1 thepayrollfactory.com 610-644-4569 THE PAYROLL FACTORY 610-644-4569 thepayrollfactory.com.

1thepayrollfactory.com 610-644-4569

THE PAYROLL FACTORY610-644-4569

thepayrollfactory.com


The Payroll FactoryService is the Difference

Presents

Payroll FraudInformation & Discussion


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


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


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.


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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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


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

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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

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Paying a Nonexistent Employee Can Be Expensive

Source: Occupational Fraud And Abuse,by Joseph T Wells,2002


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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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


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

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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%


Technology

• State of the Art Time Clocks– Biometric Hand

Scanner

– Web-based Systems• Automating Time

Systems

• Time Management

The Payroll Factory



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

1 thepayrollfactory.com 610-644-4569 THE PAYROLL FACTORY 610-644-4569 thepayrollfactory.com.

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