Real Frauds Found in Governments

Chapter 3Case 3: Management Override

Learning objectives

• Identify how the president of a fictitious government university can put pressure on staff to do things that may not appear to be in the public interest.
• Identify how management override of internal controls can lead to possible fraud in a fictitious government college.

Before we start

The higher education environment is one in which numerous highly degreed and credentialed academicians and professionals work within a somewhat hierarchical environment. In some cases, persons in the highest positions in the organization may not have the necessary business acumen to lead an institution to prominence or to hire individuals who could. Most colleges and universities have a very structured organizational chart that is steeped in history and tradition rather than what works best to run the “business” of higher education.

At the top of most organizational charts is the president of the college or university who answers, typically, only to the board of trustees. From a fraud perspective, if the presidential “tone at the top” is one of zero tolerance and fraudsters are promptly disciplined, employees may be less likely to commit fraud. Fostering a positive and open work environment at all levels of the organization also helps in preventing, detecting, and deterring fraud.

Because of the hierarchical nature of higher education institutions, staff may feel pressure from the president to do whatever he or she asks of them. College ...