It is the responsibility of each institution to establish a system to report fiscal misconduct and losses of state or institutional funds and property. When someone suspects wrongdoing, the appropriate authorities as designated by the institution’s president/director should be informed. The Tennessee Board of Regents Business and Finance Office (TBR) shall be immediately notified of the reported incident as outlined below. Administrators at all levels of management should be aware of the risks and exposures inherent in their areas of responsibility, and should establish and maintain proper internal controls to provide for the security and accountability of state resources, including resources entrusted to them. “Resources,” as used herein, shall refer to personnel, equipment, and financial resources. Compliance with the guideline will:
The following definitions apply to these terms as they are used in this guideline. “Fraudulent activities” is defined as actions that deceive or cheat, ordinarily for the purpose or result of causing some financial loss to another, or bringing about some financial gain to oneself or others. “Suspected fraud” is a reasonable belief or actual knowledge that a fraudulent activity has occurred. “Misconduct” includes conduct that contravenes institutional, TBR or other state policy/statute or federal regulation/statute, or enriches the employee or others beyond the remuneration specified by the terms of the employee’s appointment, employment contract, or vendor contract. “Suspected misconduct” is a reasonable belief or actual knowledge that misconduct has occurred.
Fraudulent activities, misappropriation, and misconduct include, but are not limited to:
The procedure for reporting property losses to the appropriate campus officials is divided into three categories: (1) losses due to cash shortages, (2) losses involving acknowledged or suspected misconduct, and (3) losses of physical property. TBR reports the suspected fraud items and cash shortages to the Comptroller of the State of Tennessee, Division of State Audit, and the property losses to the State of Tennessee, Department of Treasury, Risk Management Division. Losses must be reported to the State immediately upon discovery and the institutional procedures should address timely reporting.
1. Losses Due to Cash Shortages
Each institution is required to report cash shortages equal to or greater than $100 immediately to TBR and should follow-up with a “Notification of Loss of Funds and/or Property” report (see Attachment A). Some cash shortages result from human error and are the cost associated with doing business. However, objective reviews must be completed to eliminate misconduct and provide assurance that controls are effective. Regardless of amount, if the shortage is a repeating event or a pattern of financial shortfalls is identified in any area or unit, such should be specifically noted in the report. Furthermore, the investigation unit identified on the “Notification of Loss of Funds and/or Property” report should file a “Case Resolution Report” (see Attachment B) at the conclusion of the investigation. Both reports should be sent to TBR and Internal Audit.
2. Losses Involving Acknowledged or Suspected Misconduct
Losses of institutional assets as the result of acknowledged or suspected misconduct by either an employee or a non-employee (for example, a vendor, contractor, or student) may include, but are not limited to: shortages of cash, lost, stolen or altered checks, operational supplies, physical property, intellectual property, and any other instance where assets may have been misappropriated, e.g., travel claim abuse, long distance telephone abuse, theft of athletic tickets, reporting or approval of hours not worked, etc. TBR must be verbally notified of the incident followed by a written notification.
Individuals involved with suspected fraud activity or misconduct as that term is defined in this policy must assist with and cooperate in any authorized investigation, including providing complete, factual responses to questions and either providing access to or turning over relevant documentation immediately upon request by any authorized person. Any person refusing to provide such assistance must be notified that such refusal may result in the imposition of discipline, up to and including termination. Failure to provide such notice will not preclude the institution from terminating the employee. The procedures outlined below should be followed:
A. Any employee who becomes aware of losses involving misconduct or suspected fraud must immediately report the incident to an appropriate department official. If the incident involves their immediate supervisor, the employee must report the incident to the next highest-level supervisor. Employees should not confront the individual being investigated or initiate an investigation on their own. Such actions could compromise the investigation. A department official who receives notice of suspected misconduct or fraudulent activity must immediately report the incident to the following:
1. Vice President of Business and Finance or their designee
2. Internal Audit Department
3. Safety and Security Office (as deemed necessary)
B. The president/director will designate one of the above referenced officials to verbally notify TBR regarding the acknowledged or suspected fraud or misconduct.
C. Each institution must complete a “Notification of Loss of Funds and/or Property” report (see Attachment A). This report must be sent to TBR and Internal Audit.
D. The investigation unit identified on the “Notification of Loss of Funds and/or Property” (see Attachment A) report will file a “Case Resolution Report” (see Attachment B) at the conclusion. This report will be issued to TBR, Vice President of Business and Finance, Internal Audit Department, and the Office of Safety and Security (as deemed necessary).
3. Losses of Physical Property – Property Claims Process
Losses of physical property from thefts, equipment inventory shrinkage, natural disasters, or acts of God should be reported to TBR on a monthly basis as instances occur. Physical property includes those items that meet the definition of a capital asset.
However, individual occurrences exceeding $25,000 and occurrences that are potentially serious situations that would create public concern regardless of amount must be reported to the TBR and the State of Tennessee Treasury Department, Office of Risk Management immediately followed by a written report.
Go to http://www.treasury.state.tn.us/risk/index.htm and click on the “Contact Us” link for contact information and the “Claims Process” link for details of the insurance claims process.
The loss of physical property report referenced above should list equipment items individually and should include all related data as reflected on the equipment inventory list. This information may be forwarded to TBR on an Excel spreadsheet with a brief narrative explaining how the loss occurred. Each property damage report should include a detailed description of the loss and the estimated cost. These forms should be forwarded to:
1. Vice President of Business and Finance or their designee
2. Internal Audit Department
3. Department where loss occurred
Actions
The TBR will evaluate the information provided and make a determination concerning external reporting obligations, if any, and the feasibility of pursuing available legal remedies against persons or entities involved in misconduct or fraudulent acts against the institution. Remedies include, but are not limited to, terminating employment, requiring restitution, and forwarding information regarding the suspected fraud to appropriate external authorities for criminal prosecution. In those cases where disciplinary action is warranted, the Office of Personnel/Human Resources, Office of General Counsel, and other appropriate offices shall be consulted prior to taking such action, and applicable institutional and Board policies related to imposition of employee discipline shall be observed.
An employee suspected of theft of institutional property may not resign as an alternative to discharge after the investigation has been completed. Exceptions to this requirement can only be made by the institution’s President/Director, and require advance consultation with and approval by the Vice Chancellor for Business and Finance. If the employee resigns during the investigation, the employment records must reflect the situation as of the date of the resignation and the outcome of the investigation.
An employee who is dismissed for gross misconduct or who resigns to avoid dismissal for gross misconduct shall not be entitled to any payment for accrued but unused annual leave at the time of dismissal.
Students found to have participated in misconduct or fraudulent acts as defined by this guideline will be subject to disciplinary action pursuant to the Code of Student Conduct. The Dean of Students and/or the Vice President of Student Affairs will be responsible for adhering to applicable due process procedures and administering appropriate disciplinary action.
All investigations will be conducted in as strict confidence as possible, with information sharing limited to persons on a “need to know” basis. The identities of persons communicating information or otherwise involved in an investigation or allegation of misconduct or fraudulent activity will be revealed beyond the institution and the TBR Legal and Business Office staff only as necessary to comply with reporting requirements, state law or if legal action is taken.
Administrators at all levels of management must implement, maintain, and evaluate an effective compliance program to prevent and detect fraudulent activities. Once fraud has been reported, the overall resolution should include an assessment of how it occurred, an evaluation of what could prevent recurrences of the same or similar conduct, and implementation of appropriate controls, if needed.
Source: November 6, 2002, Presidents Meeting.
Attachment A
Notification of LOSS OF FUNDS AND/OR PROPERTY
(Date)
_________________, Vice Chancellor for Business and Finance
Tennessee Board of Regents
1415 Murfreesboro Road, Suite 350
Nashville, TN 37217
Dear ____________:
Please be advised that the following loss has occurred in (Department Name) at
(Institution)
Below is a brief description of the loss:
(include individuals name, approximate amount in question, and the nature of the loss) __ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
The situation is currently being investigated by ___(investigating unit)____. A case resolution report will be issued to you by ____(name, title, phone number)____ at the conclusion of the investigation.
Sincerely,
______________(Name)_______________
______________(Title)________________
Attachment B
CASE RESOLUTION REPORT
(INSTITUTION NAME)________________
(Date) ______________
Department:_________________________________ Unit:
1. Date of the loss:
2. Reported by:
3. Investigation/unit conducted by:_____________________________________
4. Description of the loss:
_______________________________________________________________
_______________________________________________________________
5. Total amount of loss:
6. Was employee dishonesty discovered? Yes No
7. Name(s) of employee(s) involved:
_______________________________________________________________
_______________________________________________________________
8. Action taken:____________________________________________________
______________________________________________________________________________________________________________________________
9. Methodology used to determine loss:_________________________________
______________________________________________________________________________________________________________________________
10. Internal control weaknesses found:___________________________________
______________________________________________________________________________________________________________________________
11. Actions taken to resolve weaknesses:_________________________________
______________________________________________________________________________________________________________________________