It’s always tempting to stretch your long lunch and claim it on company time, but these experts say this is actually a significant problem, specifically among middle-manager types who are starting to get more responsibility on their way up the corporate ladder.
“I had a case about six months ago where I found that there were people going out to dinner, and they were with clients so that was fine, but at the end of the meal they were offered a wine membership. It was $199 per person, and they purchased two – not hard to miss,” Shields says.
Gill says this is probably one of the areas that has the potential to be abused the most, because the lines between business and recreation can often be thin. “There’s probably more activity in the entertainment area, dining out, food and drinks and that sort of thing”.
However, Firth says there are some tell-tale signs that your employees are enjoying themselves on the company dollar.
“If I see something happening on a Monday to Friday, I generally won’t investigate it further. It’s too hard to detect. But if I see something on a weekend, I look further, because the weekend is when these more spurious claims could be made and that’s when they’re often happening, or otherwise very late at night.”
“Really it just comes down to monitoring. If you’re constantly looking at these things and checking them against benchmarks then it’s not going to be easy at all to allow these things to slip past.”
If your employees enjoy the benefit of overtime, then you need to be especially careful to make sure those extra hours aren’t being added illegitimately.
These experts say timesheet fraud occurs more often than you’d think, and especially if you have employees writing in their own hours with no oversight. Gill says the most common timesheet frauds are those that aren’t out of the ordinary – just an extra hour or two at first.
The problem is that these soon add up, and all of a sudden you’ve paid out dozens of overtime hours that haven’t actually been worked.
“Timesheet fraud is actually something that I think is potentially, quite a big problem, and a lot of the bigger organisations don’t really pay attention to it a lot,” Gill says, adding that he is actually investigating the matter for a client.
“Typically it may only be an hour here, and an hour there, but this can really add up to a substantial sum and if you don’t have good controls in place, like constant monitoring, this can be really problematic and drag on your costs.”
Is your payroll being haunted by a ghost? Rather than simply inflating an existing expense, the payroll ghost is a much more vicious form of fraud. A ghost is simply a fictional employee put on the payroll, with the inventor using the disguise to collect payments.
As accounting group Worrel’s points out on its website, this is intentional, cold-blooded theft. “The cumulative loss over a year of one or more ghost employees can be significant.”
Some tell-tale signs you’ve been paying a ghost include:
The person creating the ghost is usually someone who has access to the payroll system, who can add and delete employees at their will.
Payroll officers have a large amount of power, as was highlighted by the incident that occurred last year at Clive Peeter’s, which lost $20 million to a payroll officer who directed payments to herself.
While a ghost employee is often a more sophisticated ruse, Worrel’s points out there are still things you can do. These include refusing to pay in cash, setting up rigorous approval methods for new employees and regular performance reviews based on the payroll list.
“Have supervisors approve payroll payments to their direct employees on a random basis. This should highlight names on the payroll register that nobody recognises.”
“Have management check the payroll listing from time to time looking for suspicious names and addresses, and randomly meet employees on the payroll register. For businesses with manageable numbers of employees, have a non-payroll person randomly walk around with a payroll list and meet every employee on the list.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
