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September 29, 2023

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Hotline for reporting financial fraud faces overhaul

The University is looking for new ways to prevent financial fraud.

In 2002, Congress issued a law requiring businesses to have a fraud hotline in order for people to report suspicious activity or wrongdoing within the company.

The law was a response to previous fraud within corporations, such as Enron.

However, universities aren’t included in this law, but to include this practice is just good business, according to Melissa Hudson-Nowak, the University’s director of internal audit.

The previous director of internal audit set up the Fraud, Waste and Abuse Hotline back in 2004, but the University isn’t so sure the hotline is the most efficient way to handle fraud reports.

At the University’s last audit meeting, a plan to move from the existing process of dialing a cell phone number to a more confidential method was discussed.

The current process does not guarantee confidentiality.

According to the Fraud, Waste and Abuse Hotline policy, “If individuals truly wish to remain anonymous, they should rely on US/campus mail.”

However, most people don’t accept that e-mail is a confidential process either. The University believes people are too scared to report to either email or the existing hotline.

“People are less likely to report suspicious activity if they believe the tip will be traced back to them,” said Hudson-Nowak.

Because of the high reliance on tips to catch instances of fraud, it is important people feel safe enough to report these tips.

A 2004 study by the Association of Certified Fraud Examiners found that 40 percent of the time, fraud is detected through tips, making it the leading method of detection.

“The only way we find out about bad things happening is when somebody tells us about it,” said Hudson-Nowak.

Also, on previous occasions of reported fraud, not enough information was given in order to investigate the tips, according to Hudson-Nowak, and the current system doesn’t allow any way to get back in touch with the caller.

The University is now looking into having a third party company to handle such reports.

“We’re looking at a number of different techniques to make sure everyone is comfortable,” said John Moore, the University board of trustees’ chair.

The audit committee makes recommendations about how to go about the process of finding a new practice for fraud. The chosen method will then go to the board for the final decision.

“[The new method] will likely be either an 800 number or a Web site,” said Hudson-Nowak.

People are more likely to be apprehensive about talking directly to University staff about fraud.

“A third party as a buffer would improve the perception of confidentiality,” said Hudson-Nowak.

Having 24-hour, 365-day access is also another advantage of having a third party handle fraud tips.

“People are uneasy about calling a cell phone at 4 a.m.” said Hudson-Nowak.

At current, six out of 14 Ohio universities use an online, third party source to handle fraudulent activity reports, including Kent State, Ohio University and the University of Toledo.

The soonest any changes would take place is at the next board meeting in September. In the meantime, the audit committee is shopping for third party members and feedback from the University community.

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