Payroll 310 Badge #06 - Internal Controls and Fraud Management-Payroll 310 Badge #6

Payroll 310 Badge #6 - PowerPoint

Pdf Summary

Badge #6 (Internal Controls and Fraud Management) is a WASBO curriculum module focused on why internal controls matter and how to prevent, detect, and respond to fraud—especially payroll-related fraud. It explains that fraudsters often look like typical employees; fraud commonly arises from the “fraud triangle” of pressure, opportunity, and rationalization. The badge highlights behavioral red flags such as living beyond one’s means, financial difficulties, control issues, defensiveness, complaints about pay, refusing to take leave, and addiction problems.<br /><br />Common schemes covered include paying for time not worked (inflated hours, unauthorized overtime, extra checks, unauthorized pay increases), leave manipulation (using or cashing out leave without proper balance reductions or outside policy), ghost employees, misusing restricted funds, and cybersecurity-driven fraud like email spoofing to redirect direct deposits. The training emphasizes verifying direct-deposit changes and using established processes (e.g., physical forms, identity verification, in-person confirmation).<br /><br />The module outlines how to design internal controls: management responsibility, segmentation of processes, and ensuring losses and responsible parties can be identified. Recommended payroll/business office detective controls include reviewing payroll and benefits for unusual fluctuations, checking personnel files for ghost employees, reviewing leave and overtime approvals, running error/duplicate reports (bank accounts, addresses), and scrutinizing journal entries. It stresses that tips are a primary detection method.<br /><br />If fraud is suspected or detected, the guidance is to avoid private restitution agreements, avoid acting as the investigator, document a timeline, protect original records, notify appropriate leadership and legal counsel, report losses to the State Auditor’s Office (SAO), and involve law enforcement when advised.<br /><br />Case studies illustrate failures and fixes: negative deductions enabled by excessive access; ASB cash misappropriation due to poor segregation and weak deposit/reconciliation oversight; a ghost employee paid for months after termination due to communication breakdowns; procurement card misuse from missing documentation controls; and an email spoofing direct-deposit diversion. The badge ends with knowledge checks and a final assessment requirement (75%+).

Keywords

internal controls

fraud management

payroll fraud

fraud triangle

behavioral red flags

ghost employees

leave manipulation

direct deposit change verification

segregation of duties

State Auditor’s Office reporting