“Fraud in the Workplace” Economic Crime Case Study

Tertiary Institution Bursary Fraud

The Client, a South African Tertiary Institution, identified irregularities relating to the administration of bursary funds allocated for accommodation purposes. The irregularities were referred to Employee X for clarity, who subsequently absconded from his/her post destroying various records. The Client briefed their legal counsel who in turn briefed Nolands Forensics to conduct initially a preliminary investigation and later a full investigation.

Through its investigation, Nolands Forensics investigated the irregularities; the nature and scope therof; determined whether there was any criminality/culpability, documented its findings; and advised the Client on any further action.

As a result of the actions attributed to Employee X, the Client’s operation was found to have been compromised on various fronts leading to the identification of various ancillary contingent liabilities, specifically that:

      The client had an obligation under statute to administer the funds under management on behalf of the bursar, and as such can be held accountable for any mismanagement thereof;

·       As a result of the irregularities identified, the Clients reconciliation and validation of creditor accounts and services was compromised, limiting its ability to establish the bona fides the services provided;

·       The consequence of the above, was that the Client was forced to withhold payment to various 3rd party creditors and withhold results from various students, which translated to further liability if this had been done on erroneous grounds;

The Nolands Forensics investigators had to engage the relevant 3rd parties to reconstruct the source documentation required to resolve the identified risks. Specifically, the students, service providers, landlords, banks and the bursar.  Further to this, SAPS was engaged to assist and provide access to information and records not available to the Client. 

Ultimately, the alleged fraud itself, based upon preliminary investigation, had also not only prejudiced 3rd party creditors, students, and the principal donor, but also the Client directly. 

The identified irregularities were determined to represent material fraud, and the Client instructed that Nolands Forensics action a criminal complaint and submit a findings report to the State to support the allegation

In conjunction with both SAPS and the NPA, the criminal investigation was conducted and submitted in the form of multiple reports and various supporting affidavits; the matter was brought to Court, and resulted in Employee X being found guilty for Fraud and sentenced to 15 years with an effective 7 year incarceration.

As a consequence of the investigation and successful prosecution of Employee X, the Client was made aware of various ancillary system failures and unidentified risk areas, leading to further phases of investigation such as: -

·       The Tertiary Institution’s bursary department underwent a complete review to identify and remediate process, system and policy risks, to prevent similar breaches from happening again; 

·       During this process, further irregularities were identified, investigated and dealt with, which included disciplinary action, and optimization of process, policy, and structures.

The case of Employee X and the Tertiary Education Institution bursary Fraud is again testimony to the fact that Fraud does not happen in isolation and in order to investigate and mitigate future breaches from happening the complete system needs to be reviewed, which in this case was successfully executed.