INTHEBLACK April/May 2024 - Magazine - Page 26
F E AT U R E
“Unless an organisation has got their payroll to a point where anyone in the pay
office, or anyone who might have access to the payroll system, is above suspicion,
your governance and controls and your processes are not up to scratch. That
should be your number one priority.”
TRACY ANGWIN, AUSTRALIAN PAYROLL ASSOCIATION
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26 INTHEBLACK April/May 2024
PAYROLL FRAUD EXPLAINED
Payroll fraud is a broad term that covers
a range of deceptive activities that are
mainly committed by employees. It involves
illicit manipulation of a payroll system
or processes – directly or indirectly – for
financial gain.
“The practice can range from minor
infractions to large-scale schemes
costing companies millions of dollars,”
says Mick Symons, managing director
of Anti Corruption Consultants
Australia (ACCA). ACCA is a member
of the Association of Certified Fraud
Examiners and the Australian Institute
of Professional Investigators.
“Payroll fraud is a hidden danger in any
organisation,” Symons adds. “It is important
to be aware of how it can occur and how
to prevent it. This will ensure organisations
remain financially secure, ethical and free
from fraud.”
CEO of the Australian Payroll Association
Tracy Angwin says many businesses are
simply not aware that payroll fraud is
happening. “I call it a silent crime, because
if you are not looking for it, you will not
find it.”
“Unless an organisation has got their
payroll to a point where anyone in
the pay office, or anyone who might have
access to the payroll system, is above
suspicion, your governance and controls
and your processes are not up to scratch.
That should be your number one priority,”
Angwin adds.
FRAUD DETECTION
Payroll fraud is generally undertaken
by internal offenders, but it can also be
committed via cyber security breaches
by external hackers.
Research conducted in 2023 by payroll
services and workforce management software
provider Automatic Data Processing (ADP)
found that protecting payroll systems from
cyber security breaches is among the biggest
priorities for payroll senior leaders.
ADP surveyed more than 1463 business
leaders responsible for payroll to identify
the factors that will drive global payroll
in the next two to three years.
“Organisations are aware of the urgency
of putting the systems in place to protect
their data,” says Kylie Baullo, ADP’s
managing director for Australia and
New Zealand.
From an internal perspective, Angwin
says ghost employees are by far the most
common type of payroll fraud, especially
for employers with a large casual workforce
spread across multiple locations.
“Say you go into the payroll system
and change the bank details of a couple
of casuals to your own bank details, and
you pay them a couple of days here and
a couple of days there. The casual is
never going to figure that out from their
employment summary at the end of
the year. The manager who approves the
payroll is probably not going to pick that
up. That sort of activity is the most common
for payroll fraud, and it is so easy to find.
You only need to look at your processes
and audit trails.
“The problem with the audit trails is they
are often turned off. Anyone who wants
the audit trail turned off has probably got
other reasons for wanting that.
“Obviously, if you are seeing things like
multiple bank account changes before
you run a payroll, and they change again
afterwards, that is a red flag for fraud,”
Angwin says.
