Time off to discover fraud

Regardless of the time of year, employees will always have reasons to come and go in the office. Vacations, conferences and meetings are a regular part of most employees’ daily schedules.  So rather than worrying about the empty chair they leave behind, take advantage of the time they take off to measure efficiency and expose any vulnerabilities that might exist to fraud, waste, and abuse.

Leave no bush to hide behind

For a fraud to be successful, it must be hidden.  An employee’s position often provides the perfect method to hide the footprints of their fraud.   When they are out of the office for more than a day or two, be sure to have another employee perform their key functions.  There is a good chance the replacement will notice if something is not right.  This is especially relevant for job functions involving receipt or disbursement of cash, purchasing of goods and services, and the receiving or shipping of goods.

If they never take vacation, be suspicious

In contrast, if an employee never wants to take time off, management should recognize this  as a red flag.  The same is true for the employee that is consistently at the office early and stays until everyone else goes home. A dishonest employee trying diligently to cover the footprints of their fraud knows they will not be able to cover their tracks if they leave for more than a couple of days.   The solution:  Make vacations mandatory.

Play musical chairs in your accounting department

Remember, the perception of detection is a key deterrent to fraud.  Regularly rotate job duties in vulnerable areas, such as the accounting department.  When an employee knows they will have others picking up where they left off, they are much less likely to use their position to perpetrate a fraud.

With just a little bit of advanced planning, some focused vacation scheduling, and rotation of job duties you can help expose the footprints of fraud, waste, and abuse.

Preventing fraud during the holidays

As we discussed in last week’s blog post, there can be more fraud during the holiday season for a variety of reasons. A few quick steps you can take to reduce your vulnerability to fraud include:

  • Be present – The perception of detection is often one of the strongest controls against fraud.  Business owners need to be aware of what is going on in the work environment and let employees know that they’re watching.
  • Focus on red flags – Pay attention to employees who seem to be spending a lot of money this holiday season or who are always coming in early or staying late by themselves. Realize that these employees may be under a lot of pressure at this time of year, which could be leading them to commit fraud.
  • Have strong controls in place – Make sure that various duties are segregated so that different people are handling different tasks, rather than one person doing everything. If duties can’t be segregated, have compensating controls in place.
  • Review everything – Never leave an employee to check and approve their own work.   Be sure to review company credit card statements for personal expenditures.  Require timely requests and original  receipts for employee reimbursements. Pay close attention to bank statements and canceled checks.  The disbursement cycle is the most vulnerable to fraud.
  • Don’t get relaxed – During the holidays, people may want to be more laid back and relaxed, but this can make it easier for fraud to be committed. Review your anti-fraud programs and controls and tighten up where necessary.  Most of all make sure your employees know and understand your stance on occupational fraud.