Forensic Analytics, 2nd Edition

CHAPTER 13Case Study : An Employee's Fraudulent Tax Refunds

THIS FRAUDULENT PROPERTY TAX refund scheme is relevant to our study of forensic analytics because of the $49.3 million loss to the District of Columbia, the eighteen-year duration of the scheme, the large dollar amounts of the individual checks, and a complete disconnect with the rationalization element of the fraud triangle. The supporting documents used for the property tax refunds were seen to be authentic by the external auditors. The organization's internal controls were reasonably strong, but it was the fraudster herself who oversaw the administration of those controls. Another interesting fact was that there was no line item in the annual budget for property tax refunds. This means that there was never a variance, or a difference, between the actual and the expected amounts. This scheme was not detected by any proactive fraud detection exercise, nor was it detected during the external audits. It was not detected by any of the usual methods such as a tip, an internal audit, a management review, or by accident. The scheme was eventually detected because of the perpetrator's carelessness, the extent of her greed, and the professional skepticism of a banker, who was not even the banker of the victim organization. This scheme also highlights the importance of fraud awareness training. This chapter reviews the mechanics of the fraud scheme and gives some insights into the people involved. Also reviewed are analytics ...