Frequent Frauds Found in Governments and Not-for-Profits

Chapter 3 CASE 3: PERSONNEL FRAUD

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•     Determine how personnel policies and procedures in a fictitious government can be circumvented and lead to possible fraud or abuse.

•     Determine the importance of identifying the environment in which a fictitious government entity operates and how it may affect the development and execution of personnel policies and procedures.

BEFORE WE START

In many governmental organizations, salaries and benefits represent the major expenditure or expense category for most funds. Employees of governments are often paid less than their counterparts in the private sector which may lead some employees to rationalize misappropriation of assets as compensation for their low salary levels.

Indicators of personnel fraud include the following:

•     Unusual or second-party endorsements on payroll check images

•     Employees without the usual withholdings related to employer provided or offered benefits (that is, insurance, retirement, savings bonds, and the like)

•     Missing, unusual looking, or altered time and attendance records in general or frequently for the same employee(s)

•     Time and attendance records signed by someone other than the usual supervisor in general or frequently for the same employee(s)

Payroll and personnel controls, and therefore audit procedures, typically focus on the accuracy of the amounts paid (paid for actual hours worked at ...