One of the more interesting fraud investigations that I had carried out was the case that involved almost 100 missing IT equipment.
IT equipment such as laptops, desktops and mobile devices such as tablets are valuable items even if they are not brand new. Most organizations have a asset tracking policy that may require the assignment of an asset label and the tracking of the asset in some form of memorandum record if the unit cost of such assets do not meet the asset capitalization policy.
Controls over assets or inventory typically include having a custodian, having proper records of tracking the acquisition, issuance and return of such assets from the custodian to individual users who are assigned or allocated the assets for the purposes of work.
One of the key controls over tangible assets is the asset verification or physical stock take of the assets where an independent organizational staff needs to sight and verify that the asset is in existence and tallies to the description and asset number documented in the asset records.
However, even if your organization performs 100% asset verification sighting or verification whether using manual or automated methods (e.g. RFID scanning or bar code scanning), it can be circumvented especially if there was collusion between the asset custodian and the “independent” parties who were supposed to sight and check that the assets do exist and tally with what is in the asset records.
I will not go into the investigation process in this post (but will cover in another future post) as it was a fairly drawn-out and intensive. But what would be interest is how was such a fraud where the custodian has misplaced and not kept proper records of issuance and tracking of the IT assets could be uncovered when the custodian colluded with the verification officer and his supervisor to cover up for the missing assets?
The answer is job rotation.
This particular case came into my attention when the outgoing supervisor of the IT asset custodian has rotated out of his role in the department and the new supervisor was posted in to take over his role. When the new supervisor came in, one of the first issues she raised was whether there was any “outstanding” matter under the outgoing supervisor’s charge that needed to be raised for her information and knowledge.
The outgoing supervisor then revealed about the missing IT assets and asked for some more time to “rectify” the issue. Unfortunately, the additional time came and went and the incoming supervisor raised the issue with the Head of Department and then this fraud case came to light.
So whilst it is human nature to resist change and job rotations involving postings to new functions or roles may require staff to unlearn, re-learn new skills, knowledge and business processes, it can be an extremely effective tool to uncover hidden frauds, malfeasance and other wrong doing that had been covered up by the incumbent person performing the role.
Do you think job rotation works in your environment?
I look forward to your inputs in the comments section.
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