Healthy Hospital

Prominent university and medical school are the two schools that are affiliated Healthy
Hospital (HH), this hospital is one of the largest hospitals with the national reputation. In HH
there are 340 beds of patients, attending physicians are about 420 and there are more than 3000
stakeholders in the hospital. From 1990 till now HH using the software system and have
undergone significance upgrades from 1990s till now. The changes in the regulatory body, other
market forces and the conditions of microeconomic the profit of HH is decreasing. The profit
earned by the HH in 2005 is 3 million Dollars and now the profit is 1 million dollar in 2010.
After doing the reengineering work and downsizing, there are so many complains done by the
venders about the slow payments from the payables department. Therefore the temporary clerk is
hired to do work of accounts payable. After sometimes clerk is hired on permanent full-time
employee. There is a large or huge cash expenditure was revealed by the manager accounts
payable within a few months (Donaldson, P. W, 2004).
In information system beside that the employees are performing well in accounts payable
department which is the very sensitive department of hospital as it directly interact with the
vendors and suppliers, two full time employees were terminated which increases the burden and
department fails to cope with it because of which they have to hire a new employee on a
temporary basis. As according to hospital rules temporary employees are not entitled for health
insurance, vacation pay, disability insurance, etc. this thing force Matt Harris to do fraud as he is
ill and have to cover medical expenses (Baskerville, R. 1. (1993). Its the organizational
procedure that every employ that is hired for sensitive departments like finance and IT, have to
undergo through background investigation. Matt Harris was hired on temporary basis and
according to hospital rules and regulations his background investigation is not required which is

the major cause of fraud. If they are higher a temporary employees in a sensitive department then
they should amend their procedure because if background investigation takes place then Hospital
know that he is the son of another member who is working in sensitive department and might get
information about his illness. Because of all above things he might not get chance to enter into
organization (Bakersville, R, 1993).

Business processes also contributed to fraud in a way that first of all they treat their own
employees as an independent vendor and according to the processes whenever Tracy Downs,
accounts payable manager, or Elinor Linz, assistant accounts payable manager was setting this
thing it was acknowledged by the new vender, by updating master file of accounts payable with
the important data to ensure the accurate processing timely, new vendors checks are prepaid by
employees using oracle system and finally signed by Tracy Dawn. This business process
although is good but contributed in fraud in a way that when Harris was hired for a permanent
post and he get access to Oracle System and main safe where pre-signed physical checks are
present.

The management of Healthy Hospital is strong enough to judge the frauds however if the hospital
management take the following steps it would be more helpful for organization i.e. hospital, in order to
prevent from such frauds (Comer, M., 1998). Internal control of healthy hospital can be strengthening
by adopting the following steps are:

Give more empowerment to the internal control auditor so that

where ever he fills that organization may suffer because of happening of an event or incident or step he
can stop it by force (Comer, M., 1998).
Auditor of internal control must be in direct reporting of the CEO so that he can work without any
pressure from colleague. The internal audit manager should review final reports of each activity

perform in a day on daily basis. This will help him to maintain record and check and balance and
moreover employees will be much more careful as they know that at the end of the day their
activity record is checked so they will think many times before doing any fraud (Wells, J. T.,
2003).

Additional to Harris the personalities engaged in scam held responsible for the occurrence of this
scam are: Ms Tracy Dawn as she hired him without interviewing others. Mr. Smith who give approval for
the recruitment of employees on temporary basis for accounts payable department while knowing that this
is a sensitive department and temporary employees are not bound t go through the background
investigation. He is also responsible because under his leadership or management a relative of an
employee is hired and when internal auditor informed him with the expected fraud he should listen he and
he should send Harris to another department. Sharon Harris, Matts mother who knew companys

policy allows his son to join the organization. Secondly she is his mother so she definitely knows
what his son is doing.

In my view Internal Manager of auditing handles the condition in an efficient manner. When he
comes to know in a routine audit that Matt Harris is a son of Sharon Harris an employees of the accounts
payable, he inform it to Mr., Smith about this and possible chances of fraud. So he had done his job in an
effective manner. One thing he can do is to contact with the CEO and inform him about the hiring and all
other things.

The practical procedures that can benefit the organization to recognize, identify and avoid
these kinds of frauds are as follow: Thomas the CEO should empower the internal audit manager
to take the necessary steps where he finds appropriate. The internal audit manager should only
responsible to report to CEO. This thing will give him full control and authority and he can take

decisions in the best interest of the organization (Wells, J. T., 2003). The final reports of each
activity perform daily should be send to the internal audit manager so that if something goes
wrong or out of order then he can correct him on spot. James smith should do his duty in a
proper manner and keep check on each and every activity that takes place in the finance division.

The auditor first keeps check that all the functions like recruitment and selection and payments
are done in accordance with the companys procedures are not. In recruitment the most important
thing which is sort of person is being selected and on what basis for the departments. Two
employees of the same family should not be in the same department of the company and
especially in the sensitive departments like IT and Finance (Zikmund, Paul., 2003). The person
appointed has undergone through the background investigation or not. The background
investigation of all employees working in sensitive department is complete or not. Thoroughly
monitor the results of background investigation. Check that the vendors account of new
employees are open or not Vendors account of those employees who are initially working as a
temporary employee and now move to the permanent position is cancelled or close or not. The
new salaried accounts of permanent employees are formed or not. All the accounts with the
name of vendors along with contact number and all other required fields are made or not.
Payments on the name of vendors are made properly on time or not(Zikmund, Paul., 2003).

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