Fraud deterrence programs never take a vacation, but your employees most definitely should.
Requiring employees to take regular vacations is a key anti-fraud control in an organization’s comprehensive fraud deterrence program. In its 2014 Report to the Nations, the Association of Certified Fraud Examiners (ACFE) notes that a mandatory vacation policy reduces an organization’s median dollar loss to fraud by 33.3 percent and cuts the median length of time a fraud occurs by 40 percent.
“Fraudsters work very hard to conceal their fraud,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley. “It requires a great deal of time and attention on a consistent basis to maintain the cover-up. Very often, an employee’s illicit activities are uncovered only when he or she is on vacation or out sick.”
In fact, it is the very act of maintaining the cover-up that makes these employees seem like the most loyal, dedicated, hard-working employees on the payroll.
“They never miss a day of work,” said Anderson, a Certified Fraud Examiner and an ACFE member. “They never take vacation. They’re often the first ones at the office in the morning and the last ones to leave at night. They work evenings, weekends and holidays. They even come to work when they are sick. From all outward appearances, they are an owner or manager’s dream employee. What they really are doing is working hard to hide the fraud.”
Two recent fraud cases illustrate how a mandatory vacation policy can separate dream employees from fraudsters.
In one case, an employee created a phony service vendor with a phony address. The employee then produced phony invoices for non-existent services that the company paid. At work, the employee intercepted the check before it was mailed and then deposited it in a bank account set up by the employee. The fraudulent activity was discovered when the employee took a vacation day on the day a check was mailed to the phony vendor. When the envelope was returned as undeliverable, a manager tried to contact the vendor and discovered that not only the address, but also the phone number was phony. A fraud investigation ensued, and the employee was caught.
Another case involved a manager who was engaged in a skimming scheme — intercepting and diverting cash payments before they were entered into the company’s accounting system. The manager went on vacation, forgetting that he had left incriminating evidence in his desk drawer. The manager filling in for him found the incriminating evidence and turned it over to senior management. In this case, Anderson was engaged to perform a comprehensive fraud investigation and found that hundreds of thousands of dollars had been diverted by the fraudster.
“Forensic accountants love vacations,” said Anderson, who recommends every organization enact and maintain a comprehensive fraud deterrence program created by an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. “All sorts of fraudulent activities can surface during an employee’s absence.”
Anderson said most anti-fraud experts recommend employees be required to take at least one full week off from work and that their work activities be covered by someone else while they are gone. This simple step prevents an employee from covering their tracks, he said.
So do your employees — and yourself — a favor and enact a mandatory vacation policy. They’ll return to work more relaxed, and you can relax a bit as well because you will have instituted the most pleasant of anti-fraud controls.
Over the next weeks, Anderson will continue to share results from ACFE’s 2014 Report to the Nations, which is drawn from a global survey conducted biennially to study the costs, schemes, perpetrators and victims of fraud. The Association of Certified Fraud Examiners is the world largest anti-fraud organization, dedicated to fighting fraud through its more than 70,000 members in more than 150 countries worldwide.
If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at firstname.lastname@example.org.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.