Sick Leave Fraud – Spike in leave before and after weekends and holidays

Public servants, especially those living along the coast, take more sick leave than employees in the private sector, with a spike in days off before and after weekends and holidays, a report has found.

The NSW Auditor-General, Peter Achterstraat, has found that, despite efforts to reduce the high level of sick leave, there has been a drop of only 1.84 hours, or just one-quarter of a day, since 2004/5.

This was much less than the target of a reduction of one day over this period, which would have saved taxpayers $45 million, he said.

Abuse of sick leave needs to be addressed properly” he said.

On average, public servants take just over eight days’ sick leave annually, he said.

The highest sick leave taken was recorded by the NSW Fire Brigades at 95.3 hours, which is significantly more than the next highest group, Ambulance NSW, at 79.8 hours and Juvenile Justice at 78.6 hours.

The report also found that the more public servants are paid, the less sick leave they take and that sick leave increased with age and with length of service.

The higher the sick leave entitlement, the more sick leave was taken, the report noted.

Mr Achterstraat called for supervisors to more actively monitor and manage staff suspected of abusing sick leave and to have clear rules for managing absence.

The key barriers in reducing sick leave were an ageing workforce, an industrial environment which slows workplace reform, and an entitlement culture where staff think they must ‘use it or lose it’” the report noted.

The director general of the Department of Premier and Cabinet said programs were being pursued to reduce sick leave to 45.06 hours per employee, as part of recent wages agreements.

The Auditor-General has called for a “name and shame” list to be published by the government, which is likely to occur next year.

(Source: “Sickies by the seaside: report points the finger”, SMH 8/12/10, Brian Robins)

About Rushmore Forensic

Andrew Firth is a Director of Rushmore Forensic.  He specialises at using advanced data mining routines to detect payroll fraud. He is a forensic accountant based in Sydney, and is a regular speaker on payroll and other forensic accounting issues.

Forensic Accountants? – The Who, What, Why and How

When I’m introduced to someone and they ask what I do, the most common response is “Wow, that must be really exciting!”. This is quickly followed by the question, “Well what exactly does a forensic accountant do?

The actual job of a forensic accountant has always been in existence, but only in the last 15 to 20 years has the term “Forensic Accountant” become common.

Forensic accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring. They also provide services in areas such as accounting, competition, damages, analysis, valuation, and general consulting. Forensic accountants have also been used in divorces, bankruptcy, insurance claims, personal injury claims, fraudulent claims, construction, royalty audits, and tracking terrorism by investigating financial records. Many forensic accountants work closely with law enforcement personnel and lawyers during investigations and often appear as expert witnesses during trials (Source: Wikipedia).

As you can see, forensic accounting is a broad area with many different specialties. Forensic accounting can be broadly split between corporate investigations and expert witness work (such as divorce), but as you can see there are also many other tasks that don’t fit this neat distinction.

Most forensic accounting assignments are complex matters. The complexity can arise from:

  • the number of documents (often in the thousands or even millions of documents or computer records)
  • the type of documents (these can be faded, handwritten or lengthy legal agreements). Alternatively they can be snippets of information from say a call centre database.
  • the unstructured nature of information. It’s common for a forensic accountant to extract key pieces of information from emails, letters, and other correspondence. This information can then be cross matched to other records. These records may be financial records, phone records or internet activity.
  • The number of issues. When a forensic accountant is brought into a matter, often the client has up to 20 different issues or allegations. The Forensic Accountant will review the allegations and the potential evidence which supports each allegation. If the allegation can’t be supported, the forensic accountant will often cull the number of allegations into something that can be evidenced and has a reasonable chance of success when legal action is initiated. Most forensic accountants also find that many of the allegations are based on emotion, hearsay or are breaches in the organisations policies but are not fraudulent in themselves.

Most Forensic Accountants are trained as CPA’s or Chartered Accountants. There is no legal restriction on a person calling themselves a “Forensic Accountant” unlike other professional designations.

As corporate data is increasingly held in electronic forms, forensic accountants need to be capable of working with a wide variety of computer systems and be able to analyse large volumes of information. If you have a matter that involves a large amount of information, it is beneficial that you engage a forensic accountant who has these skills.

Another important factor when you consider engaging a forensic accountant is whether they have criminal investigation and or expert witness experience.  There are many Forensic Accountants who have moved into the industry from auditing and other general accounting disciplines.  There is a danger that these individuals can compromise an investigation through their handling of the evidence or other oversight.

About the Author

Andrew Firth is a Forensic Accountant in Sydney and Director of Rushmore Forensic. He has over 12 years experience in financial investigations, commercial disputes and other aspects of forensic accounting. Andrew is a former investigator with the Serious Fraud Office, London. He has also worked for KPMG and Deloitte during his career.

Andrew is based in Sydney and provides forensic accounting services throughout Australia.  If you have a matter which requires expert advice, please don’t hesitate to contact Andrew Firth for a complimentary and confidential discussion.

Payroll fraud accountant named by court

A senior accountant on a six-figure salary manipulated the company payroll to give himself a pay rise of just $10,000.

Mark Benjamin (Source NZ Herald)
Mark Benjamin (Source NZ Herald)

Name suppression has today been lifted from Mark Joseph Benjamin after he was convicted of seven fraud charges after a judge-alone trial in the Auckland District Court.

He appealed the suppression but was dismissed at a hearing at the High Court this morning.

The 45-year-old chartered accountant was a board member of the taxpayer-funded Hortresearch, a Crown Research Institute, and was also involved with the now defunct Auckland Regional Transport Authority.

In January 2006, Benjamin was hired as the chief financial officer for bulk food importer Kerry NZ Ltd. He negotiated for a salary of $180,000 but settled at $165,000.

But a few months later – at the same time two colleagues received pay increases – Benjamin gave himself a pay rise to $175,000. He did this by tampering with the computer payroll system, so that if anyone checked, it would show the $165,000 salary he was entitled to.

In June 2006, Benjamin took five days annual leave. But he gave himself the holiday pay on top of his monthly salary, effectively another $3500.

The following month, he took another five days leave. This time he reduced his monthly pay, but still on the basis of the bogus $175,000 salary – gaining an extra $1,120.

Then when Benjamin left Kerry NZ in August 2006, he failed to deduct the 10 days of leave – another overpayment of $10,709.

It was nearly two years before the fraud was discovered, with police laying seven fraud charges in July 2008.

In his defence, Benjamin claimed the $10,000 pay rise was verbally authorised – which was rejected by Kerry NZ bosses.

Defence counsel Mark Edgar told the Auckland District Court that if the salary rises would be “brazen” and discovered easily, if they were not legitimate changes.

He rhetorically asked why a man with Benjamin’s background as professional chartered accountant would deliberately act this way for a $10,000 pay rise – then do a poor job of covering his tracks.

Benjamin’s actions were a mistake, said Mr Edgar, as he was trialling the payroll system as a “test pilot” but forgot to correct the record. Similarly, he said the holiday pay bonuses were also errors of inexperience.

Judge David Wilson QC rejected Benjamin’s story and convicted him on all seven charges.

I find beyond reasonable doubt that he did this dishonestly and without claim of right. His explanation for his conduct is a fabrication which I reject.

Detective Sergeant Marty Laagland, officer in charge of the file, said he would alert the New Zealand Institute of Chartered Accountants about Benjamin’s convictions.

Benjamin could be struck off as a result.

He had a real sense of entitlement, that’s the crux of it. He had a grudge against the company, he felt he deserved a pay rise, then manipulated the system to cover his tracks.”

Benjamin will be sentenced on December 21.

(By Jared Savage, NZ Herald.co.nz, 1/12/2010)

About Rushmore Forensic

Rushmore Forensic specialises in detecting, investigating and recovering funds that have been misappropriated by employees. We have a significant data analytics capability covering accounts payable, payroll, expense reimbursements and other financial systems.

For further information, please don’t hesitate to contact us for a confidential discussion.

Independent school under investigation over funding

A second independent school has been identified for misappropriating federal money destined for new classrooms and libraries to prop up its operating budget instead.

The federal government is investigating the ”improper or inappropriate’‘ use of Building the Education Revolution money by schools and is unable to rule out others emerging.

”There are two schools that we are aware of [to date],” said a spokesman for Chris Evans, the new federal minister responsible for the $16.2 billion BER program.

Shearwater, the Mullumbimby Steiner School, was placed into voluntary administration in March with debts of $10 million.  The receiver, PPB, found the BER money had been spent on keeping the school operational.

It is the second Steiner school to have misappropriated federal money. Last week the Herald reported the Manning River Steiner School used part of its $250,000 grant for a library to patch up its working budget.

The problems involving the Steiner schools shifts scrutiny of the BER program to the independent education sector after the NSW government was pilloried for its handling of the money.

Under an agreement with the federal government, the Association of Independent Schools of NSW distributed the BER money to the two Steiner schools.

Dr Geoff Newcombe, the AIS executive director, said monitoring of all BER projects had occurred. “In both cases cited, the appropriate processes were followed and proved to be effective,” he said, ”No government funds have been lost in either case and all … program requirements have been satisfactorily met.”

(Source: Heath Gilmore, Brisbane Times – September 24, 2010)

Mortgage broker jailed for deceiving clients of money

Mr Michael Cay, 39, of Greenvale, Melbourne, was sentenced in the Melbourne County Court to four years imprisonment following an investigation by ASIC. Mr Cay must serve three years before he is eligible for parole.

Mr Cay, who was the operator of finance and mortgage broking firm, Jewel Financial Services Pty Ltd (Jewel), which is now in liquidation, pleaded guilty to four counts of obtaining property by deception and one count of obtaining a financial advantage by deception.

Mr Cay admitted that he deceived several investors of $475,149.07 to invest with Jewel. Mr Cay told the investors that this money was to be used by other Jewel clients allegedly seeking short-term loans. Mr Cay also told the investors that the loans would be secured either against the borrowers’ property, or property owned by Jewel. Neither of these representations occurred.

Mr Cay was also ordered to pay $381,600 compensation to victims.

The Victorian Court of Appeal dismissed the appeal against the sentence of Mr Michael Cay in November 2010.

(Source: ASIC Press Release 12/12/08  & 17/11/10 )

About Rushmore Forensic

Rushmore Forensic has significant experience at investigating property transactions, the actions of mortgage brokers and money tracing. For a complimentary and confidential discussion, please don’t hesitate to contact Andrew Firth.

Flying Under the Radar: Detecting Employee Expense Claim Fraud

When I’m asked what is the easiest fraud to detect in a business? – Expense Claim Fraud is always the answer.  The use of keyword databases, random audits and automated alerts can quickly uncover employee abuse.

Many business managers think that employee expense claims represent a small percentage of their total spend and believe that there is only a small risk to their business. However on closer examination, many businesses find that over 10% of their total expenditure is processed through employee reimbursements and some employees are being reimbursed more than $10,000 per month.

Expense claim anomalies generally fall into 1 of 2 categories. The first is a breach in the company’s policies. This can range from an employee failing to sign the expense claim cover sheet to more serious issues such as breaches in the organisations delegation of authority. It is common for employees to also claim for expense types that are prohibited by the company. This can include use of limousines; hire cars; charter flights and expenditure at adult entertainment venues.

The second category of expense claim anomalies that we encounter is fraud and personal expenses. Recently we have discovered employees claiming iTune song downloads, DVDs, local restaurants, and other electronic purchases.

Whilst it is a relatively straight forward process to detect employee expense fraud, organisations need to ensure that their policies and procedures comply with relevant statutory and common law requirements. We recommend that a Workplace Relations Specialist is consulted from the outset. We also recommend that organisations implement a process to ensure that fraudulent claims are recovered from the individuals concerned.

Some of the high risk categories that we use to categorise potential employee fraud in a keywords database include:

  • Clubs
  • Cash Withdrawal
  • Donations
  • Duty Free
  • Internet site
  • Limousines & Hire Cars
  • Memberships
  • Seminars
  • Restaurants
  • Weekend Transactions
  • Overseas (e.g. Thailand, Chonburi etc)
  • Large values (e.g. over $2,000)
  • Resorts
  • Fashion & Exclusive Stores

My final piece of advice to finance and other managers in organisations is to find where the expense claims are being filed and at random intervals spend a couple of hours reviewing the claims in detail. I guarantee that the time invested in reviewing the claims will be well spent.

Key points to remember when dealing with people in business

Key points to keep in mind when dealing with people in business:

  • Be particularly careful if you are approached by someone, rather than you being recommended to the person by someone you trust.
  • Doing business in an overseas country makes you vulnerable to fraudsters and scammers.
  • If it sounds too good to be true it probably is!
  • Ask to be taken around the business, and meet the staff. Be on alert if you only ever deal with one person in “the company” maybe that’s all there is!
  • Keep asking questions and checking the facts.
  • Something as simple as an email address that does not work could be a clue that you are dealing with a fraudster

Always seek the advice of an expert Forensic Accountant. An expert Forensic Accountant can help you assess the situation and even recover money that you have invested.

Who is a typical fraudster?

So who is a typical fraudster?

Research indicates that the typical corporate fraudster is:

  • Male
  • Well liked and respected
  • Greedy
  • Has pressing financial need e.g. has a gambling or drug problem
  • University educated
  • Close relationship with suppliers; and
  • Hardworking.

But don’t be fooled by people who don’t fit this stereotype! Don’t trust a person just because they are older, are female, appear to be wealthy, are well dressed, operate from an exclusive address, or promise you something of value.   Notably, people that commit fraud understand human emotions and how to manipulate them.

What are the common warning signs of fraudulent behaviour that a Forensic Accountant looks for? (Part 2)

Continuing on from part 1 of this topic, listed below are a number of factors that should be considered when assessing whether a business is legitimate or not. If a business fails any of the following tests then you are potentially dealing with a fraudulent company or person:

  • Review a sample of invoices that the company has issued. Are the invoices tax compliant? That is, do they have the organisation’s Australian Business Number on the invoice, and do the words “Tax Invoice” clearly appear on the invoice. Also check that the GST on the invoice is clearly shown on the invoice or words to the effect that GST has been included in the total value of the goods or services provided
  • Be particularly mindful, if there are large amounts of cash either entering, leaving or being held on the business (e.g. in the company’s safe). Is the business being used to launder illegitimate money or is the business being used to finance some other business?
  • If in doubt seek professional advice. Be particularly careful, if you are rushed into making a decision, or there is any resistance raised when you start to investigate a business or perform a due diligence.
  • Many simple searches can be quickly and simply performed on the internet. For example the NSW Land Title Office can be searched to check if a company or individual owns any property. An Electoral Roll search (Adult Population Index Search) can be used to confirm an individuals personal details.
  • Don’t take anything at face value. Ask to see bank and trade vendor references. Talk to the accountant, the neighbours, or anybody who has anything to do with the business.

What are the common warning signs of fraudulent behaviour that a Forensic Accountant looks for? (Part 1)

Listed below are a number of factors that should be considered when assessing whether a business is legitimate or not. If a business fails any of the following tests then you are potentially dealing with a fraudulent company or person:

  • The letterhead has been typed on a personal computer.
  • The wording in an email or document has grammatical errors or spelling mistakes.
  • The company is not listed in the phonebook.
  • The Email address or web site address is invalid.
  • The company does not have its own bank account i.e. the bank account is in the name of an individual.
  • The company has a Post Office address and no physical address.
  • The phone number is continually engaged or diverts continually to a recorded message.
  • The business is being run as a sole trader e.g. “Joe’s Plumbing Services”, rather than a limited liability company “Joe’s Plumbing Services Pty Ltd”.
  • The business is being run from a private residence.
  • The Australian Business Number (ABN) or the Australian Company Number (ACN) is invalid or is not quoted on company stationery.
  • If the business is incorporated and uses the abbreviation “Pty Ltd”, check the Australian Securities & Investments Commission, National Names Index that the company exists, is registered, and the directors are who you think they are.
  • The business is registered in a foreign country. E.g. “KZT Telecommunications Inc.” (US company), “RTW Trading Ltd” could be an Australian public company (easily checked on the ASIC website) or maybe a UK limited liability company (which you can checked online at the UK Companies House website).

To be continued at Part 2 of article.