[Webinar] Fraud in Accounts Payable

Fraud and Other Shenanigans in

Accounts Payable

Mary Schaeffer

Publisher & Editorial Director AP Now

Author Fraud in Accounts Payable: How to

Prevent It + 15 other business books

25 Ways Crooks Steal Your Organization’s Money and

How You Can Stop Them

Agenda

Introduction

Invoice Fraud

Check Fraud

e-Fraud

P-card Fraud

T&E Fraud

Closing Thoughts

Mary S. Schaeffer 2

Introduction

The honest mistake issue

It happens at every organization

Fraud comes in two flavors

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The Good, Bad & Ugly

The Good news: You can deter

The Bad news: Not a one-time fix

The Ugly news: Fraudsters smart and sophisticated

Deter, prevent, detect

Mary S. Schaeffer 4

Invoice Fraud

Mary S. Schaeffer 5

#1 Phony Invoices

Yellow pages ads, copier toner, help-wanted

A word about billing notices

Items that skirt the law Look like invoices (really)

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#2 Inflated Prices

Vendors knowingly charge higher prices than agreed to

Difficult to prove

Solution: 1) Complete Pos 2) Line item matching – automation a big

help here Identify vendors

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#3 Unauthorized Charges

Vendor charges for freight etc. that was supposed to be included Difficult to prove

Solution:

1) Complete Pos 2) Line item matching – automation a big

help here Identify vendors

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#4 Duplicate Invoices

Invoices submitted a second time with the intent of getting the customer to pay twice

Solution Invoice number control

Check for duplicate payment amounts

Rely on approver

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#5 Suppress Credits

Vendor statements with credits suppressed

Solution:

1) Use best practices so credits not created

2) Request statements and follow up on a timely basis

3) Hire an audit firm

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#6 Checks Intended for Others How:

1) The Master Vendor File Scam

2) The Return to Requisitioner Scam

3) Honest mistake

Solutions

1) Good controls on MVF

2) Reports on changes

3) Don’t return checks to requistioners

#7 The Credit Hold Scam

The threat of putting the organization on credit hold unless

an invoice is paid NOW

Solution:

1) Don’t over react

2) Double check before blindly issuing the payment

3) If payment is made, close the PO and extinguish the

receiving docs

Check Fraud

#8 Phony Checks: Your Bank Info

Physical

Electronic; Internet orders

Solution

Positive pay for physical checks

Daily reconciliations of bank accounts

Separate account for refund checks

ACH blocks, filters

#9 Same Check; multiple copies

Mostly a payroll problem

Solution:

Positive pay

Better Solution:

Payee name positive pay

Best Solution:

No checks – all on direct deposit

#10 Stolen Checks: Payee

Name Changed

Example of how crooks are getting smarter

Solution:

Payee name positive pay

Direct deposit

Electronic Fraud

#11: Positive Pay Rejects

Resubmitted as ACH debits

Solution:

1) ACH blocks, filters

2) Daily bank reconciliations

3) of course, positive pay

#12: Unauthorized ACH

Transactions

Can be debit or credit

Several variations

Solutions

ACH blocks, filters

Daily bank recs

Separate computer for online banking

#13: Corporate Account Takeovers

How they work

Solutions Separate computer

Careful with attachments

Careful clicking on links

Careful even with legitimate looking emails

Better updating of contact info

#14: Ridiculous e-mails

The ones that scream scam

Solutions

Obviously, don’t respond

DO NOT CLICK ON ANY LINK IN THEM – just to see

#15: Serious Looking Emails

Examples

Includes NACHA, FBI, Feds etc.

Your ACH payment has been returned

Looks like it came from your bank

Solutions

Keep contact info updated – and verify separately

Don’t click on anything!

Separate computer

#16: Change of Bank Account Request

Variation on the change of Remit-To address request

Solutions

Verify separately

Get contact info when setting up master vendor file

Keep contact info updated

P-card Fraud

#17: Unauthorized Spend

Could be for personal use

Could be for items not authorized

Solutions:

Guidelines - detailed

Cardholder agreement

Manager review

#18: Charges just under the Limit

Trying to get around authorization limits

Trying to get around other restrictions

Solution

Detailed policy

Run reports identifying such charges

Talk with purchaser and/or sup

#19 Spending by Terminated Employee

100% preventable!

Solution:

1) Get card back

2) Immediate notification by HR

3) Cancel card at bank ASAP

T&E Shenanigans

20: Outlandish Spending

$800 leather skirt

$300 bottle of wine

$50 steak etc.

Solutions:

1) Detailed policy setting guidelines

2) Make managers responsible

3) Warnings

#21: Adding a Gift Card

Newest T&E fraud

Solutions:

1) Detailed receipt

2) Refuse to pay

3) Level 3 data – if T&E combined on p-card

#22: Going the Extra Mile

Submitting extra miles for reimbursement

Solutions:

1) reasonableness

2) Mapquest etc. to estimate

3) Feature in newest T&E software

4) Make managers responsible

#23 Double Dipping Submitting an expense twice

Same receipt

T&E, invoice, p-cards

Solutions

(not easy) – same amount on different reports

The 14-month search

Duplicate payment audit – might find

Manager review

Question items paid out of the norm

#24: Personal Guests

Client or significant other?

IRS Guidelines

Solution - partial

1) Detailed receipts

2) Manager’s oversight

#25: Employees’ Eat out on

Employer’s Dime

How? Lower level employee submits the bill

Solution

Strict guidelines Higher level employee submits

No one approves a function they attended

Automated T&E

Closing Thoughts

Crooks creative

Stay on top of the issue

Detailed policy, strong internal controls, appropriate segregation of duties and automation will help prevent and detect many frauds.

Thank you/Questions

Questions always welcome.

To share your thoughts and insights

Mary Schaeffer

marys@ap-now.com

302 836 0540

Sign up for our free weekly ezine at

www.ap-now.com/ezinesignup.html

About Mary Schaeffer

Mary Schaeffer is a nationally recognized accounts payable expert. Following a career in finance she turned to writing and consulting. For the last 15 years she has been researching and writing newsletters for the accounts payable profession. Currently she is the Editorial Director & Publisher of Accounts Payable Now & Tomorrow, (www.ap-now.com) a fee-based newsletter published by CRYSTALLUS, Inc.

She also handles most of the firms consulting assignments (focused primarily on AP issues) often working with other well-regarded professionals. Her blog, at http://ap-now.com/blog/ is read by over 15,000 professionals each month.

Ms. Schaeffer is the author of over 15 business books including The CFO and Controllers’ Guide to Accounts Payable and the recently published Fraud in Accounts Payable: How to Prevent It. John Wiley & Sons is the publisher of most of her books.

She also is a regular contributor to the AICPA’s Corporate Finance Insider.

Ms. Schaeffer has a BS in Math from York College (CUNY) and a MBA in Finance from New York University.

She can be reached at marys@ap-now.com

“75% of enterprises use a fully manual indexing and approval process.” – Aberdeen Group

It’s time to Let Go and Gain Control. Automate your Accounts Payable.

Visit http://www.anybill.com/ today!

[Webinar] Fraud in Accounts Payable

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