Page 24 - The EDGE Spring 2020

CONFLICT OF INTEREST

BY JILL BARRAGAN
CONFLICT OF INTEREST – Does Your Staff

Fully Understand?
Jill Barragan

Conflict of interest is a growing area of concern for school Some of you may have seen a film now out on Netflix called
business officials. Compelling questions to consider include: “All the Queen’s Horses.” The shocking story tells of a Dixon,
Do your employees understand what it is? Do you know how to Illinois, City Comptroller who stole $53 million of public funds
properly track conflicts of interests? Do you know how to protect over a 20-year period. This makes her the perpetrator of the
your organization? largest case of municipal fraud in American history. She used
the stolen funds to live a lavish lifestyle, which included four
The Association of Certified Fraud Examiners (ACFE) issues months off annually, hundreds of quarter horses, large farms, a
a report every two years called Report to the Nations which vacation home in Florida, million dollar RVs and much more.
reports a global study on occupational fraud and abuse. Current While she was enjoying her lavish lifestyle, the city of Dixon,
trends and statistics from the ACFE Report to the Nations for with an approximate population of 16,000, endured reduction
2018 revealed that typical organizations lose 5% of revenues in staffing, cuts to the police budget, and neglect of public
to fraud on an annual basis. This report reviewed 2,690 cases infrastructure, such as road and parks. While this case is unusual
of occupational fraud and identified over $7 billion were lost, in its magnitude and duration, it spotlights the most common
or an average of $130,000 per case. The report recognized that red flag in corruption cases – living beyond one’s means. It is
corruption, which includes conflict of interest, was the most unfortunate to consider there are many other occupational fraud
common scheme in every global region reviewed. cases occurring every day throughout the country.
Conflict of Interest Leading to Fraud
For these reasons, and so many more, it is important to explore
valuable strategies that can be implemented in your school district In occupational fraud, there are three main types of fraud:
to protect your organization and employees while maintaining corruption, asset misappropriation and financial statement fraud.
the highest level of integrity with your community. Ensuring Corruption represents one of the most significant fraud risks for
proper internal controls are in place to properly identify, monitor organizations. Understanding the specific factors involved in
and address an employee conflict of interest can prevent fraud corruption schemes can help organizations effectively prevent,
within your school district. detect and investigate them. Corruption has various subcategories
including bribery, illegal gratuities, extortion and conflict of
interest. Conflict of interest is a current hot topic and includes
purchasing schemes and sales schemes.

According to the ACFE, industries with the highest portion of
corruption cases are energy at 53%, manufacturing at 51%, and
government and public administration at 50%. In Education,
which falls under the heading of Government and Public
Administration, the most common occupational fraud scheme
is corruption, reported in 38% of the cases. Therefore, being
aware of potential red flags that are typical in corruption cases
is a helpful tool for the school business professional. Some 43%
of corruption cases involve someone who is living beyond his
or her means; 34% involve an employee who is unusually close
with vendors and/or customers; 23% have someone experiencing
financial difficulties; and 21% of corruption cases involve an
employee with a ‘wheeler-dealer’ attitude.

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24 THE EDGE SPRING 2020