Fraudsters Work Overtime

Time card fraud is one of many employee embezzlement schemes on the rise, according to an ACFE report.

Employee embezzlement has increased during the past year, making it the most commonly cited fraud category among certified fraud examiners (CFEs), according to an Association of Certified Fraud Examiners (ACFE) report, Occupational Fraud: A Study of the Impact of an Economic Recession. Furthermore, 88 percent of CFEs polled for the report said they anticipate a slight or significant increase in fraudulent activity through the end of 2010.

During the past year, employee embezzlement accounted for 48 percent of reported frauds, according to the ACFE research. One type of employee embezzlement is overtime — or time card — fraud. Employees and supervisors can commit overtime fraud when their organizations are not closely monitoring time recording systems. These systems can be difficult to monitor, particularly in organizations experiencing frequent staff turnover. One way organizations can help control time card fraud is by having management review the feasibility of enacting systematic controls within both the time recording system and the payroll programs to block employees with data entry access.

“Fraudulent Overtime,” featured in the June 2006 issue of Internal Auditor magazine, provides an example of overtime fraud committed by an organization’s site manager, which cost an organization US $33,000.

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