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Dishonest or Fraudulent Activities

1. General
NMMI must identify and promptly investigate any possibility of dishonest or fraudulent activities in the handling of Institute money, documents, and equipment involving cadets, faculty, staff, vendors, agencies, or unknown parties. All employees are responsible for reporting any possible dishonest or fraudulent activity.

An employee found to have committed a dishonest or fraudulent act in relation to the Institute's financial affairs is subject to disciplinary action by the NMMI and investigation by law enforcement agencies when warranted. Described herein are the steps to be taken when fraud, misappropriation, and similar dishonest activities are suspected. This policy also includes the procedures to follow in accounting for any missing funds, restitution, and recoveries.

2. Scope
Dishonest or fraudulent activities include the following:

  • Forgery or alteration of documents (transcripts, checks, promissory notes, time sheets, independent contractor agreements, purchase orders, budgets, etc.).

  • Misrepresentation of information on documents.

  • Misappropriation of funds, securities, supplies, or any other asset (including furniture, fixtures, or equipment).

  • Improprieties in the handling or reporting of money transactions.

  • Authorizing or receiving payments for goods not received or services not performed.

  • Authorizing or receiving payments for hours not worked.

  • Any apparent violation of federal, state, or local laws.

  • Any similar or related activity.

3. Supervisor Responsibility
Supervisors are responsible for detecting dishonest or fraudulent activities in their areas of responsibility. Each manager should be familiar with the types of improprieties that might occur in his or her area and be alert for any indication that improper activities, misappropriation, or dishonest activity is or was in existence in his or her area. When an improper activity is detected or suspected, supervisors should immediately contact the Institute Police Department if they feel the situation warrants such action (for example, obvious theft has taken place, security is at risk, or immediate recovery is possible). In addition, supervisors should immediately contact the appropriate Vice President/Director who will contact the Institute Internal Auditor.

Supervisors should not attempt to conduct individual investigations, interviews, or interrogations to determine if a suspected activity is improper. The Internal Auditor will conduct an investigation of any suspected dishonest or fraudulent activity working with internal or external departments, such as the Institute Legal Advisor, Vice President of Finance and Business Processes and law enforcement agencies. However, supervisors are responsible for taking appropriate corrective actions to ensure adequate controls exist to prevent continued occurrences of such improper activities.

Supervisors will support the Institute's responsibilities and will cooperate with the Internal Auditor and law enforcement agencies in the detection, reporting, and investigation of criminal acts, including prosecution of offenders. The Internal Auditor is to have full and unrestricted access to all necessary records and personnel. All Institute furniture and contents, including desks, are open to inspection when there is a reasonable suspicion of a dishonest or fraudulent activity which makes such inspection appropriate; there is no assumption of privacy. Every effort should be made to effect recovery of Institute losses.

Great care must be taken in the dealing with suspected dishonest or fraudulent activities to avoid the following:

  • Making incorrect accusations.

  • Alerting suspected individuals that an investigation is under way.

  • Violating the employee's right to due process.

  • Making statements that could lead to claims of false accusation or other offenses.

Responsibilities of the supervisor in handling dishonest or fraudulent activities include the following:

  • Do not contact the suspected individual to determine facts or demand restitution. Under no circumstances should there be any reference to "what you did," "the crime," "the fraud," "the forgery," "the misappropriation," etc.

  • Take appropriate disciplinary action after consulting with the Vice President of Finance and Business Processes.

  • Do not discuss the case, facts, suspicions, or allegations with anyone outside the Institute, unless specifically directed to do so by the Institute Legal Advisor or the Internal Auditor.

  • Do not discuss the case with anyone inside the Institute other than employees who have a "need to know," the Internal Auditor, the Legal Advisor, the Vice President of Finance and Business Processes and the NMMI Police Department.

  • Direct all inquiries from the suspected individual, his or her representative, or his or her attorney to the Internal Auditor. Direct all inquiries from the media to the NMMI Marketing Director. Proper response to such an inquiry should be, "I'm not at liberty to discuss this matter."

4. Investigation
The Internal Auditor will conduct an investigation of any situation involving possible impropriety in financial matters pertaining to the Institute. The Internal Auditor will make inquiries to the extent necessary to determine whether the allegation has substance. Investigating, documenting, and reporting dishonest or fraudulent activities provide the following:

  • A sound foundation for the protection of the innocent.

  • The removal of wrong-doers from the Institute.

  • Appropriate judicial action when warranted by the facts.

  • Basis for risk management claims and civil litigation seeking recovery.

If warranted, an investigation will be conducted. This entails expeditious action and detailed analyses of available financial records. The audit investigation requires the full cooperation of the department's personnel. The Internal Auditor will proceed as follows if evidence is uncovered showing possible dishonest or fraudulent activities.

(1) The Internal Auditor will advise supervisors to meet with the Vice President of Finance and Business Processes to determine if any disciplinary action should be taken.

(2) The Internal Auditor will discuss findings with management and cognizant administrators.

(3) The Internal Auditor will notify the President/Superintendent and the Legal Advisor. The Internal Auditor will also notify the Board of Regents through the President/Superintendent, if the investigation is of any area of high public interest or if the amount involved is excessive.

(4) If illegal activity appears to have occurred, the findings will be reported to the appropriate audit and law enforcement agencies. This will be coordinated with Institute Legal Advisor and Institute administrators.

(5) The Internal Auditor will notify the State Auditor immediately in writing if State Auditor Rules apply.

(6) The Internal Auditor will coordinate the notification of insurers and filing of claims with Institute Property Management.

5. Accounting for Loss, Restitution, and Recovery

The department incurring the loss from a dishonest or fraudulent act will suffer the loss until the monies can be recovered through insurance or restitution. The NMMI Business Office will set up a receivable for the amount owed the Institute. Due to the uncertainty of collection, an allowance for doubtful accounts will be credited in an amount equal to the receivable. At fiscal year end, the allowance account will be adjusted by the amount collected and the department account will be credited accordingly.

6. Cost of Recovering Funds
There is no special fund to cover the costs of recovery, such as hiring special investigators or outside legal counsel. These expenses will be allocated from existing budgeted funds.

7. Whistle blower Protection

NMMI strongly encourages all Institute employees, acting in good faith, to report any suspected misconduct that may be taking place at the Institute.  An employee who interferes with or tries to interfere with the right of another employee reporting suspected dishonest or fraudulent activities (misconduct) is subject to disciplinary action, up to and including dismissal.  The Institute is committed to protecting employees who report suspected misconduct in accordance with the Whistle blower Protection Act. 

If an employee believes that retaliation or interference was threatened, attempted, or occurred, he or she may file a complaint with the Internal Audit Department.  Employees reporting suspected interference with or suspected retaliation for reporting suspected misconduct by the Internal Audit Department may file a report with the President/Superintendent’s Office.  An employee may file a retaliation complaint only if he or she has previously reported suspected misconduct.

Retaliation is any adverse action taken against an employee who has reported suspected misconduct when business related reasons do not exist for the action or the action is outside of regular practice.  Some examples of retaliation are:

    •   Giving unwarranted negative performance evaluations to the reporting employee.

    •   Transferring the reporting employee, without legitimate business justification.

    •   Reprimanding the reporting employee without legitimate business justification.

    •   Taking adverse salary actions against the reporting employee, without legitimate business justification.

    •   Suspending, demoting, or dismissing the reporting employee, without legitimate business justification.

    •   Creating a hostile work environment for the reporting employee.

Reporting suspected misconduct does not exempt an employee from legitimate personnel action taken during the normal course of business.

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