OFFICE OF INSPECTOR GENERAL PALM BEACH COUNTY ENHANCING

OFFICE OF INSPECTOR GENERAL PALM BEACH COUNTY “ENHANCING PUBLIC TRUST IN GOVERNMENT” AGA Podcast – Data Analytics Megan Gaillard DIRECTOR OF AUDIT

Internal Audit vs. Inspector General Internal Audit Typically created by the Board or Management Inspector General Typically creation is influenced by External Pressure Independent, but under Management Typically more independent with control to various degrees legal/regulatory authorities/protection Audit centric Audits, investigations, inspections, and more Standards: “Red Book” and/or “Yellow Standards: “Red Book, ” “Yellow Book, ” Book” “Green Book, ” and more Typically, reports are internal and not publicized Typically, reports are publicized and available Results: Mainly performance based and improving internal controls Results: Performance based, internal controls, monetary, discipline, arrests

Auditing versus Investigations Conducted for stakeholders May be compulsory or required Typically red or yellow book standards Efficiency and Effectiveness Controls Audit Report Audits Conducted as a request or from “tip” Not compulsory Greenbook standards Special inquiry or review Allegations Investigation Report Investigations

The Palm Beach County Office of Inspector General

Palm Beach County Ethics Movement 2003 – 2010: Arrests/Prosecutions of high level County and City officials. 2009: State Attorney convenes a Grand Jury. December 2009: County Code of Ethics, Commission on Ethics, and the Office of Inspector General created.

The Creation of the Palm Beach County OIG November 2010, by over a 72% majority, the people of Palm Beach County voted to expand the IG’s jurisdiction over all 38 municipalities (now 39). The Palm Beach County IG is unique in that the IG reports to its citizens.

PBC OIG’s Mission Our mission is to provide independent and objective insight, oversight, and foresight in promoting integrity, efficiency, and effectiveness in government. Ultimately, enhancing public trust in government.

Jurisdiction/Oversight Responsibilities Palm Beach County Government, 39 Separate Municipalities, and 2 Special Districts ü Civil Service Employees: 14, 500 (+) ü Combined Budgets: $8 Billion ü Contract Value Monitored: $ Billions

Inspector General Authorities Investigate, audit, and review. Receive full and unrestricted access to records. Receive Whistleblower complaints. Obtain sworn statements. Issue subpoenas. Make criminal referrals to Law Enforcement Agencies.

How Auditors and Investigators Work Together in the Office of Inspector General Example #1

Audit, Investigations, Prosecutor Working Together Purchasing Audit – Investigation - Prosecution Identified $81, 478 in questionable transactions 3. Office of Inspector General Investigations 2. Office of Inspector General Audit Staff 1. Planned Audit of City - Purchasing Benefit to Citizens/Government • $158, 139 in questionable transactions • $120, 630 in other Questioned Costs 4. State Attorney Office Public Corruption Unit (PCU) 5. Office of Inspector General Audit Report Identified an additional $48, 007 Justice is Served Three Arrested for Organized Scheme to Defraud & Grand Theft Identified an additional $28, 654 Total of $158, 139 in questionable transactions

Audit, Investigations, Prosecutor Working Together A Plant Operator and a Supervisor were identified as owners of a registered City vendor, who caused the City to pay for purchases totaling over $150, 000 for products the City never received. Three former City employees were arrested on felony and charged with Organized Scheme to Defraud and Grand Theft.

The Palm Beach County Office of Inspector General Data Analytics

What is Data Analysis? Data analysis is a process of inspecting, cleansing, transforming, and modeling data with the goal of discovering useful information, suggesting conclusions, and supporting decision -making. Data analysis can be used for many purposes, including fraud detection.

Analytics can: Describe the data Compare groups and test hypotheses. Is the violation rate in group A different from group B (Statistical hypothesis testing) Identify causal relationships, estimate their strength, and predict outcomes (Multivariate modelling with appropriate identification) Make the best possible predictions given the available data without attempting to understand causation (Machine learning) Identify the optimal use of resources Simulate, predict, and identify uncertainties Help describe textual information

Benefits of Data Analytics Access data from many sources 100% transaction coverage Fast to complete for large volumes Limited resources Higher rates of detection and prevention Acts as a deterrent Can be automated for continuous monitoring Quantifies the impact of fraud Prompt notification of control breakdowns

Data Analytics for Fraud Prevent Fraud Detect Fraud Proactive Tools = Save Money Less Resources

Data Analytics

Data Analytics - Audit Process Risk Assessment Planning Fieldwork Reporting Other

Data Analytics Tools

Data Analytics Techniques ü Benford’s Law ü Round Numbers ü Duplicates ü Cost Codes ü Comparison ü Gap Analysis ü Frequency ü Anomalies ü Vendor Spend ü Trends ü Descriptive statistics (including outliers) ü Models and probability distributions ü Network/link analysis ü Text analytics

Descriptive Statistics

Data Analytics – Low Lying Areas Apply filters and sort data Check for information gaps Look for duplicate entries Join and match data Round-dollar payments Identify amounts under thresholds (structuring) / split purchases Identify unusual dates and times

Data Analytics - Example Purchasing Cards Even number expenditures Merchant Codes Highest spending by user Expenses by vendor Key word searches (gifts, personal, other)

Detection through Analytics Office of Inspector General Example #2

Audits – Data Analytics Credit Card Audit Data Analytics for Selection Planned Audit of Town – Credit Cards Findings • $4, 100 gift cards • $1, 683 food purchases • $13, 601 entertainment tickets • Miami Dolphins tickets • Marlins tickets • Sunday brunch on cruise • $17, 903 – 33 tablet devices High Risk Transactions -Key Words -Separated Employees Lack of documentation and/or approval Office of Inspector General Audit Report Total of $83, 741 in questionable transactions

Data Analytics - Example NOT JU 5 T NUM 8 ER 5 Key word searches (gifts, personal, other) Conflict of Interest searches Addresses, Names, Locations

Data Analytics - Example Payroll Terminated ghost employees Unauthorized payroll adjustments Overtime fraud / false hours reported Exempt employees receiving overtime Duplicate payroll checks

Red Flags

Data Analytics – Why Not?

How to Start Data Analytics Specialist / Position Training and Cross-Training Set goals for all audits ◦ Identify Objectives and Align Analytics Establish practices and operations ◦ Inventory Tools and Techniques Know Your Data Quality Control / Quality Assurance

Data Analytics – Success Tips Provide training and tools Identify quick wins Get buy in from the top Develop clear goals Communicate the benefits Determine what success should be – target goals / KPIs Provide incentives

QUESTIONS? Visit our website at: http: //www. pbcgov. com/OIG Email speaker at: Mgaillard@pbcgov. org