SWINDLING SENATOR POCKETS SMALL CHANGE

The Norwich Bulletin reports that a Connecticut senator has resigned after 16 years in office and pleaded guilty to six misdemeanor larceny counts stemming from double-billing expenses incurred during six trips to legislative conferences between 2004 and 2007. Prosecutors said the former senator collected about US $2,800 in travel expenses from his political action committee after being reimbursed by the state. A preliminary audit of the former senator’s financial filings led to an investigation by the State Elections Enforcement Commission in January 2008.

Lessons Learned

This situation reminds internal auditors that travel expenses are a high fraud risk area, particularly when the claims can be processed by more than one area of the organization or by different organizations. In this case, expenses were reimbursed by both the political action committee and the state. When claims can be paid by different groups, it is important to have controls in place to ensure that claims are submitted only once. A simple control, for example, would be to require original copies of all receipts. A more effective control would be comparing claims submitted to both sources to ensure they are not duplicates.

While the financial extent of this fraud (i.e., US $2,800) is small, the case highlights points that also are present in more costly frauds:

  • Fraudulent activity can occur within any level of an organization, so fraud risks should be considered for all employees (even senators).
  • Fraudsters often rationalize the theft. (The former senator claimed expenses were double-billed because he was busy with his legislative duties, full-time job, and family responsibilities.)
  • Some kind of pressure is usually present, and it is not always financial pressure (e.g., the death of a child).
  • Frauds are rarely isolated events and usually expand into other schemes (e.g., violation of campaign finance laws in addition to double-billing expenses).
In this case, internal auditors also should have reviewed expenses of the former senator’s aides, as the tone at the top can influence the behavior of the entire organization. Because fraud can occur at any level in any organization, fraud risks need to be identified and the adequacy of controls should be verified.

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