Essential Project Investment Governance and Reporting Preventing Project Fraud and Ensuring Sarbanes-Oxley Compliance

by Rollins, Steven; Lanza, Richard

• ISBN13: 9781932159264
• ISBN10: 1932159266
• Format: Hardcover
• Copyright: 2005-01-01
• Publisher: J. Ross Publishing

Summary

Many businesses are not properly considering the risks inherent in reporting project investments in compliance with the new Sarbanes-Oxley federal law. This represents a very real threat to these organizations, their senior executives and project managers. This book introduces proactive best processes for ensuring proper financial reporting of project investments and techniques for preventing, detecting, and managing the risks of fraud in projects. The authors provide a roadmap for implementing a project fraud policy that will ensure corporate governance compliance with Sarbanes-Oxley. Steven C. Rollins, MBA, PMP, is a well-known expert in Enterprise Program/Project Management Office, a best-selling author and CEO of the ALL PMO Network. Richard D. Lanza, PMP, is a Project Management/PMO expert, CPA and Manager of Internal Auditing for Toys R Us.

Author Biography

Steven C. Rollins, MBA, PMP, PMOP, is President, CEO and Founder of the ALLPMO Network serving 18 worldwide PMO niche-specific web sites free to the public at www.PMOUSA.com. Steve is a best-selling author and well known national subject matter expert in Enterprise Project Management implementations and improvements. Steve's background includes extensive experience in industries such as Financial Services, Government, Healthcare, Human Resources, Information Technology, Insurance and Telecommunications. Steve has been a featured key-note speaker at many project management events speaking to "Growing the Business, The Value Proposition of Project Managers" at PMI Chapters and Businesses across the USA, Canada, Europe and Asia. Additionally, Steve is currently the PMI Metrics Specific Interest Group Chair and the Executive Chair of the Mid-America PMO Regional Group that operates as a chapter to the PMI PMO SIG with a membership of more than 700 people serving seven states in the midwest.

Table of Contents

Preface	xiii
About the Authors	xv
Acknowledgments	xix
Web Added Value	xxiii
Part 1: New Corporate Governance Landscape
Chapter 1: The New World of Corporate Governance	3	(7)
1.1 What Happened?	3	(1)
1.2 It Is All About Trust	4	(1)
1.3 Transparent Reporting	4	(1)
1.4 Corporate Governance	5	(1)
1.5 Regulatory Reaction: Sarbanes-Oxley	6	(1)
1.6 Does Sarbanes-Oxley Go Far Enough?	6	(1)
1.7 A Renewed Emphasis on Internal Control	7	(1)
1.8 Lack of Project Focus and Training	8	(1)
1.9 Summary	8	(1)
Questions	9	(1)
References	9	(1)
Chapter 2: Enabling Compliance with Sarbanes-Oxley	10	(7)
2.1 Overall Requirements of the Act	10	(1)
2.2 Sections 302 and 404	11	(1)
2.3 Roles and Responsibilities for Complying with Sarbanes-Oxley	12	(1)
2.4 Summary	13	(1)
Questions	14	(3)
Part 2: The Emergence of Project Fraud
Chapter 3: Project Failure (and Possible Fraud) Case Study	17	(4)
3.1 California State Welfare Automation Project	17	(1)
3.2 How Did This Project Get Out of the Gate?	18	(1)
3.3 Was There Fraud?	19	(1)
3.4 Summary	20	(1)
Questions	20	(1)
References	20	(1)
Chapter 4: Project Fraud Defined and Its Many Faces	21	(10)
4.1 Fraud Defined	21	(1)
4.2 Project Fraud Defined	22	(2)
4.3 Project Fraud Set	24	(5)
4.4 Summary	29	(1)
Questions	29	(1)
Reference	30	(1)
Chapter 5: Impacts and Motives of Project Failures and Fraud	31	(7)
5.1 Introduction	31	(1)
5.2 Financial Statement Misstatements and Financial Accounting Standard 144	31	(2)
5.3 Motives for Fraudulent Financial Statement Reporting and Associated Project Statement Reporting	33	(1)
5.4 Other Project Impacts	34	(1)
5.5 Benefits of Reducing Project Mismanagement and Fraud	35	(1)
5.6 Summary	36	(1)
Questions	37	(1)
References	37	(1)
Chapter 6: Impairment of Assets	38	(9)
6.1 What Is the Nature of a Long-Lived Asset?	38	(1)
6.2 FAS 144: The Basics	39	(1)
6.3 How Is Fair Value Calculated?	40	(1)
6.4 How Is an Impairment Reported in the Financial Statements?	41	(1)
6.5 Example of a Project Impairment and Financial Statement Fraud	41	(2)
6.6 Summary	43	(1)
Questions	44	(1)
Reference	44	(3)
Part 3: Overall Responses to Project Fraud
Chapter 7: Understanding Internal Control and Using It as a Model for Reviews	47	(8)
7.1 Internal Control Defined	47	(1)
7.2 What Is COSO?	47	(1)
7.3 The Internal Control Objectives	48	(1)
7.4 The Internal Control Framework	49	(2)
7.5 Limitations of Internal Control	51	(1)
7.6 Responsibility of Project Stakeholders in Implementing Internal Control	52	(1)
7.7 Using the Internal Control Framework as a Model for Project Fraud Reviews	53	(1)
7.8 Summary	53	(1)
Questions	54	(1)
References	54	(1)
Chapter 8: Project Fraud and Statement of Auditing Standard 99	55	(8)
8.1 Audit Standards and Their Relevance to Project Fraud	55	(1)
8.2 The Effects of SAS 99 on the Audit Industry	56	(1)
8.3 Increased Professional Skepticism	57	(1)
8.4 Required Brainstorming Sessions	57	(1)
8.5 Increased Inquiries	58	(2)
8.6 Increased Testwork	60	(1)
8.7 Auditor Communication	61	(1)
8.8 Summary	61	(1)
Questions	61	(1)
References	62	(1)
Chapter 9: Assessing the Organizational and Project Control Environment	63	(12)
9.1 Control Environment Defined	63	(1)
9.2 Pillar #1: Integrity and Ethical Values - Reducing Pressures	64	(1)
9.3 Pillar #2: Integrity and Ethical Values - Communicating Guidelines	65	(1)
9.4 Pillar #3: Commitment to Competence	66	(1)
9.5 Pillar #4: Board of Directors and/or Audit Committee Participation in Governance and Oversight	66	(1)
9.6 Pillar #5: Management's Philosophy and Operating Style	67	(1)
9.7 Pillar #6: Organizational Structure and Assignment of Authority and Responsibility	68	(1)
9.8 Pillar #7: Human Resource Policies and Practices	68	(2)
9.9 Project Environment Defined	70	(1)
9.10 Control Environment Assessment Questions	70	(2)
9.11 Summary	72	(1)
Questions	73	(1)
References	74	(1)
Chapter 10: Complete Project Fraud Risk Assessment	75	(15)
10.1 The Risk Assessment Process	75	(1)
10.2 Risk Assessment: Getting Started	76	(1)
10.3 Assessing Fraud Risks Overview	77	(2)
10.4 Internal Documents	79	(3)
10.5 Improper Asset Valuations	82	(1)
10.6 Concealed Liabilities and Expenses	82	(1)
10.7 Bribery and Conflicts of Interest	83	(1)
10.8 Expense Reimbursement Schemes	84	(1)
10.9 Payroll Schemes	85	(1)
10.10 Billing Schemes	86	(1)
10.11 Inventory and Other Assets Misuse	87	(1)
10.12 Summary	88	(1)
Questions	88	(1)
References	89	(1)
Chapter 11: General Responses to Key Project Error and Fraud Risks with Prevention and Detection Procedures	90	(13)
11.1 High-Level Deterrence and Prevention	90	(1)
11.2 Code of Conduct	91	(1)
11.3 Vigilant Investigation and Follow Through	92	(1)
11.4 Antifraud Training	93	(1)
11.5 Whistle-Blowing Program	94	(1)
11.6 Part One: The Power of Anonymous Employee Assessment	94	(2)
11.7 Part Two: Establishing an Anonymous Employee Assessment	96	(3)
11.8 Complete Regular Audits	99	(2)
11.9 Purchase Fidelity Insurance	101	(1)
11.10 Summary	101	(1)
Questions	101	(1)
References	102	(1)
Chapter 12: Specific Responses to Key Project Fraud Risks with Prevention and Detection Procedures	103	(9)
12.1 Specific Control Activities	103	(1)
12.2 A Recap on the Project Fraud Categories	104	(1)
12.3 Specific Fraud Prevention: Fraud Types #1, 2, and 3	104	(1)
12.4 Specific Fraud Prevention: Fraud Types #4 and 5	105	(2)
12.5 Specific Fraud Prevention: Fraud Type #6	107	(1)
12.6 Specific Fraud Prevention: Fraud Type #7	107	(1)
12.7 Specific Fraud Prevention: Fraud Type #8	108	(1)
12.8 Specific Fraud Prevention: Fraud Type #9	109	(1)
12.9 Utilizing Technology to Proactively Detect Fraud	109	(1)
12.10 Summary	110	(1)
Questions	110	(1)
References	111	(1)
Chapter 13: Utilizing the Audit Function/Program Management Office for Fraud Prevention and Detection While Maximizing Project Investments	112	(11)
13.1 Getting It Done, Establishing Roles	112	(1)
13.2 Management	113	(1)
13.3 Program Management Office	113	(1)
13.4 Internal Audit/External Audit	113	(1)
13.5 Fraud Examiner	114	(1)
13.6 General Fraud Prevention	115	(1)
13.7 Roles for Specific Fraud Risk Responses	116	(2)
13.8 Summary	118	(1)
Questions	118	(1)
Reference	119	(4)
Part 4: Enabling the PMO and Audit Function to Support Corporate and Financial Reporting Governance
Chapter 14: Defining the PMO/Internal Audit Value Proposition for Project Fraud Prevention and Detection	123	(9)
14.1 Size of Projects in the Global Economy	123	(1)
14.2 General Fraud Statistics	123	(1)
14.3 What Is a PMO?	124	(1)
14.4 Defining the PMO Value to the Business	125	(1)
14.5 Defining the PMO Value Model	126	(1)
14.6 Defining the Service Level Agreement with Internal Auditing	127	(2)
14.7 Why Should the PMO Care?	129	(1)
14.8 Summary	129	(1)
Questions	130	(1)
References	131	(1)
Chapter 15: Utilizing a PMO Data Store that Supports Project Fraud Prevention and Detection	132	(10)
15.1 What Is the PMO Data Store?	132	(1)
15.2 Elements of a PMO Data Store and Project Fraud Impact	133	(3)
15.3 Developing PMO Data Store Processes That Help Detect and/or Prevent Project Fraud	136	(1)
15.4 How to Manage Lack of Compliance by Project Teams or Team Member	137	(1)
15.5 Using the PMO Data Store to Raise Visibility and to Improve Delivery Speed Leading to Business Transformation	138	(1)
15.6 Summary	139	(1)
Questions	140	(1)
References	141	(1)
Chapter 16: Implementing Project Management Policies Through the PMO That Support Fraud Detection and Prevention	142	(6)
16.1 Defining Policy Requirements	142	(1)
16.2 Applying the Project Management Body of Knowledge (PMBOK®) to Project Fraud Policy	143	(1)
16.3 Desired Results/Objectives	144	(1)
16.4 Who Owns the Policy?	145	(1)
16.5 PMO Role and Responsibilities	145	(1)
16.6 Internal Auditing Role and Responsibilities	145	(1)
16.7 Summary	146	(1)
Questions	146	(2)
Chapter 17: Creating a Safety Net for the Project Teams	148	(10)
17.1 The Common Bond Between Project Managers and Astronauts	148	(1)
17.2 Impact of Project Fraud on Project Failure	149	(1)
17.3 Defining the Safety Net for Project Delivery Success	149	(2)
17.4 Corporate Governance Role	151	(1)
17.5 Business Unit Role	151	(1)
17.6 Project Team Role	152	(1)
17.7 PMO Role	152	(1)
17.8 Project Prioritization Roles	152	(1)
17.9 Portfolio Management Role	153	(1)
17.10 Project Fraud Management Policy Role	154	(1)
17.11 Portfolio Review Meetings Role	154	(1)
17.12 Project Audit Role	154	(1)
17.13 Enterprise Project Management Tools Role	155	(1)
17.14 Timing Impact	155	(1)
17.15 Summary	155	(1)
Questions	156	(2)
Chapter 18: Connecting Project Investments with Corporate Objectives to Improve Project Fraud Control	158	(11)
18.1 Throughput Optimization Versus Cost Optimization	158	(2)
18.2 Who Owns It?	160	(1)
18.3 PMO Role	161	(1)
18.4 Portfolio Management Defined	162	(1)
18.5 Defining the Need for Enterprise Project Management Tools	163	(1)
18.6 Defining the Corporate Governance Charter	163	(1)
18.7 Enabling Corporate Alignment	164	(1)
18.8 Reducing Project Fraud Opportunity Through Alignment to Improve Business Transformation	165	(1)
18.9 Roadmap to Corporate Alignment	166	(1)
18.10 Summary	166	(2)
Questions	168	(1)
Chapter 19: Defining Where to Start	169	(7)
19.1 Getting Started	169	(1)
19.2 How Do We Train Our Workforce to Manage Project Fraud?	170	(1)
19.3 What Policies Should be Implemented to Manage and Communicate on Project Fraud Effectively?	170	(1)
19.4 The Value Proposition of the PMO in Detecting and Preventing Project Fraud	171	(1)
19.5 Defining Portfolio Management	172	(1)
19.6 Defining Corporate Governance	172	(1)
19.7 Initial Action Steps to Regain Executive Control	173	(1)
19.8 Summary	174	(1)
Questions	175	(1)
Reference	175	(1)
Chapter 20: Searching for Project Fraud within the Project Investment	176	(9)
20.1 Recognizing Project Fraud	176	(1)
20.2 Examples of Project Fraud	177	(1)
20.3 How Do We Prevent and Detect Project Fraud in Project Investments?	178	(1)
20.4 Project Delivery Environmental Contributors That Enable Project Fraud Opportunities	178	(1)
20.5 Examining Project Teams	179	(4)
20.6 Summary	183	(1)
Questions	184	(1)
Chapter 21: Essential Project Reporting Processes That Support Project Fraud Prevention and Detection	185	(10)
21.1 Defining the Objective	185	(1)
21.2 Roles and Responsibilities	186	(2)
21.3 Essential Data Elements in Project Governance Reporting	188	(2)
21.4 The Value Proposition of Status Meetings	190	(2)
21.5 Summary	192	(1)
Questions	193	(2)
Chapter 22: Training the Organization to Manage Project Fraud Prevention and Detection	195	(9)
22.1 Determining the Type of Training Required	195	(1)
22.2 Training Courses and Expected Outcomes	195	(1)
22.3 Project Management Skills Area	196	(4)
22.4 Business Analysis Skills Area	200	(2)
22.5 Fraud Management Skills Area	202	(1)
22.6 Summary	203	(1)
Chapter 23: Using Enterprise Project Management Tools for Project Fraud Detection	204	(9)
23.1 Defining Enterprise Project Management	204	(1)
23.2 Purpose of EPM Tools	204	(1)
23.3 Determining EPM Tools for the Overall Benefit of the Enterprise	205	(1)
23.4 Implementing the EPM Tools	206	(1)
23.5 Training the Workforce on EPM Tools Utilization: What They Must Learn	207	(1)
23.6 How Project Teams Should Use EPM Tools	208	(1)
23.7 How Internal Auditors and Fraud Examiners Should Use EPM Tools	209	(1)
23.8 The Value Proposition of EPM Tools to the PMO to Prevent and Detect Project Fraud	210	(1)
23.9 Summary	211	(1)
Questions	211	(2)
Chapter 24: The Executive Proposal for Sarbanes-Oxley Section 404 Compliance in Detail	213	(15)
24.1 Executive Summary/Commitment Letter	213	(13)
24.2 Summary	226	(1)
Questions	226	(2)
Chapter 25: PMO Roadmap for Implementing Sarbanes-Oxley into Project Delivery	228	(9)
25.1 Project Development Work Breakdown Structure	233	(2)
25.2 Summary	235	(1)
Questions	235	(2)
Chapter 26: Summary	237	(6)
Appendices
Appendix 1: List of Sarbanes-Oxley Act Sections	243	(3)
Appendix 2: Capitalization Decision Tree Software Development Projects	246	(3)
Appendix 3: Project Fraud Management Policy Template	249	(6)
Index	255