Fraud - Failure to Hold Employees Accountable

Business owners can easily be victims of fraud, particularly if you don’t know what to look for. In this second installment of our Fraud series, we’ve asked Scott Rebein of SFR Consulting & Advisory to share stories and insights from his time as a federal agent conducting fraud investigations. As you read, remember that if something sounds familiar, you don’t have to suffer the consequences of fraud alone – you can work with someone like Scott to detect potential fraud and protect your interests.

Most people associate fraud with financial transactions and theft. But did you know if your employees don’t provide a fair day’s work for their pay, that can be fraud, too? Wasting work hours each day can directly impact your bottom line, cause missed deadlines, and negatively impact morale for employees who work diligently.

In my 28 years of experience as a federal special agent and supervisor conducting and directing financial fraud investigations, I have seen very unfortunate situations for business owners and employees. Below are true stories, generalized to protect those involved.  

Example 1: The Construction Company

In our first example, an employee at a large construction company that had employees outside the office working in different locations noticed the lack of communication between his foreman and the office manager. The employee told the foreman he was headed back to the office to obtain some materials and do some paperwork, and told the office manager that he was out working on-site. However, he was actually at a local casino gambling. He had a gambling problem, and had been committing this scheme for over a year, going “MIA” about once every couple of weeks.   

Example 2: The Grocery Store

In another case, a young lady worked at a grocery store as an office manager. She was very efficient and completed her work quickly, and asked her supervisor if there was other work she could do. The supervisor said to not worry about it, as more work would be coming soon. This turned out not to be the case, and she eventually spent most afternoons shopping online, spending at least 4 hours per day on personal business.

The office manager went further and even starting using the store credit card for certain small purchases, until she was caught by an outside accountant who had Certified Fraud Examiner credentials. Though he found only a few purchases with the store credit card, he did notice the time of the purchases was during the employee’s work hours. Once he obtained access to her computer, he determined that the wasted time totaled nearly 1560 work hours. She was being paid $17 per hour, so the loss was almost $27,000.

There are a number of actions employers can take to protect against this type of fraud. To start with, employers need to design position descriptions with detailed narratives of the duties required. Once hired, employees should have a performance plan articulating duties and expectations for the coming year, and undergo periodic assessments to make sure their assigned work matches their hours. Employers should also have policies in place for breaks, lunches, and computer use and monitor employees to make sure they do their job and follow company rules.

About SFR Consulting & Advisory

At SFR Consulting & Advisory, we provide reactive investigative services and proactive internal controls design, implementation, training, assessment, and periodic monitoring, among other investigative services. Designing and implementing comprehensive internal controls in both cases above could have prevented the loss of significant income. Having an outside, independent company with complex financial fraud detecting experience can assist in identifying employee waste, fraud and abuse of company policies, procedures, and funds. Don’t become a victim of financial fraud. If you suspect, detect, or want to protect against fraud, it’s not too late to contact SFR Consulting & Advisory at www.specialtyfinancialresources.com. You can reach Scott at scott@specialtyfinancialresources.com.