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

Video Transcription

Video Summary

Maro Cho, Director of Finance for Summit Public Schools, presents WASBO Payroll 310 Certification Badge 6 on internal controls and fraud management. The session explains why internal controls matter, common payroll-related fraud schemes, how fraud is detected, and what to do when fraud is suspected or discovered.<br /><br />The training introduces the “fraud triangle” (pressure, opportunity, rationalization) and notes that fraudsters often look like typical employees. Citing the ACFE 2023 report, it highlights that tips are the leading detection method (42%), with many coming from employees via email or web reporting. It reviews behavioral red flags (e.g., living beyond means, control issues, refusing leave), emphasizing these do not prove fraud.<br /><br />Common payroll schemes covered include time not worked, unauthorized pay increases, leave abuse, ghost employees, misappropriation of funds, and email spoofing of direct-deposit changes. Key internal controls include segregation of duties, supervisor approval of timesheets, regular review of payroll/benefit fluctuations, reconciliations to bank activity, monitoring journal entries, and running exception reports (duplicate accounts/addresses).<br /><br />If fraud occurs, participants are instructed not to investigate personally or make private restitution deals. Instead, document a timeline, secure original records, notify leadership and legal counsel, and report losses to the State Auditor’s Office (SAO), following SAO guidance (including police reporting when directed). Case studies illustrate failures and preventive controls.

Keywords

internal controls

payroll fraud

fraud triangle

fraud detection tips

segregation of duties

ghost employees

direct deposit email spoofing

State Auditor’s Office (SAO) reporting