Question

what is fraud risk assessment in terms of municipal organisation or entity? What kinds of fraud risks that are faced by municipal organisations?

Answer 1

A fraud risk assessment should be performed periodically to identify potential schemes and events that need to be mitigated.. This document provides guidance for conducting a fraud risk assessment;however,entities will need to make modifications to meet their individual needs and complexities.

An effective fraud risk management assessment of an entity should identify where fraud may occur and who the perpetrators might be.Therefore,control activities should always consider both the fraud scheme and the individuals within and outside the organization who could be the perpetrators of each scheme. If the scheme is collusive ,preventive controls should be augmented by detective controls, as collusion negates the control effectiveness of segregation of duties.

Fraud, by definition, entails intentional misconduct, designed to evade detection. As such, the fraud risk assessment should anticipate the behavior of a potential fraud perpetrator. It is important to design fraud detection procedures that a perpetrator may not expect, requires a skeptical mindset and involves asking questions such as:

•How might a fraud perpetrator exploit weaknesses in the system of controls?

•How could a perpetrator override or circumvent controls?

•What could a perpetrator do to conceal the fraud?

Municipal Frauds:

Procurement/Contracting:

• For municipal services and infrastructure projects; may take the form of kickback

           brokers, bid rigging, the use of front or shell companies.

• Concerns identified by municipal informants include corrupt tendering practices.

Municipal Approvals and Licensing

• .eg., zoning approvals, building permits , business licences

Bylaw Enforcement

• e.g. selective enforcement of laws on gambling, liquor, narcotic s, prostitution,traffic offences as well as property tax assessments.

Public -Private Partnerships

• raises similar issues as procurement and contracting, above.

Election -related Concerns

Inappropriate election contributions to city councilors, lobbying improprieties/bribery, campaign help to politicians in return for favourable votes on projects election cheating.