Transcript Types of Payroll Fraud - TSWB-apa

Missey Jackson, CPP
Payroll Director
Parallon/HCA
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Payroll Fraud
 Statistics
 Red Flag Indicators
 Types of Payroll Fraud
 Payroll Fraud Prevention
 Recent Payroll Fraud Cases
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Payroll Privacy
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Questions
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Payroll Fraud happens in 27 percent of all
businesses
Payroll Fraud occurs nearly twice as often (14.2
percent) in small organizations with less than
100 employees than in large ones (7.6 percent)
The average instance of payroll fraud lasts
about 36 months.
Payroll Fraud is not 100% preventable, but
catchable. Anyone can steal at any time. Key
is catching it and minimizing the risk.
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Unexplained wealth or Living beyond their means
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Financial Problems e.g. Credit card or other debt
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Family problems e.g. divorce, child access issues
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Gambling problems e.g Poker Machines
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Addiction to drugs.
If an employee displays any of these indicators, then
its worth reviewing your key controls and
determining if there is any other action required.
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Not paying back payroll advances
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Prevention - Keeping proper records when
employees receive advances, closely monitoring the
repayment, this form of fraud is easy to find and
rectify
Buddy Punching
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Prevention – Review time sheets/punches compared
to actual, develop tools to help catch (ie. Time
Bandit), hold employees accountable for this fraud,
up to and including termination
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Ghost Employees
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Prevention – Audit your payroll records, keep up
with how many employees you have, separation of
duties, complete “Surprise” payoffs
Pay check Diversion
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Prevention – Keep paper checks locked up, secure,
blank stock, direct deposit of all checks
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Pay Rate Alteration
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Prevention – Separation of duties, Audit of pay rates
to actual pay, ensure accurate support for system
override
Timecard Falsification
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Prevention – Automated system vs. manual time
cards, manage the employees by ensuring they are
clocking in/out, not allowing them to abuse the
system of rounding,
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Exaggerating Sales Commissions or Figures
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Workers Compensation Fraud
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Prevention – Make sure you do follow ups on what they
sold versus what was claimed, perform audits
Prevention – Make sure your employees claiming injury
was actually hurt at work, either thru camera
surveillance, or supervisor
Worker Misclassification
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Prevention – Ensure classifications are accurate based on
Department of Labor definition of an employee versus a
1099 worker
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False Expenses or Exaggerated Expenditures
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Prevention – Make sure your employees keep track
of all receipts, and watch for counterfeit or fake
receipts.
Employee and Supervisor Time Sharing
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Prevention – Ensure you are rotating
employee/supervisor roles to prevent alliances from
forming where they could split the extra money
from added overtime hours, etc.
1.
Timecard Falsification
2.
Ghost Employees
3.
Worker Misclassification
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Conduct Background Checks
Limit Access to Payroll Information
Segregation of Duties
Review Reports Every Time
Use a Positive Pay Service
Promote Direct Deposit and Pay Cards
Biometric Time Clocks
Fingerprint authentication
 Facial recognition
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New York City payroll fraud case, $40 million, by
kickbacks (November, 2013)
A former executive of a company that provided payroll
tax services to small businesses pleaded guilty
Thursday to mail fraud and money laundering charges
over his role in a $110 million tax fraud (March, 2013)
Gold’s Gym Payroll Manager – From January 2011 thru
July 2013, Embezzled $365,000, by falsifying timesheets
45 IRS Employment Tax Cases in 2013
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Consolidate all your employees personal
information in a secure location
Keep employment records in a password
protected computer environment
Make records accessible only to those directly
involved with HR matters
Do not use Social Security numbers as
employee IDs
Install a firewall
Encrypt emails
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Potential employers will research potential
employees, it’s important to ensure you know
what is out there and that it is professional
Posting information online can get you fired.
Some employers have policies regarding this
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http://www.rushmore-forensic.com.au/forensicaccounting-sydney/fraud-investigation/payrollfraud
http://www.forbes.com/sites/matthewgarrett/20
13/09/10/payroll-fraud-a-big-threat-and-how-toavoid-it
www.IRS.gov
http://www.infostructures.com/mm/protectingemployees'-privacy.asp
http://jobsearch.about.com/od/jobsearchprivacy