Guide to Preventing Workplace Fraud - Chubb Group of Insurance ...

More documents

Recommendations

Info

Payroll fraud may involve collusion between employees (e.g., between the employee who receives the fraudulent pay and an “insider” with the ability to facilitate the payment). Ghost Employees—Deferred Separation Status Chris worked as an information technology representative in the human resources (HR) department with responsibility for maintaining HR information systems databases. Chris was responsible for updating employee data in the system (e.g., change of address, change in employee status). The HR database maintained by Chris fed into other company information systems, including the payroll system. When a salaried employee resigned from the company, Chris would defer changing that employee’s status to “inactive” for a week or more after the employee’s last day of work. The company payroll system would automatically compute wages due the former salaried employee for every day that the employee remained “active” in the system. Prior to each subsequent payday, Chris would temporarily change the address shown for the former employee to an address that Chris controlled, e.g., a mail drop. After the system issued a paycheck, Chris would change the former employee’s address back to the original. Chris would make sure that the former employee status was reflected as inactive when he felt it necessary to “end” the scheme. In the rare circumstance when anyone questioned these payments, Chris was prepared with phony documentation indicating a payment had been made to the former employee in error and that collection action was being initiated to recover the overpayment. Payroll fraud risk mitigation efforts that companies should consider include: ■ First-line manager review of payroll reports. First-line managers generally have the best knowledge of employee status and how much and when they should be paid. However, companies need to 40
understand there is risk that can arise related to overdependence on “routine” report reviews because “busy” managers may routinely not spend time performing an adequate review. ■ Unscheduled, random, in-depth reviews by managers of payroll reports conducted several times a year with a required report on all findings (including “nothing found” or “no exceptions” reporting). ■ Manager certification that a payroll report review was conducted and that all discrepancies found were appropriately resolved/reported. ■ Active review of payroll data by internal auditors for fraud warning signs. The existence of adequate segregation of duties also needs to be assessed. Employees with the ability to add new employees or to change employee profile information should not have the ability to approve payroll payments or adjustments, enter pay hours, change pay rates, or authorize bonus or other special payments. Payroll fraud warning signs include: ■ Frequent changes in an employee’s payroll mailing address, direct deposit account, or check-deposit instructions, particularly changes occurring more than once in a short span of time that subsequently change back to the original information. ■ Sharp increases in an employee’s pay without apparent reason or explanation. ■ Broad disparity in a particular employee’s pay compared to similarly situated employees without apparent reason or explanation. ■ “Employee” names found in payroll records that do not appear in company rosters, email address directories, and telephone lists. 41
Page 1 and 2: Guide to Preventing Workplace Fraud
Page 3: GUIDE TO PREVENTING WORKPLACE FRAUD
Page 7: CONTENTS Introduction .............
Page 10 and 11: focus on prevention, detection, and
Page 12 and 13: The Fraud Triangle What motivates p
Page 14 and 15: ■ Minimization: “I’m not taki
Page 16 and 17: Cash-diversion schemes range from s
Page 18 and 19: FRAUD RISK MANAGEMENT- LOSS CONTROL
Page 20 and 21: General fraud detection practices.
Page 22 and 23: ■ “Vendor audits,” which typi
Page 24 and 25: company. Checks with identified inc
Page 26 and 27: ■ Investigate Forms W-2 and 1099,
Page 28 and 29: Segregation of duties may be diffic
Page 30 and 31: In many companies, vendor payments
Page 32 and 33: ■ “Vendor audits,” which typi
Page 34 and 35: The above scenario presents a numbe
Page 36 and 37: part of computerized records and ar
Page 38 and 39: software, and color laser printers
Page 40 and 41: Misappropriation of Waste, Scrap, a
Page 42 and 43: Expense Account Reimbursement Fraud
Page 46 and 47: ■ Employee correspondence sent to
Page 48 and 49: ■ Design and implement safeguards
Page 50 and 51: ■ Foster a strong “perception o
Page 52 and 53: Many companies require that employe
Page 54 and 55: ■ Callers are asked to call back
Page 56 and 57: ABOUT THIS BOOKLET This booklet was
Page 60: Chubb Group of Insurance Companies

Guide to Preventing Workplace Fraud - Chubb Group of Insurance ...

Create successful ePaper yourself

Delete template?

Save as template?