Best Practices for Managing Internal Fraud #APAutomation
Fact! Expense reimbursement fraud makes up about 15 percent of business fraud with a median annual loss of $26,000.*
* Report to the Nations on Occupational Fraud and Abuse, 2012
I have come to realize that accounting and finance people are always on the lookout for a great story about catching the bad guy or gal and stopping them from accessing the company’s money.
Well, I hope today is not going to be any exception to that story telling. Although this story is true, the names, company and locations have all be omitting, not for legal purposes but because I don’t want to embarrass anyone.
Once upon a time in a large city there was a controller that was always on the lookout for fraud. To set the stage they were having difficulties tracking people because the AP process was paper. Now, I know that most of you that read my articles knew it was going to go there (plus the name of the article) but the problem behind the problem with looking for fraud in a paper world is you must have probable cause.
With paper you must have an idea that someone is stealing, you can’t go around randomly accusing people (well you could but no one would want to work with you). The tipping point with this company is they got rid of the paper in Accounts Payable and they automated. The good news is with AP Automation you are able to track everyone without their knowledge. When you have data, not paper, it creates pattern that can be followed and if things break the pattern that can give you an indication that something may be wrong.
(Back to the story) One of those patterns were broken when there was an irregularity in an ordering and shipping process. When the controller (our hero) looked into the matter they found that a few Staples orders were being delivered to a residential address. The address was associated to an employee and the fraud was uncovered.
There were two crimes that were stopped that day. Crime number one was using the company’s credit and ultimate payment (funds) to buy furniture. Crime number two was outfitting a home with furniture bought at Staples.
The criminal was doing this for a long period of time with smaller dollar amounts. She knew that if it was under $200 then it wouldn’t require multiple approvals and if the invoice matched the paper PO then no one would be alerted. Once the paper was gone, what the criminal didn’t know was the addresses had to be electronically validated with a valid shipping address in the ERP system and the rest is history.
I feel bad that the employee was ousted and everyone knew her furniture was from Staples.
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