The City of Tenino lost $280,309 in public funds after an employee sent the money out of state using a common electronic payment method, according to a fraud report released today by the Office of the Washington State Auditor (SAO).
A former state Employment Security Department (ESD) employee misappropriated at least $315,282 in 2020, according to a fraud report released today by the Office of the Washington State Auditor. The investigation also identified $121,503 in questionable unemployment benefit payments associated with the same employee.
When frauds happen, people are often left in disbelief that someone they knew would choose to deceive and harm their organizations. We've all heard stories of the “trusted employee” who proved to be anything but trustworthy. Outside observers often have questions like “how could this have happened?” or “shouldn't someone have noticed?” Answers to these questions usually require a deeper understanding of the “human side” of fraud.
Local governments are moving away from traditional paper checks to more efficient and lower-cost digital payments, such as direct deposit, automated clearing house (ACH) payments, electronic funds transfers (EFT) and wire payments. And the benefits are clear: You can pay a variety of vendors seamlessly, process employee payroll faster, and easily transfer funds between multiple bank accounts.
But alongside the benefits, beware: Digital payments also create new opportunities for employees to conceal and personally benefit from these payments.
The COVID-19 pandemic has likely forever changed how we purchase goods and services—at home and at work. E-commerce and contactless payment options have become the norm, and many governments have transitioned to using credit cards for the majority of purchases and for receiving payments. But as more online transactions occur, fraudsters also have more opportunities to steal credit card information. And judging from loss reports to the State Auditor's Office, the fraudsters are finding success in their schemes.
Employee fraud is on the rise in government, yet it often comes as a shock to those charged with oversight of a government when it happens in their own agencies. It shouldn't. Elected officials and appointed boards have a duty to understand their agency's operations. They also have a key role to play when it comes to fighting fraud.
With International Fraud Awareness Week kicking off on Nov. 14, now is a great time to look back at how the COVID-19 pandemic affected the level of fraud in the workplace and understand the roadblocks to preventing and detecting fraud in a post-pandemic work environment.
Fraud trends during the pandemic
To accommodate the effects of the pandemic, organizations had to make changes to their work environments, including:
Looking for a way to improve your game when it comes to cash receipting internal controls? Add the double count to your arsenal. The double count is as easy as the name suggestions: money should never transfer from one employee to another without being counted and documented first.
Though it's simple, the double count is a necessary addition to your internal control processes for minimizing the risk of loss . Let's walk through a few scenarios to illustrate the concept and its importance.
Scenario 1: Fundraising in a school
The State Auditor's Office received 410 reports of suspected or known loss in 2020. While some of these reports were from citizens and whistleblowers, more than 80 percent of reports came from management at state agencies and local governments.
That's because state law (RCW 43.09.185) requires all state agencies and local governments to immediately notify SAO of any known or suspected loss of public resources or other illegal activity, including cyberattacks and other activities that potentially affect financial records or systems.
Do you ever wonder if a key control can be a person? Maybe you have a long-standing employee that everyone goes to for answers, or perhaps an employee that really knows and understands a certain process. People are most certainly an important part of the control system, and governments benefit from these valuable employees that contribute so much.