Preventing payroll fraud

Johannesburg, 21 Aug 2009

Lack of process, segregation of duties, and ineffective checking and reconciliation are the main drivers of payroll fraud threats, explains Christine Witthoft, forensic payroll consultant, Softline VIP.

Payroll fraud is often difficult to detect and will not only cost an organisation money, but also damage its image and credibility, states Witthoft. The most effective way of stamping out fraud and corruption is to integrate skills, such as accounting, auditing, legal, and investigative, into a single team, she advises.

When a company suspects that payroll fraud has been committed, the first step is to enlist the help of professional forensic consultants to conduct a forensic review. This review investigates how the apparent fraudulent activity took place, who was involved, and the total monetary value involved.

She cites the following as key enablers of payroll fraud: adding on and paying of ghost employees, incorrect payments, duplicate employee records, and the manipulation of leave records.

To counteract this, companies must ensure that user access rights support the segregation of duties. Also, a payroll should be checked on at least two levels. This second-level check should make use of audit trails and system-generated reports to identify the most common risk areas, Witthoft advises.

“Knowledge of payroll best practices and procedures is also important as we make recommendations to our clients of how they can effectively manage or lower risks in their payrolls.

“Payroll skills allow us to make recommendations suited individually to our clients. The legal skills we acquire through consultants are necessary when our forensics consultants become involved in internal and legal proceedings, allowing us to lay bare the hard facts in the best possible way for such proceedings,” says Witthoft.

Risk management consultations and training are an integral part of preventing commercial crime, she adds. By being involved in reviews, forensic consultants gain the skills necessary to identify possible risk areas. If such measures are implemented commercial crime can be prevented or at least detected early.