Payroll fraud

Payroll fraudAre all your workers’ raises authorized? Could your company have a ghost employee on the books?

Before you dismiss the idea, consider that payroll schemes constitute almost 11 percent of all employee fraud cases reported in the United States, according to the Association of Certified Fraud Examiners. The ACFE estimates that payroll schemes cost American businesses about $100 billion each year, have a median loss of $72,000 and take about 24 months to discover.

Payroll fraud has been in the news over the past year, too:

  • In early 2010, an employee of a Chesapeake, VA, staffing firm was sentenced for defrauding the firm of more than $265,000 by inflating the payments of temporary workers and diverting the excess to his own bank account using direct deposit.
  • The director of a Norfolk community services agency discovered in August 2010 that a worker had been paid for the past 12 years without ever showing up to work, costing the agency an estimated total of $300,000 in salaries alone.
  • In late 2009, the Brooklyn Museum was haunted by a ghost employee: the wife of the museum’s payroll manager, who embezzled $650,000 from the New York art museum by inflating his own salary and paying hers.

Staffing businesses are especially vulnerable to fraud, given the high turnover rates and massive amount of paperwork involved in staffing. And a difficult economy can provide additional rationalization for employees looking to defraud their companies.

Now the good news: COATSsql 4.0 gives you two more ways of finding payroll fraud: Duplicate with Direct Deposit Report and Payroll with No Billing Report. Running a Duplicate with Direct Deposit report will show all duplicate Direct Deposit accounts attached to more than one employee, while Payroll with No Billing will show if pay has been issued without corresponding work being billed.

“These reports will help our clients catch items that could slip through daily processing. It’s another check and balance COATS is pleased to provide to all our existing clients,” says Karen Connor, our Vice President of Sales and Marketing.

The two new reports are part of COATSsql Version 4.0, available soon, and included in your license or renewal agreement.

Has your business experienced employee fraud, or do you have advice for avoiding it? Let us know in the comments! (Just don’t name names.)

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