Terry Coyne

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Terry Coyne
Accountability and Casework Branch
Department of Enterprise, Trade Investment
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• A practical approach to fraud risk assessment

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DETI Structure
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Expenditure 2007-08

• DETI 56 million
• Invest NI 134 million
• NITB 13 million
• HSENI 0.6 million
• GCCNI 1.5 million

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Fraud Risk Assessment

• HM Treasury Publication
• Managing the Risk of Fraud A Guide for
  Managers
• Published May 2003
• http//www.hm-treasury.gov.uk/media/C/3/managing_t
  he_risk_fraud_guide_for_managers.pdf

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Fraud Risk Assessment

• We used a top down approach with significant
  input from Internal Audit and staff from
  Accountability and Finance Branches.
• For the three larger organisations DETI Invest
  NI and NITB we assessed activities at risk of
  fraud on a Divisional basis. For the two smaller
  NDPBs we assessed activities on a whole
  organisation basis.

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Fraud Risk Assessment

• Advantages of Top Down Approach
• Can see the big picture
• Relatively quick
• Disadvantages
• Risk of missing detail
• No buy in from staff across the organisation

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Fraud Risk Assessment

• We used the risks set out in the HMT guidance
  we did not reinvent the wheel.
• Divisions that handled cash would have been
  allocated risks associated with cash handling
  for example, the risk of theft or the risk of
  income received not being brought to account.
• Divisions that paid grants would have been
  allocated risks associated with grants for
  example, misappropriation of grant funds.

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Quality Assurance

• Lists of fraud risks sent to Heads of Division in
  DETI and Finance Directors in NDPBs for
  confirmation of accuracy and completeness.

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Fraud Risk Weighting

• Once we had identified fraud risks our next step
  was to assess the relative vulnerability to fraud
  of each Division.
• A scoring grid was completed for each Division
  on the basis of the fraud risks it faced.

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Fraud Risk Weighting

• Opportunity for Fraud
• Opportunity for Corruption
• Value of Transactions
• Volume of Transactions
• Audit Opinion

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Fraud Risk Weighting

• Opportunity for Fraud
• Minimal 1
• Moderate 2
• Average 3 Weight X5
• High 4
• Extensive 5

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Fraud Risk Weighting

• Opportunity for Fraud Weight X 5
• Opportunity for Corruption Weight X 4
• Value of Transactions Weight X 2
• Volume of Transactions Weight X 2
• Audit Opinion Weight X 3

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Fraud Risk Weighting

• Results used to categorise business areas as
  having relatively high, relatively medium and
  relatively low risks of fraud. We also completed
  an HMT checklist to assess the overall fraud risk
  of DETI.

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Fraud Risk Assessment

• Originally planned to do some data matching work
• Overtaken by National Fraud Initiative
• Internal Audit programmes include areas judged to
  have a relatively high fraud vulnerability

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Fraud Risk Assessment

• Need to periodically review and update in line
  with changes to the business.
• High level fraud risk assessments can be used as
  the starting point for detailed assessments of
  individual business areas.