The Fraud Examiner BACK TO SCHOOL MEANS NEW FRAUD IN HIGHER EDUCATION SCHEMES
As school ramps up again for many students, so too does the risk for fraud occurring in colleges and universities. Higher education institutions are just as vulnerable to fraud as many large organizations, and their risk can be exacerbated by the many moving parts required for a university to function. There are various ways in which higher education institutions can be the victims of fraud — including individuals in areas such as athletics, research, admissions and prospective students. Here are some of the recent fraud schemes to be aware of.
Giving up guardianship
Some parents are going so far as to give up legal guardianship of their children so that they might receive more in financial aid. ProPublica, an investigative journalism nonprofit, recently exposed nearly four dozen families from affluent Chicago suburbs who had gone to court to turn over guardianship of their children to relatives or friends, typically a few months before the child turned 18. This was done so that the children could apply for need-based federal, state and university-funded financial assistance without their parents’ income compromising the amount of grants that the prospective students could potentially be awarded. While not inherently illegal, the practice of students in questionable guardianship cases receiving both financial aid and monetary support from their parents raises serious concerns. Among those worries is the effect this will have on students who might be financially worse off and in greater need of these funds to pursue a higher education.
Embezzlement in athletic programs
College sports programs are no stranger to scandal, and sometimes their coaches can be the biggest players in higher education fraud schemes. Paul Krebs, the former University of New Mexico athletic director, was recently indicted for taking a lavish golf trip to Scotland that was paid for on the university’s dime. Krebs, along with two individuals unaffiliated with the university, spent $25,000 of public funds on the trip during a period when the college’s athletic department was struggling financially. To decrease spending, the university was forced to cut other athletic programs around the time that Krebs took his trip
Research fraud
Fraud occurring in the research departments of colleges and universities can be especially devastating since it can affect outside parties relying on the discovered data. Duke University was recently in the news for accusations that Erin Potts-Kant, a former researcher, submitted falsified data to help the university win and keep lucrative federal grants worth more than $200 million. When another researcher joined the lab, he became suspicious of Pott-Kant’s experiments always succeeding with very low error rates. After working with her for some time, the researcher blew the whistle on the fudging of research. Many of Potts-Kant’s research papers had to be retracted as a result. During the subsequent investigation, it was also discovered that she embezzled $25,000 during her time working for Duke.
While these stories of individuals defrauding colleges and universities have recently gained greater media attention due to the Hollywood admissions scandal, this is a long-standing type of fraud. Fraud can be all too common due to the sheer number of employees at colleges and universities, the competitive nature and cost of higher education, and the large number of potential students vying for admission. One way to promote ethical actions by university employees — and therefore reduce the risk for the school as a whole — is by creating a well-defined set of policies and procedures regarding ethics, fraud and abuse. Clearly articulating what constitutes each item and the repercussions for such actions will leave no questions as to what will be done if fraud is discovered.
Another way to reduce the risk of fraud in higher education institutions is by establishing more oversight in research and athletics departments. A supervisory team in a research department could be responsible for carefully outlining the requirements to ensure compliance with funding requirements, as well as to certify that research is being gathered in an ethical and appropriate manner that will benefit others. Oversight in an athletics department could include auditing university expenditures, properly vetting coaches and training staff and thoroughly evaluating whether potential student-athletes are ready for the academic undertaking of a college education.
The examples of fraud in higher education institutions highlight a few ways that colleges and universities can be victims of fraud by their employees and those attempting to gain admission. While there is certainly not an all-encompassing solution to the issue, there are certain controls that can be applied to reduce the risk and deter potential fraudsters in the future. Modifying the language on financial aid applications, as well as reforming the laws concerning guardianships, might help reduce the number of students receiving financial aid that deserves to go to the neediest students. The cases concerning athletics and research fraud show the importance of oversight for these two departments and the harsh reality of what can happen if one individual is given unchecked access to university funds. Fraud has the potential to run wild among colleges and universities but can be prevented with the right internal controls in place.