Guideline No. B-080
Subject: Reporting and Resolution of Institutional Losses
It is the responsibility of each institution to establish a system to report losses of state or institutional funds, property or other resources, whether by malfeasance or misfeasance (TCA 8-19-501). When fraud, waste or abuse is suspected, the appropriate authorities as designated by the institution’s president/director should be informed in accordance with the Tennessee Board of Regents (TBR) Policy 4:01:05:50, Preventing and Reporting Fraud, Waste or Abuse. Administrators at all levels of management should be aware of the risks and exposures inherent in their areas of responsibility, and should establish and maintain proper internal controls to provide for the security and accountability of all assets and other resources entrusted to them. “Resources,” as used herein, shall refer to supplies, equipment, real property, intellectual property, data, and financial resources.
The procedure for reporting property losses to the appropriate officials is divided into three categories: (A) losses due to cash shortages, (B) losses involving acknowledged or suspected misconduct, and (C) losses of physical property. TBR reports the suspected fraud items, cash shortages and property losses to the Comptroller of the State of Tennessee, Division of State Audit. The institution reports property losses to the State of Tennessee, Department of Treasury, Office of Risk Management. Losses must be reported to the State immediately upon discovery and the institutional procedures should address timely reporting.
Reporting Losses – For each reportable situation, the institution must complete a “Notification of Loss Report” (see Attachment A) or “Property Loss Report” (see Attachment B). Losses should generally be reported on the Notification of Loss Report, but losses involving property may be reported on the Property Loss Report.
Reporting Resolution – The investigation unit identified on the notification report will file a “Case Resolution Report” (see Attachment C) at the conclusion of the investigation. Depending upon the nature and extent of the investigation, an Internal Audit Report may be issued in lieu of a Case Resolution Report.
Distribution of Reports – Each required report should be submitted to the following:
- Vice President for Business and Finance
- Internal Audit Director
- Office of Safety and Security/Campus Police
- TBR Vice Chancellor for Business and Finance
- TBR Director of System-wide Internal Audit
A. Losses Due to Cash Shortages
Each institution is required to report cash shortages equal to or greater than $500 immediately to TBR. Some cash shortages result from human error and are the cost associated with doing business. However, objective reviews must be completed to eliminate misconduct and provide assurance that controls are effective. Regardless of amount, management should routinely review shortages to identify any unusual items, recurring issues or a pattern of financial shortfalls. If suspected fraud or misconduct is identified in any area or unit, the matter should be reported immediately to TBR and handled as a reportable situation as noted in this guideline.
B. Losses Involving Acknowledged or Suspected Fraud, Waste or Abuse
Losses of institutional assets or other resources as the result of acknowledged or suspected misconduct by either an employee or a non-employee (for example, a vendor, contractor, or student) may include, but are not limited to: lost, stolen or altered checks, shortages of cash, operational supplies, physical property, intellectual property, data and any other instance where assets or other resources may have been misappropriated, e.g., travel claim abuse, long distance telephone abuse, theft of athletic tickets, reporting or approval of hours not worked, etc. Such losses should be reported immediately to TBR and handled as a reportable situation as noted in this guideline.
C. Losses of Physical Property
Property Records – Institutions maintain property inventory records for capitalized property (property with a cost of $5,000 or more) and sensitive property (property vulnerable to theft or misuse with a cost between $1500 and $4,999).
Property Losses Due to Misconduct – Institutional losses of physical property from thefts or other suspected fraudulent activities should be reported immediately to TBR and handled as a reportable situation as noted in this guideline.
Other Property Losses – Other losses of physical property due to inventory shrinkage, vandalism, unexplained events, natural disasters, or acts of God should be reported to TBR on a quarterly basis on the Property Loss Report (see Attachment B). A Case Resolution report is not required to be submitted for these losses. However, unexplained losses and those due to shrinkage or vandalism should be routinely reviewed by management to identify any unusual events, recurring issues or a pattern of losses. If suspected fraud or misconduct is identified in any area or unit, the matter should be handled as a reportable situation as noted in this guideline.
Occurrences that are potentially serious situations that would create public concern regardless of amount must be reported to the TBR and the Office of Risk Management immediately, followed by a written report.
Claims Process – Individual occurrences exceeding $25,000 must be reported to the TBR and the Office of Risk Management immediately, followed by a written report. The Office of Risk Management website at www.treasury.state.tn.us/risk/index.htm contains contact information under the “Contact Us” link and details of the insurance claim process under the “Claims Process” link.
Property Loss Report – This report (see Attachment B) should list equipment items individually and should include all related data as reflected on the equipment inventory list. This information may be forwarded to TBR on an Excel spreadsheet with a brief narrative explaining how the loss occurred. Each property damage report should include a detailed description of the loss and the estimated cost. In addition to the reporting requirements noted above, the department where the loss occurred should also receive a copy of this report.
Refer to the Addendum to this Guideline for reporting requirements for situations discussed in this guidance.
The TBR will evaluate the information provided and make a determination concerning external reporting obligations, if any, and the feasibility of pursuing available legal remedies in cases of misconduct or fraudulent activities.
ADDENDUM TO B-080: Tennessee Board of Regents Reporting Matrix for Institutional Losses
ATTACHMENT A: Notification of Loss Report
ATTACHMENT B: Institution Property Loss Report (Quarterly)
ATTACHMENT C: Institution Case Resolution Report
Source: November 6, 2002, Presidents Meeting; February 28, 2008, Presidents Meeting; February 29, 2008; Presidents Meeting November 7, 2012.