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Key principles applied by Witzenberg Municipality to Manage of Fraud Presented by: Gerhard Louw Internal Audit PEC Engagement 25 July 2013 IIA Guideline of fraud risk management. Fraud anchor principles. Principle 1 - Policy and procedures Principle 2 - Periodically fraud risk assessment

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Key principles applied by Witzenberg Municipality to Manageof FraudPresented by: Gerhard Louw Internal AuditPEC Engagement25 July 2013IIA Guideline of fraud risk management

fraud anchor principles
Fraud anchor principles

Principle 1 - Policy and procedures

Principle 2 - Periodically fraud risk assessment

Principle 3 - Prevention techniques

Principle 4 - Detection techniques

Principle 5 - Reporting and corrective action


Principle 1: As part of an organization’s governance structure, a fraud risk management program should be in place, including a written policy (or policies) to convey the expectations of the Council and senior management regarding managing fraud risk.

  • Fraud prevention policy
  • Performance, Risk and Audit Committee
  • News letters – awareness – Community and internal
  • Fraud committee
  • Fraud Month

Principle 2: Fraud risk exposure should be assessed periodically by the organization to identify specific potential schemes and events that the organization needs to mitigate.

  • Fraud risk Identification
  • Put on your “fraudster cap” for each process and capital project
  • Think like a fraudster – “e.g. How can I beat the system?”
  • Implement controls to mitigate
  • Monthly Inter-action with local Police

Principle 3:Prevention techniques to avoid potential key fraud risk events should be established, where feasible, to mitigate possible impacts on the organization.

  • E.g. Various Procurement declaration required from suppliers (MBD’s)
  • Employees code of conduct
  • Suppliers code of conduct
  • Background checks
  • Transunion checks on potential suppliers
  • E.g bank detail fraud - one person

Principle 4: Detection techniques should be established to uncover fraud events when preventivemeasures fail or unmitigated risks are realized.

  • Ghost employees
    • Monthly select a few employees from payroll and physical verify existence and identification numbers
  • Inventory checks
  • Reconciliations
  • Financial System Exception reports
  • Audit projects – fraud considerations
  • Monthly SCM deviation report to council
  • Pre-determined/automated tests to detect abnormalities
    • Procurement threshold – monthly check of payments nearby threshold values – investigate exceptions

Principle 5: A reporting process should be in place to solicit input on potential fraud, and a coordinated approach to investigation and corrective action should be used to help ensure potential fraud is addressed appropriately and timely.

  • National Fraud Line - News letter and website
  • Risk Management reporting
  • Own Fraud Line – best practice
new ideas
  • CRO and CAE Forum needs to spend to more time on fraud detection, prevention and mitigating controls ?