Case in point

Minding your own business: Preventing payroll fraud with internal controls

How would you like to double your salary? No, this isn’t about some “get-rich-quick” scheme, but it’s a case of how a controller at a medical practice took to heart this dubious route to riches and used her position to perpetrate a payroll fraud scheme against her employer. Her attempts to garner a bigger paycheck ultimately failed, but her story provides important lessons for fraud examiners investigating these types of scams.

Medical practices are often susceptible to fraud because their owners — usually physicians — are focused on patient care instead of the day-to-day operations of running a business. Often, they designate someone else to manage the practice with little oversight.

In this case, a medical practice based in the U.S. state of Georgia, found itself the victim of occupational fraud when the owners learned that their controller had been embezzling funds via a payroll scheme. The controller had worked at the practice for more than three years and was earning a salary of $85,000 after having received two raises over that period. But despite those advances in her career, she’d decided to defraud the practice and had been conducting her scheme over 20 months before she was caught. The medical practice’s external CPA found discrepancies in the payroll registers compared to the total funds deducted from the bank account for payroll expenses. The practice’s outside legal counsel retained my team to investigate the controller’s theft and quantify the misappropriated funds.

Through our investigation, we discovered that the controller had misappropriated approximately $80,000. And while that might be a relatively insignificant sum to a large business, that kind of loss can devastate a small company.

Indeed, it’s those small businesses that are particularly susceptible to this type of fraud. According to the ACFE’s 2020 Report to the Nations, small organizations are twice as likely to fall victim to payroll schemes as large businesses. (See

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