2. Payroll Fraud It’s Always a Trusted Employee

3. Allegation:  Falsification of timesheets and leave records  Received special assignment pay for which they did not qualify

4. Background  Authority embarked into a business venture  Venture served as a temporary staffing agency

5. Payroll Extra Service Purchasing Card Travel Advances 4

6. What Did We Do?  Reviewed bi-weekly payroll reports noting: Regular payroll payments >80 hours Regular payroll payments >80 hours Number of hours for extra service Number of hours for extra service Number of hours for sick, vacation Number of hours for sick, vacation Card allowance payment Card allowance payment  Wild Goose chase for supporting documentation  Extended scope to travel expenditures  Obtained e-mails for the HR staff 5

7. What did we find?  No checks and balances - HR Director and Payroll Coordinator had total control  Inappropriate payments for extra service  Inappropriate sick and vacation sell-back  Unrecorded leave requests 6

8. Leave Policy Vacation and Sick leave Sell-back Policy Vacation and sick leave sold: HR Director: 400 vacation hours 80 sick hours Total $13,223

9. Vacation and Sick leave (cont.) Payroll Coordinator: 260 Sick hours 80 vacation hours (not eligible) Total $6,962

10. Extra Service Compensation HR Director Regular PayExtra ServiceCar Pay period# of hoursCompensation# of hoursCompensationAllowanceGross 3/1080$3,240.4981$3,280.99$175.00$6,696.48 7/14160$7,004.6261$2,670.51$0.00$9,675.13 7/2880$3,502.3161$2,670.51$0.00$6,172.82 8/1180$3,502.3161$2,670.51$700.00$6,872.82 8/2580$3,502.3161$2,670.51$175.00$6,347.82 9/880$3,502.3161$2,670.51$350.00$6,522.82 9/2280$3,502.3161$2,670.51$350.00$6,522.82 10/680$3,502.3161$2,670.51$0.00$6,172.82 10/2080$3,502.3161$2,670.51$350.00$6,522.82 11/380$3,502.3161$2,670.51$350.00$6,522.82 11/1780$3,502.3161$2,670.51$350.00$6,522.82 12/180$3,502.3161$2,670.51$0.00$6,172.82 12/1580$3,502.3161$2,670.51$525.00$6,697.82 12/2980$3,502.3161$2,670.51$350.00$6,522.82 1/1280$3,502.3161$2,670.51$0.00$6,172.82 1/2680$3,502.3161$2,670.51$0.00$6,172.82 2/980$3,502.3161$2,670.51$525.00$6,697.82 2/2380$3,502.3161$2,670.51$175.00$6,347.82 $66,282.07 $48,679.66$4,375.00$119,336.73 9

11. Why Did It Happen?  No-one was minding the store - Lack of Monitoring  Financial – Blind trust in the individual who was to bring extra revenues to the organization 10

12. Extra Service: Policy Required:  Maintain separate timesheets to support extra service hours  Assignments should not be completed during regular hours  Requests for extra services assignments should be in writing and approved by the HR Director or his superior 11

13. Extra Service – What did we find?:  Non-compliance with Policy  Assignments were completed during regular hours  Timesheets to support extra service hours and approvals did not exist  Extra Service hours were combined with regular hours  HR Director received $48,680 for extra service performed during regular hours 12

14. Travel  Policy Required : Settle within 10 working days Settle within 10 working days Submit original receipts Submit original receipts  Lack of Compliance: Travel expenditures were not settled Travel expenditures were not settled Receipts were not submitted Receipts were not submitted  Received cash advances of $52,773 13

15. Purchasing Card  HR Director had a P-Card assigned to him  He charged travel expenses to the P-Card:  $18,535 lodging  $4,079 meals  $2,437 car rental  $7,523 flights  Why did it happen? Lack of monitoring by Finance 14

16. Personal Expenses:  $359 flight to Salt Lake for his wife  $2,028 charges while in Salt Lake City  $109 flight for his son to fly to NYC  $1,935 New York Marriott-Marquis Other expenses included:  Fast food restaurants, gift cards, I pods, portable DVD player, PS2 hardware

17. Other Weaknesses  Leave applications not processed  Unaddressed grievance letter  Correspondence indicating 93% of leave balances were incorrect  Personal withdrawals of $30K from a Fund Raising Account

18. Outcome  Executive Director resigned  Evidence and work paper were turned over to State Police and Commonwealth Attorney Office to pursue criminal charges  HR Director was indicted 17

19. ObservationsAmount The Human Resources Director and the Payroll Coordinator had complete control over processing payroll transactions. They processed and collectively received additional compensation by misusing the leave redemption policy. $20,186 The Human Resources Manager received improper payment for 80 hours of sick leave in addition to 80 hours of regular pay in the same two-week period. $2,116 The Human Resources Director received additional compensation for performing extra duties during regular hours for which he was already compensated for. $48,680 Certain employees were paid travel advances for job related travel, which were for the purpose of payment of all travel related expenses. However, the Human Resource Director charged travel related expenses to the RBHA credit card and retained the advances. $52,774 The Human Resources Director charged personal expenses to the RBHA credit card, which were paid by RBHA. $6,292 There were several questionable expenses charged to the RBHA credit card, the business use of which is not known. $8,446 Credit card charges were incurred after the Human Resources Director was placed on administrative leave. $1,823 The investigator hired by RBHA identified cash or personal withdrawals made from the fund raising account. $30,030 Total amount of improper or questionable transactions $170,347 18

20. Questions? 19