Phoning it in: employee phone fraud and abuse


By Joseph R. Dervaes, CFE, CIA, ACFE Fellow
joseph-dervaes-80x80.jpg   Fraud's Finer Points: Case history applications

 NovDec-secret-phone       
MARILYN NIEVES/ISTOCKPHOTO 
Using the organization's phone for personal benefit is a simple asset misappropriation and a type of fictitious expense scheme. In the ACFE's Fraud Tree, the crime is a subset of fraudulent disbursements, which is a subset of cash schemes. At the end of the month, an entity's phone statement may include both official business charges and personal charges. If managers don't detect the personal charges, obviously the entity unknowingly will pay them and sustain a loss. Phone fraud and abuse occurs when an entity hasn't established appropriate policies and procedures to deter it, to detect it in a timely manner and to stop it before paying phone bills.

INTERNAL CONTROLS FOR PHONES

The entity should establish formal written policies and procedures for phone use and conduct training to advise employees about its expectations. Here are some key elements of these policies and procedures: 
  1. In Washington state agencies, employees may not use their official business phones or their state-owned cellular phones to make personal long-distance phone calls even if they subsequently reimburse their agencies for such use. Entities that use zero tolerance procedures should understand that invariably some employees will use phones for personal use, such as emergency family matters. So, entities must regularly monitor monthly phone statements for any inappropriate employee long-distance charges when they receive them. 
  2. Once an entity identifies personal phone calls, it should seek reimbursement from the individual. It should also take appropriate personnel actions for this abuse, possibly ranging from a simple reprimand to termination of employment and/or prosecution for continuing or serious abuses. 
  3. Employees normally do their best to refrain from using official business phones for personal purposes to avoid the possible negative effects from these strict phone control systems. Also, they almost always purchase personal cellphones that they may use for both personal and official business purposes.
  4. Under these procedures, employees submit their personal cellphone statements to their supervisors at the end of each month to obtain reimbursement for any official business phone use.

Entities usually don't maintain records for local calls made on business landline phone systems, so it's not possible for them to identify employee's local calls. Entities should expect some employee use of local phone calls for personal purposes, such as child-care inquiries, doctor's appointments, repair status on automobiles, etc. However, some employees abuse this privilege and even try to manage personal businesses using the office landline phone system. 

Employees usually report their fellow employees' call abuses to supervisors. The minimal cost of the local phone calls doesn't normally annoy honest employees. Rather, it's the amount of work-related time these individuals lose from constant incoming and outgoing calls and interruptions. In serious cases, the offending employees' actions may negatively affect their job performances and result in the entities taking adverse personnel actions against them.

Entity policies and procedures should prohibit employees making personal phone calls and accepting collect phone calls in any official business long-distance phone system. The entity should also take appropriate actions to block employee access to out-of-state and international calling applications except when this would be expected for the individual, such as those in key executive positions.

All employees don't need this type of access to perform their work. Leaving this option active and accessible to everyone on the phone system is simply an open invitation for employee abuse. 


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