIBILITIES • Investigating all employee, and contractor misconduct. – Particularly losses of County funds, resources or assets. • Coordinates all such cases and where appropriate works these cases with law enforcement. • County Fraud Hotline OFFICE OF COUNTY INVESTIGATIONS 6

Who Performs Investigations in the County • Office of County Investigations. Criminal/Administrative • • District Attorney- Criminal Department of Human Resources-Personnel CEOP – Discrimination, Harassment Department’s Internal Affairs, Internal Audit, Personnel, etc. -Administrative/Management OFFICE OF COUNTY INVESTIGATIONS 7

TRAINING • Complete Peace Officers Standards and Training (POST) PC 832 Arrest training. • Investigators are encouraged to have at least two certifications: CFS, CPA, CIA, CFE, CISA or private investigators license. • Degrees in accounting, computer science. • Training sources: DOJ, local law enforcement, Reid & Associates, Public Agency Training. • Most important training: Interview and Interrogations OFFICE OF COUNTY INVESTIGATIONS 8

HOW TO OBTAIN PENAL 830 STATUS • Establish that primary duties of investigators are to investigate criminal fraud cases related to theft of funds. • Staff should be regularly employed and paid in the capacity as investigators. OFFICE OF COUNTY INVESTIGATIONS 9

WHAT IS CALIFORNIA PENAL CODE 830. 13 ? • PC 830. 13 allows investigators of a county’s auditor-controller or director of finance to: – Serve Search Warrants – Receive State Criminal History information the same as peace officers of the state. • PC 830. 13 does not give Powers of Arrest or authority to carry firearms. OFFICE OF COUNTY INVESTIGATIONS 10

Effectiveness of OCI • 1, 400+ CASES ANNUALLY – 25% Substantiated – 35% Not substantiated – 40% Immaterial, previously investigated, not enough information, or referred out to CEOP, Welfare Fraud Hotline or other non-County agencies • HOTLINE OPERATOR • SEMI-ANNUAL REPORTS – Disciplinary Action Follow-Up • TIME THEFT IS THE #1 ALLEGATION REPORTED TO THE HOTLINE OFFICE OF COUNTY INVESTIGATIONS 11

What is Fraud? Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain. Source: “Managing the Business Risk of Fraud: A Practical Guide” sponsored by IIA, AICPA and ACFE. OFFICE OF COUNTY INVESTIGATIONS 12

2002 Revenue Loss Survey • $2. 9 Trillion, 5% of Revenue is Loss Annually to Fraud (based on Gross World Product) OFFICE OF COUNTY INVESTIGATIONS 13

2012 Revenue Loss Survey • $3 Trillion, 5% of Revenue is Loss Annually to Fraud (based on Gross World Product) OFFICE OF COUNTY INVESTIGATIONS 14

TYPES OF CASES INVESTIGATED • Theft – Timecard, mileage claims, medical certifications, abuse of County assets and resources • • • Bribery Computer Crimes Surveillance – Physical – Cameras Contractor/Vendor Fraud Identity Theft OFFICE OF COUNTY INVESTIGATIONS 15

Fraud Triangle – Why do people commit fraud? Opportunity Pressures Rationalization OFFICE OF COUNTY INVESTIGATIONS 16

Nathan Mueller OFFICE OF COUNTY INVESTIGATIONS 17

RED FLAGS OFFICE OF COUNTY INVESTIGATIONS 18

Types of Red Flags • • Life Style and Personality Organizational Accountability and Control Financial Documents OFFICE OF COUNTY INVESTIGATIONS 19

Organizational RED FLAGS § No Communication of Expectations § Too Much Trust in Key Employees § Lack of Proper Authorization Procedures § Lack of Attention to Detail § Changes in Organizational Structure § Lax Management Style § Tendency Toward Crisis Management OFFICE OF COUNTY INVESTIGATIONS 20

Accountability and Control RED FLAGS §Separation of Duties §Lack of Physical Security and/or Key Control § Missing Independent Checks on Performance § Poor System Design §Not rotating assignments among employees § Inadequate Training §Weak Links in Chain of Controls and Accountability OFFICE OF COUNTY INVESTIGATIONS 21

Financial Document RED FLAGS § Missing Documents § Duplicate Payments § Alteration of Documents § Unusual Billing Addresses or Arrangements § Excessive Number of Voided Documents § Address of Employee Same as Vendor Documents Not Numerically Controlled § Duplicate or “Home Made” Photocopied Invoices § § Questionable Handwriting or Authorization OFFICE OF COUNTY INVESTIGATIONS 22

Lifestyle and Personality RED FLAGS §Wheeler/Dealer Attitude §Financial Difficulties §Living Beyond Means §Control Issues §Dissatisfied Worker * §Family Problems §No Vacations or Sick Time §Close Customer/ Vendor Relationships §Unusual or Change in Personality (irritable, defensive, argumentative) §Vices (alcohol, drugs, gambling) §Too Good to Be True Performance OFFICE OF COUNTY INVESTIGATIONS 23

INTERNAL CONTROLS Internal Control is an organizational plan which defines separation of duties and how an operation can ensure that assets are safeguarded, accounting records are accurate and timely, and transactions that get processed and recorded are only those transactions that management wants processed and recorded. OFFICE OF COUNTY INVESTIGATIONS 24

Case Study Learning Activity Mr. Smith Dr. Dentist Mr. Wiggins OFFICE OF COUNTY INVESTIGATIONS 25

Webne OFFICE OF COUNTY INVESTIGATIONS 26

PROACTIVE FRAUD DETECTION Data Mining • Continuous Monitoring and Real Time • Transaction Inspection OFFICE OF COUNTY INVESTIGATIONS 27

AUTOMATED DETECTION Continuous Systems Monitoring – Suspicious Transaction Flagging Address and Account # Comparisons Payment Analysis OFFICE OF COUNTY INVESTIGATIONS 28

INTERNET CONTENT FILTERING • BLUE COAT – TRACKS INTERNET USAGE – BLOCKS SPECIFIC WEBSITES OFFICE OF COUNTY INVESTIGATIONS 29

Fastest Growing Cases • • • Time Abuse Identity Theft Cash/Deposit Theft Gas Theft (Voyager cards) IT Misuse Stolen County Warrants OFFICE OF COUNTY INVESTIGATIONS 30

IDENTITY THEFT Protection of Client and Employee Data § Limiting Dissemination of Personal Data § Document Shredding § Data Wiping (Computers and Media) § Physical Security and Access Controls § Responses to I. D. Theft Incidents OFFICE OF COUNTY INVESTIGATIONS 31

FRAUD HOTLINE INTERNET FRAUD. LACOUNTY. GOV PHONE (800) 544 -6861 E-MAIL HOTLINE@AUDITOR. LACOUNTY. GOV OFFICE OF COUNTY INVESTIGATIONS 32

Effectiveness of Investigations Departments have been more responsive to discipline employees, including managers for misconduct, etc. OFFICE OF COUNTY INVESTIGATIONS 33

TONE FROM THE TOP • Management must: – Set the tone that reflects the desired culture – Personally demonstrate the tone in everyday communications and functionality – Drive tone down through all levels of the organization – Communicate with specific message of ethics and integrity at least annually – Consistently enforce the organization’s Code of Conduct “It's pretty clear that the best compliance program in the world is meaningless - even if it is funded with a well-meaning compliance officer - if the leadership is not behind it and isn't supportive. ” - Honorable Michael E. Horowitz, Commissioner, United States Sentencing Commission OFFICE OF COUNTY INVESTIGATIONS 34

Questions? OFFICE OF COUNTY INVESTIGATIONS 35 35

THE END OFFICE OF COUNTY INVESTIGATIONS 36