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UNIVERSITY OF TENNESSEE SYSTEM POLICY
FISCAL

POLICY NO: FI0130 SUBJECT:  FRAUD, WASTE, AND ABUSE  
EFFECTIVE: 07/01/2006 REVISION NO: 6

TOPICS:
General Policies Settlement
Definition Of Fraud, Waste, And Abuse Bonding
Reporting Fraud, Waste, Or Abuse Involving University Employees Related Policies
Confidentiality Procedures
Recovery Of Assets Forms
Prosecution Under Criminal Law Contacts

OBJECTIVE:

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To provide policies on fraud, waste, and abuse regarding university resources and to establish reporting requirements for illegal, improper, wasteful, or fraudulent activity regarding university resources.


POLICY:

General Policies[top]

  1. This policy applies to (l) faculty, staff, and student employees, (2) contractors and vendors while conducting university business, and (3) others who use university resources or information with or without authorization. The university will investigate all allegations of fraud, waste, or abuse by internal or outside parties. Any member of the university community found to be involved in fraud, waste, or abuse as defined in this policy is subject to disciplinary action, up to and including termination, and criminal prosecution when warranted. Also see POLICY HR0525 on disciplinary action, POLICY FI0125 on conflicts of interests, POLICY FI0405 on ethics in purchasing, and POLICY FI0805 on acceptable use of the university's information technology resources.


  2. UWA Audit and Consulting Services has primary responsibility for investigations of suspected fraud, waste, and abuse by employees. Campus police departments will assist as needed in conducting investigations. If warranted, the internal auditor will issue a written report. The report will be sent to appropriate university officials for administrative action, with copies to the audit committee of the Board of Trustees, chief financial officer, general counsel, campus human resources officer, and state comptroller. When appropriate, reports involving losses are also sent to the Risk Management section of the Treasurer's Office.


  3. University employees are responsible for ensuring that resources entrusted to them by the university are used ethically, prudently, and for their designated purpose. Employees with managerial or supervisory duties are responsible for creating an environment that encourages integrity and deters dishonest behavior. University employees, contractors or vendors, and others who use university resources or information are responsible for reporting fraud, waste, or abuse regarding university resources, whether by members of the university community or outside parties. (See Reporting Procedures for losses of university resources.) When circumstances warrant, employees who fail to report fraud, waste, or abuse are subject to disciplinary action. Employees who knowingly make false accusations are subject to disciplinary action.

  4. When fraud, waste, or abuse is known or suspected, management should determine whether an employee may be involved. If employee involvement is known or suspected, the procedures in 7-10 below should be followed. To report cash shortages or losses of equipment or other university resources in which employee involvement is not suspected, see POLICY FI0131.

  5. All faculty, staff, and student employees have a duty to cooperate with university and/or state or federal investigations of fraud, waste, and abuse. Failure to cooperate may result in disciplinary action, up to and including termination of employment.

Definition of Fraud, Waste, and Abuse [top]

  1. Fraud, waste, and abuse, for the purpose of this policy, include illegal, improper, wasteful, or fraudulent activities regarding university resources. Examples include, but are not limited to:

    • Theft or misappropriation of funds, supplies, property, or other resources
    • Improper and wasteful use of resources
    • Forgery or alteration of documents
    • Bribery or attempted bribery
    • Unauthorized use of records
    • Unauthorized alteration or manipulation of computer files
    • Unauthorized use of logos, trademarks, copyrights, etc.
    • Falsification of reports to management or external agencies
    • Pursuit of a benefit or advantage in violation of the university's conflict of interests policy (see POLICY FI0125)
    • Improper handling or reporting of financial transactions
    • Authorizing or receiving compensation for goods not received or services not performed
    • Authorizing or receiving compensation for hours not worked
    • Willful violation of laws, regulations, or contractual obligations when conducting university business
    • Falsification or unauthorized alteration of time or leave records.

Reporting Fraud, Waste, or Abuse Involving University Employees[top]

  1. Employee Reporting Requirements. Employees should report suspected fraud, waste, and abuse regarding university resources to their supervisor, department head, or campus or institute official or to the campus or institute internal audit department, UWA Audit and Consulting Services (865-974-6611), or the State of Tennessee hotline (1-800-232-5454). Employees who suspect or detect such activity must not initiate investigations on their own or alert the suspected individual(s) of an impending investigation.


  2. Departmental and Other Management Reporting Requirements. Department heads and other management officials must report suspected fraud, waste, and abuse and all allegations of such activity made to them immediately to UWA Audit and Consulting Services at 865-974-6611. Management personnel who suspect or detect such activity must not initiate investigations on their own or alert the suspected individual(s) of an impending investigation.


  3. Student, Taxpayer, or Other Citizen Reporting Requirements. A student, taxpayer, or other citizen who suspects or detects fraud, waste, or abuse regarding university resources should contact Audit and Consulting Services (865-974-6611) or call the State of Tennessee hotline (1-800-232-5454).


  4. System Reporting Requirements. The director of UWA Audit and Consulting Services will notify the state comptroller of any shortages of funds or unauthorized removal of property resulting from dishonesty by any university employee in accordance with Tennessee Code Annotated 8-19-501.


  5. Retaliation Prohibited Against University Employees. Employees who report fraud, waste, or abuse shall be free of intimidation or harassment when reporting matters of public concern, including offering testimony to, or testifying before, appropriate legislative panels. No department head or other management official, employee exercising supervisory authority, or other employee or contractor shall recommend or act to discharge, demote, suspend, reassign, transfer, discipline, threaten or otherwise discriminate against a university employee regarding the employee's evaluation, promotion, compensation, terms, conditions, location or privileges of employment, nor may any employee or contractor retaliate against another university employee because the employee, or a person acting on behalf of the employee, reports or attempts to report, verbally or in writing:.

    1. The willful efforts of such persons or contractor to violate a state or federal law, rule or regulation that had or would have had a material and adverse effect upon program operations or program integrity, or the willful efforts to conceal such a violation.

    2. Acts constituting fraud against the state, the federal government, the public, or any fellow employees.

    3. The willful misappropriation of state or federal resources.

    4. Acts posing an unreasonable and specific danger to the health or safety of the public or employees.

    5. Acts constituting gross mismanagement of a program, gross waste of state or federal funds, or gross abuse of authority.

In accordance with the Higher Education Accountability Act of 2004, any person who knowingly and willingly retaliates or takes adverse action as noted above against a person for reporting alleged fraud, waste, or abuse, or for cooperating with the investigation of such allegations, is subject to disciplinary action, up to and including termination of employment, and criminal prosecution.

The department head, management official, or other employee exercising supervisory authority over the university employee may, however, take any appropriate action or appropriate disciplinary action in relation to the reporting or attempted reporting of any information that is believed in good faith by such department head, management official, or other employee exercising supervisory authority to be fraudulent, dishonest or with willful disregard for the truth or falsity of the information.

Confidentiality[top]

  1. In accordance with the Higher Education Accountability Act of 2004, detailed information received pursuant to a report of fraud, waste, or abuse regarding university resources or any ongoing investigation thereof shall be considered work papers of the university's internal auditor and shall be confindential. Such information, however, may be disclosed to the public in accordance with a subpoena or court order.

Recovery of Assets[top]

  1. The university will take appropriate action to recover any assets lost as a result of fraud, waste, or abuse. University funds may not be used to pay for losses for which an employee is responsible under this policy. Actions to recover such losses include the following:

    1. Voluntary Return or Repayment. Generally, action to recover losses should not be taken until an investigation has been completed. At any time, however, university officials may accept voluntary offers to reimburse the university for losses due to alleged employee dishonesty. Repayments should be appropriately receipted and deposited to a university cost center/WBS element. Officials accepting repayment should inform the employee that such offers will not cause an investigation to stop, relieve the employee of liability for future claims, nor prevent prosecution under criminal law.

    2. Demand for Repayment. If an investigation concludes that an individual's or entity's actions have resulted in loss of university assets, the appropriate university officials, after consultation with general counsel, should demand repayment from the person or entity. The demand may be verbally or by letter.
    3. Withholding of Salary and Wages. If an employee is charged with gross misconduct, the university may recover losses due to the employee's actions by withholding part or all of the amount owed from his or her paycheck. The amount to be withheld must be communicated to the employee in writing. The written communication must also explain the employee's right to a hearing to appeal the disciplinary action or termination (also see POLICY HR0525). Even when a hearing is requested, the paycheck will be held to the extent allowed by law pending the outcome. In addition, because employees who are terminated for gross misconduct lose unpaid sick and annual leave, they may not use this leave to pay debts to the university.
    4. Retirement Funds. In some circumstances, an employee may be able to use his or her retirement fund to pay debts to the university. UWA Retirement and Benefits Services and the General Counsel's office should be contacted for advice on this method of repayment.

    5. Legal Action. When full recovery of assets attributed to fraud, waste, or abuse by employees, other individuals, or entities is not realized from other means, legal action to obtain a judgment may be initiated. The chief financial officer (or designee) and the general counsel must approve this action.

Prosecution Under Criminal Law[top]

  1. Any person who steals, fraudulently obtains, or otherwise intentionally misuses university assets, or aids and abets others to do so, or in any way engages in criminal activity with respect to university property, contracts, or other resources, is subject to criminal prosecution. UWA Audit and Consulting Services will send the state comptroller a final report on every investigation of losses due to employee dishonesty. The state comptroller may forward the report to the appropriate district attorney and/or U.S. attorney for prosecution under criminal law.

Settlement[top]

  1. All proposed settlements of liability for fraud, waste, or abuse must be submitted to the general counsel and the state comptroller for advance approval. In some cases, employees suspected of fraud, waste, or abuse will request a settlement that relieves them of liability for losses identified in subsequent investigations. No written or verbal agreements may be made to relieve an employee of liability for such losses without the advance approval of the general counsel and the state comptroller. UWA Audit and Consulting Services must be contacted to request approval of the state comptroller.

Bonding[top]

  1. The state of Tennessee maintains a public employees blanket bond under which all university employees are included. This special coverage indemnifies the university for losses sustained through employee dishonesty whether acting alone or in collusion with others. An employee is automatically covered when employed. The public employees blanket bond coverage has a maximum limit of $1 million and is subject to a deductible of $100,000 for each occurrence. The bond also covers employees who handle third-party funds as part of their university duties, provided a fund is established in the university's accounting system. For details, see POLICY FI0310, 32-34.

    1. Claims. The Risk Management section of the Treasurer's Office is responsible for making claims against the public employees blanket bond. The Risk Management section will file a claim after receiving a report from UWA Audit and Consulting Services which identifies an employee responsible for a loss in excess of the deductible. Proceeds from claims against the bond are returned to the campus or institute.

    2. Volunteers. Volunteers are not included in the public employees blanket bond. When reasonably possible, departments should avoid using volunteers to handle cash or other liquid assets that exceed the bond's deductible. (Also see POLICY FI0135.)

RELATED POLICIES
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PROCEDURES
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Knoxville:  http://web.utk.edu/~dfinance/fiscal-policy.shtml
Health Science Center:  http://www.uthsc.edu/policies/w932_document_list.php?app=FSC
Space Institute:   
Chattanooga:   
Martin:  http://www.utm.edu/departments/finadmin/procedures.php
FORMS
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FOR MORE INFORMATION
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  Mark Paganelli  (865) 974-6611  mpaganel@utk.edu