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THE PAYROLL FACTORY610-644-4569
thepayrollfactory.com
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The Payroll FactoryService is the Difference
Presents
Payroll FraudInformation & Discussion
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What is the problem?
The Payroll Factory
Service is the Difference
What is the problem?•Dishonest Employees
•Financial Pressures on the employee (rise of credit and other debt)
•Layoffs – commit fraud knowing they are leaving the company
•Kick backs from other employees
•Stealing Time
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Demographics
Men 59.1% Women 40.9 %High School Degree 34 %Some College 21 %Bachelor’s Degree 34 %Postgraduate Degree 11 %
Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes
International, Inc.Research Date: 9.18.2012
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According to the Association of Certified Fraud Examiners, payroll fraud the number one source of accounting fraud and
employee theft
• 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. That’s three years of paying ghost employees or overpaying existing ones. In Delaware, a School District Finance Director paid himself an extra $150,000 over eight years. He also underpaid several school administrators a combined $50,000 in one school year.
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Other Employee Theft Statistics
• Percent of total thefts committed by a manager 37.1 %
• Percent of total thefts by an employee who had ideas stolen at work 29 %
• Average time office fraud lasts before detected 2 years
• Retail employees arrested for workplace theft 1 in 30
Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research Date: 9.18.2012
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The Payroll Factory
Service is the Difference
How big is the problem?Employee Theft Statistics Data
Amount stolen annually from U.S. businesses by employees $50,000,000,000
Percent of annual revenues lost to theft or fraud 7 %
Percent of employees who have stolen at least once from their employer 75 %
Percent of employees who have stolen at least twice from their employer 37.5 %
Percent of all business bankruptcies caused by employee theft 33 %
Source: Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research
Date: 9.18.2012
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The Victims
Loss by Type of Organization
Victim Pct. casesMedian
loss
Government agency 17.6 $100,000
Publicly traded company 31.7 $200,000
Privately held company 36.8 $210,000
Not-for-profit organization 13.9 $100,000
Loss by Number of Employees
Number Pct. cases Median loss
1–99 36.0 $190,000
100–999 20.3 $179,000
1,000–9,999 24.8 $120,000
10,000+ 18.9 $150,000
Source: 2006 Association of Certified Fraud Examiners Report to the Nation on Occupational Fraud & Abuse
The Payroll Factory
Service is the Difference
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Ways to Cheat
• Ghost employees– Someone on the payroll who does not actually
work for the victim company
• Falsified Hours and Salary– Buddy Punching– Online RIO Calculator available
• Altering the Payee Name on a check
• Withholding Tax Schemes• Commission Schemes• False Workers
Compensation Claims
The Payroll Factory
Service is the Difference
Paying a Nonexistent Employee Can Be Expensive
Source: Occupational Fraud And Abuse,by Joseph T Wells,2002
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Vast majority of incidents of employee fraud goes undetected due to:
– No employee screening– No internal audit control/procedures– No monthly reconciliation of accounts– No separation of duties of employees– Bad habits by Owners/Management– Emotional Issues
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The Payroll Factory
Service is the Difference
Detection of Fraud•Tip from employee 26.3 %
•Accidental discovery 18.8 %
•Internal audit 18.8 %
•Internal controls 15.4 %
•External audit 11.8 %
•Tip from customer 8.8 %
•Anonymous tip 6.2 %
•Tip from vendor 5.1 %
•Notification from law enforcement 1.7 %Source: Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research Date: 9.18.2012
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Reducing and Preventing Fraud• Owners Involvement• Select the Right Employee
- Verify Past Employment- Criminal Conviction Checks- Drug Screening- Reference Checks- Have Employee Bonded• Perform Audits - Expense Reports- Payroll- Sales- Cash- Suspense Accounts
• Job Rotation and Separation of Duties• Thorough Internal Control• Retain Outside Payroll Fraud Consultant• Allow Payroll Provider to Control Tax
Monies
The Payroll Factory
Service is the Difference
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Behavioral Red Flags
• In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct.
• Living beyond means 36% • Financial difficulties 27%• Unusually close association with vendors or
customers 19%• Excessive control issues 18%
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Technology
• State of the Art Time Clocks– Biometric Hand
Scanner
– Web-based Systems• Automating Time
Systems
• Time Management
The Payroll Factory
Service is the Difference
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Thank You for Attending Today’s Seminar
If you have any further questions about Payroll Fraud
Please contact
The Payroll Factory610-644-4569
www.thepayrollfactory.com
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