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Payroll Fraud

Have you experienced any in your career?


  • Not the question, but I generally had both PR and AP report to me, and most fraud is on the AP side (in my experience). I had a manager who paid a "consultant" $5K a month on his expense report. Turned out the "consultant" was also his GF. This had been happening for years, and it violates maybe a half dozen normal process rules. Several people not related to the fraud were not doing their job.

    Fraud is a function of process. Set up a good process and you make fraud very difficult. Even if you have fake invoices, there should be approvals and POs. Maybe even detailed budget references. Do you have a second person review all invoices? Do you send a monthly report to supervisors detailing their expenses for the month? Do you periodically rotate which vendors the AP clerks handle? Do you have mandatory two week vacations for AP/PR staff? Many frauds require active management. Do you have mandatory POs over a certain amount. It is much harder to manage a fraud when more people get involved. Also, staff if never 100% honest or 100% dishonest. They are occasionally weak. Good process discourage staff from doing something stupid. You can never stop all fraud, but you can make it very difficult.

    Lastly, teach your staff everything you know about everything. Especially fraud. Get as many eyes out there as possible. Pay bonuses for finding and closing holes. Praise is fine and use it when earned, but an unexpected $100 bonus can make an AP clerk move mountains.

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