Financial Analyst Steals Millions from UMass Medical; Fraud Red Flags Ignored

WORCESTER, Mass. — The Boston Globe reported (9/15/13) that University of Massachusetts Medical School leaders said an internal investigation has revealed a five-year $3.4 million theft by an employee who died in a December 2012 car accident.

The investigation found a financial analyst mis-directed funds from payments intended for the State of Massachusetts Medicaid insurance program, called MassHealth.  The analyst was employed for 12 years by the school’s Commonwealth Medicine division that provides consulting services, including collecting over $500 million on behalf of MassHealth for the past decade.  He worked within the Commonwealth of Massachusetts Estate Recovery Unit, which seeks money from the estates of people who were eligible for Medicaid for expenses such as nursing homes, but had assets — such as a home — that could be liquidated after their death to reimburse the state.

The school has dismissed one supervisor and disciplined several other workers in response to the theft. It also has called in an outside auditor.

Source of information: The Boston Globe

FRAUDVISON HEADQUARTERS ASSESSMENT

Fraud Red Flag – The Boston Globe story reports a key fraud red flag that all anti-fraud professionals need to be aware of.  The analyst was living beyond his means. School officials say the analyst made $46,000 a year, but drove a Porsche, collected Salvador Dali paintings and built a large home in Uxbridge, MA. They say the analyst claimed he inherited money.

Anti-Fraud Controls – It appears that the analyst had access to payments and access to certain computer accounting records.  A key anti-fraud control is Separation of Duties.  This type of fraud can be easy to conceal because it deals with off-balance sheet financial transactions, in this case the recovery of payments.  With off-balance sheet transactions such as recoveries there are usually no exact numbers to reconcile with amounts recovered.  That is because it is usually not known how much will be collected, also making it difficult to use historical data to budget for expected recoveries.  It is very important to separate duties in these cases between the cash/payment handling function and the accounting function.

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