College Admissions Scandal: Are We too Quick to Blame the Institutions?
The college admissions scandal has caused quite a stir in the media over the last few weeks. The stories have varied, the fraudsters are unique to each situation, but in the end it’s the same old tale; the rich use money and power to influence the morally weak and advance those closest to them to undeserved positions of grandeur. The key in this case is that schools across the US are being brought down to the same level as the criminals and fraudsters that perpetrated the crime in the first place.
Yale University, founded in 1701, has graduated five U.S. Presidents, and prides itself on its motto, ‘Lux et veritas’ or in English “Light and Truth.” However, a Yale soccer coach was able to pull off a scholarship-based fraud in which a student was accepted without merit. Is this Yale’s fault? Perhaps in part, but I would like to blame it on a much larger, systematic fraud scheme that can easily be discovered and rectified with appropriate planning and execution.
Other schools were involved in Title IX fraud, SAT proctoring schemes, and direct fraud from payoffs or bribes. Each school left a back door open for a fraudster to come barging through and in the end, will be sued for millions of dollars. These lawsuits, some frivolous and others merited, will need to be tried and tested. What can your institution do to avoid situations such as this?
In our experience, fraud is perpetrated in larger educational institutions and corporations when the controls breakdown or are antiquated. There are simple ways to enhance controls and become a much more aware organization.
Some important tips that we feel will mature your organizational fraud prevention controls are below.
Enhance Internal Controls
When looking at sophisticated organizations such as a university, one might think that internal controls are deployed across the enterprise. However, this was not the case in athletics, where some of the fraud was perpetrated. Entities should implement enterprise wide systems of internal “dual control” whereby a minimum of two people are involved in the decision-making process/function. The purpose of dual control is to deter fraud, provide a properly documented audit trail, maintain quality assurance, and prevent extortion. This dual control process creates a system of “checks and balances” in which a single person (authorized person(s) within a department) does not have the sole authority to decide without the verification and approval conducted by a secondary and separate department (authorized person(s) within that department). This helps to mitigate the potential for collusion. These obvious changes can deter fraudulent actions and lead to much more effective fraud deterrence. Internal control is vital when trying to ensure that protocols and regulations are carried out according to policy.
Make your organizations aware, and force reporting
Create a fraud risk policy with demonstrative cases that establish consequences for perpetrators. It sounds simple, but this is a critical step in setting up the consequential deterrence that is sometimes needed to stop amateur fraudsters. If individuals in the organization are aware that management is looking for certain types of fraud, they might think twice before acting.
An additional aspect of organizational awareness is to implement reporting. In any instance where there is a violation of policies or an employee feels there is a violation by someone else, encourage reporting. Anonymous reporting/tip lines have historically been the number one means by which occupational fraud is discovered. These reports and tips need to be vetted and followed up to ensure there are consequences. As the fraud risk policy matures, there should be a noticeable difference that will help secure organizations from becoming victims of fraud.
Know Your People
Fraudsters tend to demonstrate behavioral traits that can indicate they have committed or are candidates to commit fraud. Comprehensive background screening can be the first step in ensuring that there are no concerns prior to offering employment. However, initial background checks are not enough.
Employers and leaders need to listen to what employees are saying. If there are divisional leaders, or in this case coaches and deans, that are deeply respected or far too entrenched in the internal control environment, they can create circumstances that could lead to fraud. For instance, USC, who saw their senior athletic director implicated, was victim to the college admissions scandal when the water polo coach recruited a student who didn’t even play water polo! Had USC screened each scholarship athlete and ensured there were controls and reporting in place, this could have been avoided. Now, USC is at the mercy of the judicial system.
In conclusion, it is amazing that these events transpired in today’s digital environment, but it clearly demonstrates a lack of understanding when it comes to the willingness of fraudsters to attain what they want. Legacies are now tarnished over the acts of bad actors and their accomplices.
Lowers Risk Group prides itself in delivering solutions to our clients that rectify these types of situations.
Contact us to learn more.