Fraud, Waste, and Abuse

Fraud, Waste and Abuse Hotline

Fraud – An intentional deception that violates a law or the public trust for personal benefit or the benefit of others.
Waste – Behavior involving the extravagant, careless, or needless use of government funds, property, and/or personnel.
Abuse – Behavior involving the use of government funds or property that a prudent person would not consider reasonable and necessary business practice given the facts and circumstances.

Since October 1983, the Comptroller of the Treasury has provided a toll-free hotline for reporting fraud, waste and abuse of government funds and property. Periodicals throughout Tennessee publish information to alert citizens to the hotline and to encourage them to report wasteful, inefficient or fraudulent activities. In addition, all state agencies, as well as those agencies receiving community grant funds, are required to call attention to the hotline by displaying in a prominent place signs with the following language:

If you observe an agency director or employee engaging in any activity which you consider to be illegal, improper or wasteful, please call the State Comptroller's Toll-Free Hotline:

1.800.232.5454

Calls and online submissions to the hotline should concern allegations of fraud, waste, and abuse. Substantive notifications, may concern a wide range of entities, including municipalities, counties and state agencies and departments. In the event of nonsubstantive notifications, such as requests for assistance or information, the reporting party may be referred to the appropriate agency or department for assistance.

Paragraph 7 of the Contract to Audit accounts includes the following provisions for reporting fraud:

Any reasonable suspicion of fraud, (regardless of materiality) or other unlawful acts including, but not limited to theft, forgery, credit/debit card fraud, or any other act of unlawful taking, waste, or abuse of, or official misconduct, as defined in Tennessee Code Annotated, § 39-16- 402, involving public money, property, or services shall, upon discovery, be promptly reported in writing by the auditor to the Comptroller of the Treasury, State of Tennessee, who shall under all circumstances have the authority, at the discretion of the Comptroller, to directly investigate such matters. Notwithstanding anything herein to the contrary, the Comptroller of the Treasury, State of Tennessee, acknowledges that the auditor's responsibility hereunder is to design its audit to obtain reasonable, but not absolute, assurance of detecting fraud that would have a material effect on the financial statements, as well as other illegal acts or violations of provisions of contracts or grant agreements having a direct and material effect on financial statement amounts. If the circumstances disclosed by the audit call for a more detailed investigation by the auditor than necessary under ordinary circumstances, the auditor shall inform the organization's management and those in charge of governance in writing of the need for such additional investigation and the additional compensation required therefor. Upon approval by the Comptroller of the treasury, an amendment to this contract may be made by the organization's management and those charged with governance and the auditor for such additional investigation.

In order to comply with this requirement, the auditor should describe the suspected fraud in as much detail as possible. If known, information about the names and positions of suspected individual(s) involved, dates, amounts, records involved, how the fraud was discovered, etc. should be included. All instances of fraud, regardless of materiality, should be reported.

In 2007, The General Assembly passed the “Local Government Instances of Fraud Reporting Act” (Section 8-4-501, Tennessee Code Annotated). This act provides that public officials “with knowledge based upon available information that unlawful conduct has occurred shall report the information in a reasonable amount of time to the office of the Comptroller of the Treasury”

The act defines “public entity,” “public official,” “reasonable amount of time,” and “unlawful conduct.”

Provisions

The act provides that “The comptroller shall have the power to prescribe the method of making such reports.” Therefore, we have prepared a Fraud Reporting Form to be used by public officials.

Effective Date

The Governor signed the act on May 22, 2007, and it is now in effect as law.