Welcome to 2025: Staying Vigilant Against Fraud
From the Editor’s Desk
by Rod Smith, Director of Internal Controls
As we enter the new year at the University of North Carolina at Chapel Hill, the evolving fraud landscape presents many challenges. Fraudsters are becoming more sophisticated, often impersonating individuals or manipulating systems to exploit vulnerabilities. This year, we must double our efforts to protect Carolina, its resources and our greater community from fraud.
Below are key areas to remain vigilant about:
1. Financial Aid Fraud: Protecting Students and Resources
Financial aid fraud has surged nationally, targeting students, institutions and even systems meant to help those in need. Fraudsters often deceive students by offering false assistance or intercepting funds intended for tuition payments. Common tactics include setting up “phantom” payment systems or pretending to be representatives of student aid programs.
What You Can Do:
- For Managers and Department Heads: Implement regular training for staff to identify and prevent these types of fraud.
- For Students: Encourage students to verify payment systems and report suspicious communications immediately.
Example to Discuss: A fraudulent “student financial aid company” contacted students offering loans, only to request up-front fees and steal personal information. After the students made payments, the company vanished without providing any services.
2. Procurement Fraud: Safeguarding Contracts and Bids
Procurement fraud is on the rise, with fraudsters submitting fake bids, inflating contracts or colluding with vendors to manipulate procurement processes. This can also include fraudulent billing, where invoices are submitted for goods or services that were never delivered.
Fraudsters may also impersonate high-level university officials to manipulate the procurement process or even divert funds through phishing or vishing attacks—fraudulent phone calls or emails asking for sensitive information.
What You Can Do:
- For Procurement Teams: Establish a transparent bidding process and verify all bids and invoices.
- For Managers: Regularly audit contracts and vendor communications to ensure everything is legitimate and above board.
Pro Tip: Double-check vendor details with known contacts and use trusted, secure communication channels when in doubt. Remember the adage – Trust but verify.
3. Research Fraud: Protecting Innovation and Integrity
Research fraud, including the misappropriation or diversion of research funds, has become a growing concern. Fraudsters may inflate project expenses, divert grants, or falsify research results to divert resources or mislead funding agencies.
What You Can Do:
- For Research Managers: Ensure that funding requests and project expenses are regularly reviewed. Implement clear project management guidelines to avoid misuse.
- For All Employees: Stay alert for signs of over-inflated claims or discrepancies in research-related financial documentation.
Example to Discuss: A research project submitted at another institution had an inflated budget report to secure more funding and use the extra funds for non-research purposes. This was caught during an audit and resulted in a significant reputational risk.
4. Accounting Fraud: Ensuring Financial Stewardship and Integrity
Accounting fraud is often seen in falsified documentation, misrepresentation of assets, and deceptive billing practices. With the increasing complexity of financial systems, fraudsters are finding new ways to manipulate data, create false reports, and exploit financial weaknesses.
What You Can Do:
- For Financial and Accounting Teams: Ensure all financial reports are accurate, transparent, and backed by proper documentation. Implement robust checks and balances to avoid unauthorized contracts or expense manipulation.
- For Leadership: Establish a clear code of ethics and conduct to promote accountability and integrity within the team.
Example to Discuss: There were misreported operating costs at another university, understating liabilities to appear financially stable. This misrepresentation led to poor financial decision-making, triggered corrective actions later, and caused significant losses and agency support.
5. Tools to Combat Fraud: Strengthening Our Defenses
Several key tools and strategies can help combat fraud and protect the institution:
- Communication: Foster a culture of transparency. Keep all employees informed about potential risks and how to report suspicious activities.
- Training: Regular, mandatory training programs for staff and managers will help raise awareness and prevent fraud before it occurs.
- Evaluation: Periodically evaluate current policies and procedures to ensure they are aligned with best practices for fraud prevention.
- System Strengthening: Implement robust systems and technologies to monitor real-time financial transactions and procurement processes.
- Data Analytics: Leverage data analytics tools to detect patterns indicative of fraud or financial irregularities.
Remember: An informed workforce is one of the most effective deterrents to fraud. Encourage your teams to stay alert and engage in conversations about fraud prevention. The more we share real stories and raise awareness, the better equipped we’ll be to spot potential threats early.
A Call to Action
As we navigate the New Year, we must commit ourselves to a higher vigilance and ethical responsibility. Fraud in any form harms not only the immediate victims but the broader trust we’ve worked hard to build within our community. By staying alert, working together and using the tools at our disposal, we can protect the integrity and resources of our University.
Together, we can make a difference. Please stay vigilant and keep an eye on this.
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