Missey Jackson, CPP Payroll Director Parallon/HCA

 Payroll Fraud  Statistics  Red Flag Indicators  Types of Payroll Fraud  Payroll Fraud Prevention  Recent Payroll Fraud Cases  Payroll Privacy  Questions

 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.  Payroll Fraud is not 100% preventable, but catchable. Anyone can steal at any time. Key is catching it and minimizing the risk.

 Unexplained wealth or Living beyond their means  Financial Problems e.g. Credit card or other debt  Family problems e.g. divorce, child access issues  Gambling problems e.g Poker Machines  Addiction to drugs. If an employee displays any of these indicators, then its worth reviewing your key controls and determining if there is any other action required.

 Not paying back payroll advances  Prevention - Keeping proper records when employees receive advances, closely monitoring the repayment, this form of fraud is easy to find and rectify  Buddy Punching  Prevention – Review time sheets/punches compared to actual, develop tools to help catch (ie. Time Bandit), hold employees accountable for this fraud, up to and including termination

 Ghost Employees  Prevention – Audit your payroll records, keep up with how many employees you have, separation of duties, complete “Surprise” payoffs  Pay check Diversion  Prevention – Keep paper checks locked up, secure, blank stock, direct deposit of all checks

 Pay Rate Alteration  Prevention – Separation of duties, Audit of pay rates to actual pay, ensure accurate support for system override  Timecard Falsification  Prevention – Automated system vs. manual time cards, manage the employees by ensuring they are clocking in/out, not allowing them to abuse the system of rounding,

 Exaggerating Sales Commissions or Figures  Prevention – Make sure you do follow ups on what they sold versus what was claimed, perform audits  Workers Compensation Fraud  Prevention – Make sure your employees claiming injury was actually hurt at work, either thru camera surveillance, or supervisor  Worker Misclassification  Prevention – Ensure classifications are accurate based on Department of Labor definition of an employee versus a 1099 worker

 False Expenses or Exaggerated Expenditures  Prevention – Make sure your employees keep track of all receipts, and watch for counterfeit or fake receipts.  Employee and Supervisor Time Sharing  Prevention – Ensure you are rotating employee/supervisor roles to prevent alliances from forming where they could split the extra money from added overtime hours, etc.

1. Timecard Falsification 2. Ghost Employees 3. Worker Misclassification

 Conduct Background Checks  Limit Access to Payroll Information  Segregation of Duties  Review Reports Every Time  Use a Positive Pay Service  Promote Direct Deposit and Pay Cards  Biometric Time Clocks  Fingerprint authentication  Facial recognition

 New York City payroll fraud case, $40 million, by kickbacks (November, 2013)  A former executive of a company that provided payroll tax services to small businesses pleaded guilty Thursday to mail fraud and money laundering charges over his role in a $110 million tax fraud (March, 2013)  Gold’s Gym Payroll Manager – From January 2011 thru July 2013, Embezzled $365,000, by falsifying timesheets  45 IRS Employment Tax Cases in 2013

 Consolidate all your employees personal information in a secure location  Keep employment records in a password protected computer environment  Make records accessible only to those directly involved with HR matters  Do not use Social Security numbers as employee IDs  Install a firewall  Encrypt s

 Potential employers will research potential employees, it’s important to ensure you know what is out there and that it is professional  Posting information online can get you fired. Some employers have policies regarding this

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