THE PAYROLL FACTORY 610-644-4569 thepayrollfactory

1. THE PAYROLL FACTORY610-644-4569thepayrollfactory.com thepayrollfactory.com 610-644-4569

2. The Payroll FactoryService is the Difference Presents Payroll Fraud Information & Discussion thepayrollfactory.com 610-644-4569

3. The Payroll Factory Service is the Difference What is the problem? • What is the problem? • Dishonest Employees • Financial Pressures on the employee (rise of credit and other debt) • Layoffs – commit fraud knowing they are leaving the company • Kick backs from other employees • Stealing Time thepayrollfactory.com 610-644-4569

4. Demographics Men 59.1% Women 40.9 % High School Degree 34 % Some College 21 % Bachelor’s Degree 34 % Postgraduate Degree 11 % Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research Date: 9.18.2012 thepayrollfactory.com 610-644-4569

5. According to the Association of Certified Fraud Examiners, payroll fraud the number one source of accounting fraud and employee theft • Payroll Fraud happens in 27 percent of all businesses • Payroll fraud occurs nearly twice as often (14.2 percent) in small organizations with less than 100 employees than in large ones (7.6 percent). • The average instance of payroll fraud lasts about 36 months. That’s three years of paying ghost employees or overpaying existing ones. In Delaware, a School District Finance Director paid himself an extra $150,000 over eight years. He also underpaid several school administrators a combined $50,000 in one school year. thepayrollfactory.com 610-644-4569

6. Other Employee Theft Statistics • Percent of total thefts committed by a manager 37.1 % • Percent of total thefts by an employee who had ideas stolen at work 29 % • Average time office fraud lasts before detected 2 years • Retail employees arrested for workplace theft 1 in 30 Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research Date: 9.18.2012 thepayrollfactory.com 610-644-4569

7. The Payroll Factory Service is the Difference How big is the problem? Employee Theft Statistics Data Amount stolen annually from U.S. businesses by employees $50,000,000,000 Percent of annual revenues lost to theft or fraud 7 % Percent of employees who have stolen at least once from their employer 75 % Percent of employees who have stolen at least twice from their employer 37.5 % Percent of all business bankruptcies caused by employee theft 33 % Source: Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research Date: 9.18.2012 thepayrollfactory.com 610-644-4569

8. Loss by Number of Employees Loss by Type of Organization Victim Number Pct. cases Pct. cases Median loss Median loss The Payroll Factory Service is the Difference 1–99 Government agency 36.0 17.6 $190,000 $100,000 Publicly traded company 100–999 20.3 31.7 $200,000 $179,000 1,000–9,999 Privately held company 24.8 36.8 $210,000 $120,000 Not-for-profit organization 10,000+ 18.9 13.9 $150,000 $100,000 The Victims Source: 2006 Association of Certified Fraud Examiners Report to the Nation on Occupational Fraud & Abuse thepayrollfactory.com 610-644-4569

9. The Payroll Factory Service is the Difference Ways to Cheat • Ghost employees • Someone on the payroll who does not actually work for the victim company • Falsified Hours and Salary • Buddy Punching • Online RIO Calculator available • Altering the Payee Name on a check • Withholding Tax Schemes • Commission Schemes • False Workers Compensation Claims Paying a Nonexistent Employee Can Be Expensive Source: Occupational Fraud And Abuse,by Joseph T Wells,2002 thepayrollfactory.com 610-644-4569

10. Vast majority of incidents of employee fraud goes undetected due to: • No employee screening • No internal audit control/procedures • No monthly reconciliation of accounts • No separation of duties of employees • Bad habits by Owners/Management • Emotional Issues thepayrollfactory.com 610-644-4569

11. The Payroll Factory Service is the Difference • Detection of Fraud • Tip from employee 26.3 % • Accidental discovery 18.8 % • Internal audit 18.8 % • Internal controls 15.4 % • External audit 11.8 % • Tip from customer 8.8 % • Anonymous tip 6.2 % • Tip from vendor 5.1 % • Notification from law enforcement 1.7 % • Source: Association of Certified Fraud Examiners, Easy Small Business HR, Institute for Corporate Productivity, Jack L. Hayes International, Inc.Research • Date: 9.18.2012 thepayrollfactory.com 610-644-4569

12. The Payroll Factory Service is the Difference Reducing and Preventing Fraud • Owners Involvement • Select the Right Employee - Verify Past Employment - Criminal Conviction Checks - Drug Screening - Reference Checks - Have Employee Bonded • Perform Audits • Expense Reports • Payroll • Sales • Cash • Suspense Accounts • Job Rotation and Separation of Duties • Thorough Internal Control • Retain Outside Payroll Fraud Consultant • Allow Payroll Provider to Control Tax Monies thepayrollfactory.com 610-644-4569

13. Behavioral Red Flags • In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct. • Living beyond means 36% • Financial difficulties 27% • Unusually close association with vendors or customers 19% • Excessive control issues 18% thepayrollfactory.com 610-644-4569

14. The Payroll Factory Service is the Difference Technology • State of the Art Time Clocks • Biometric Hand Scanner • Web-based Systems • Automating Time Systems • Time Management thepayrollfactory.com 610-644-4569

15. Thank You for Attending Today’s Seminar If you have any further questions about Payroll Fraud Please contact The Payroll Factory 610-644-4569 www.thepayrollfactory.com thepayrollfactory.com 610-644-4569