PAYROLL AND PERSONAL FRAUD SCENARIOS

Protect your payroll
Payroll is where the most obvious fraudulent activities occur. For example, falsifying hours is fairly simple to do, particularly with lax supervision of timesheets or timecards on job sites. Falsifying wages is harder because perpetrators need access to personnel files or payroll records, though with collusion they can do it.

• A payroll clerk improperly allocating FIT withholding away from other employees to their account. Then when the W-2 is issued, files a tax return and claims a larger refund than they are entitled to.
• Carry fictitious employees on the payroll, or pay one employee through more than one paycheck, and increase amount paid to employee.
• Increase rates/hours or manipulate deductions so employee receives more pay than they should.
• Keep employees on payroll beyond their actual severance date.
• Withhold unclaimed wages.
• Falsify employee timecards/timesheets, vacation and sick records.
• Use access to confidential employee records and information to commit fraud, e.g., obtaining unauthorized credit cards by using the employee's social security number, birth date, etc.
• Use employee funds, such as profit-sharing for personal use.
• A plant foreman approves overtime never worked in exchange for 40% of the overtime pay.
• A payroll clerk puts herself down for overtime never worked.
• Co-workers take turns punching each other's time cards giving themselves "free" time off.
• A personnel manager paid his own firm placement fees for new hires, which came directly to the company without really going through an employment agency.

To prevent such fraud separate payroll responsibilities at logical points in the process. For example, assign different employees to prepare payroll, distribute paychecks and reconcile bank statements. Also conduct periodic reviews to uncover internal breakdowns and verify employee hours and wages. Generate payroll reports from these reviews, noting changes in personnel, rates or hours. Last, notify employees of regular independent payroll procedure reviews. Doing so can discourage potential fraudsters from executing their nefarious plans.

The preceding is not intended to be legal advice pertaining to your situation and should not be construed as such.The information provided is intended as a general overview with regard to the subject matter covered.