Employee Fraud: False Invoicing, Forensic Focus, Deloitte New Zealand

Employee Fraud: False Invoicing

Forensic Focus — February 2015

False invoices have been used for many years by employees to misappropriate funds from their employers; and it remains one of the most common types of frauds committed by employees in New Zealand. Despite the fact that it is not a new fraud, false invoicing continues to cost New Zealand businesses thousands of dollars each year.

How do employees commonly use false invoices to perpetrate fraud?

Employees use false invoices to defraud their employers by either:

  • Creating an invoice for supposedly legitimate products or services that have never been delivered or carried out, then creating an invoice and submitting it for payment. The employee may work alone or they may work in collusion with a third party. Sometimes the latter occurs in what is known as a “pass-through” fraud — where an employee inserts their own intermediary company between a supplier of legitimate services and their employer. Payments are made for services but the employee’s intermediary company skims a percentage of the transactions.
  • Re-submitting a legitimate vendor’s invoice for payment but using a bank account under the employee’s control. To carry out this fraud, the employee usually has to gain access to the employer’s accounting software whereby they are able to change the vendor’s bank account to one under the employee’s control to receive the payment. To avoid detection the employee will then change the bank account number back to the vendor’s once the payment has been made and then pay the legitimate invoice again to the real supplier’s bank account.

Recent media coverage of employees using false invoices to defraud their employers include:

  • Jimmy Ming Miu, an IT Manager defrauded his employer, McKay Shipping, of more than $1 million over a 6 year period. Mr Miu raised false invoices for IT equipment from Avanti Systems and Avanti Systems Integration, companies that he had control of. The IT goods were never supplied, not required or hugely overpriced.
  • Hemant Kumar Maharaj and Suresh Din, who defrauded the former North Shore City council of more than $829,000 over 10 years. Mr Maharaj was employed by the council and he arranged for Mr Din to submit invoices to him for payment for road and berm maintenance that was never completed. The Council paid the invoices into a bank account controlled by Mr Din, who split the profits with Mr Maharaj.
  • Michael Swann and Kerry Harford defrauded the Otago District Health Board of almost $17 million over a six year period. Mr Swann was employed by the Otago DHB as an IT specialist. Through a company set up by Mr Harford, Sonnoford Solutions, Mr Swann invoiced his employer for IT-related services that were never provided.
  • Vicky Lee Kyle abused her position as an accounts payable clerk in Hastings by creating and submitting false invoices for payment into her bank account. Ms Kyle had access to her employer’s accounting software, whereby she changed the payment details to her own, once the false invoices had been approved for payment. Ms Kyle defrauded her employer of $660,000 over a 6 year period.
  • Colleen Margaret Gray, a 66 year old Principal of Mayfield Primary School in Auckland, defrauded the school of more than $30,000. Mrs Gray raised false invoices in the names of fictitious teachers and the payment was made to companies owned by her husband, Bruce Kenneth Gray.

How to spot a false invoice

False invoicing frauds are not particularly sophisticated but it is difficult to keep them going for a long period of time without detection. When an employee creates a false invoice (as opposed to re-submitting a legitimate invoice), many ‘red flags’ may be present, such as:

  • The company name listed on the invoice is not a registered company;
  • No physical address is listed (do not solely rely on email addresses);
  • The contact information listed on the invoice may not be legitimate. i.e. the PO Box number or telephone number might not actually exist;
  • Incorrect/invalid dates may be present, such as 31 February 2013 for example;
  • Invalid GST numbers or incorrectly formatted GST numbers;
  • The GST value on the invoice may be incorrectly calculated;
  • Often a very brief description is listed that is insufficient to adequately detail the goods or services being invoiced, such as “services as requested” or “supply goods as requested”;
  • Casual or sloppy grammar, spelling mistakes etc;
  • No tax invoice details;
  • No remittance details; and
  • The invoice is created using Microsoft Word.

It is important to emphasise this this list is not exhaustive, rather it represents the more common attributes of false invoices that were presented by employees in fraud cases that Deloitte has investigated. If 1 or 2 of these attributes alone are present, it may not necessarily mean that the invoice is false, however it would be prudent for the employer to make further enquiries into the legitimacy of the invoice before making payment (such as by checking if the company exists by phoning the contact telephone number listed, or by checking the validity of the GST number; or by requesting further documentation to support the goods or services being invoiced).

Avoid becoming a victim

The best method for an employer to protect themselves against an employee submitting a false invoice for their own financial benefit is to ensure that adequate controls are in place.

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Adequate controls, such as requiring a second person to authorise all changes to a vendor’s bank account, requiring adequate supporting documentation for all invoices, or reviewing invoices and making further enquiries if ‘red flags’ are present, will make it harder for the employee to submit false invoices or to alter the vendor’s bank account information. Having adequate controls in place will make it harder for an employee to commit false invoicing frauds against their employees. However, in the same way that you can only deter (and not completely stop) would-be burglars by having prevention mechanisms in place (such as an alarm system), an employee intent on committing fraud may will still find a way in despite having adequate controls in place.

If you would like to discuss false invoicing fraud, other employee frauds, or the controls to prevent employee frauds, please contact Barry Jordan.

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Add formulas and references

In this course:

Formulas help you extract useful information from your data. Add cell references and functions to calculate values that update automatically when you change your data.

Want more?

I have added an Over/under budget column to the worksheet to help us track our budget as the actual costs begin to come in.

But to make that column work, we need to add a formula.

In case you had not noticed, Excel has already added some formulas for us, down here, in the Total row.

Tables can be very useful when it comes to formulas.

But to really understand how they work, let’s try creating one on our own.

Select the first cell in the column. To let Excel know we are entering a formula, type an = sign.

Now, there are number of ways to write a formula.

We could type the values in each column with a — sign between them, and get the correct result.

But then what would happen if one of the numbers changed? We would have to rewrite the formula.

To solve that problem, we can use cell references.

Instead of typing the value of each cell, we simply type the cell addresses.

To help you keep track of cell references in the formula, Excel puts a colored highlight on the cell.

Press Enter and Excel calculates the formula and displays the result in the cell.

Now because we used cell references, we can change a value and Excel automatically updates the Total.

Keep in mind that even though the cell shows the result, the real content of the cell is still the formula.

If you wonder if a cell contains a formula, click the cell and look in the Formula Bar.

Also, we can use AutoFill.

Just click this little green handle in the cell and drag it down, and Excel automatically fills the formula to the other cells.

It even updates the cell references to point to the right cells.

Note that negative values are displayed in parentheses.

But for an even easier way to enter formulas, we can use functions.

A function does all the formula writing for you. As you saw earlier, you can add a function to the Total row by simply clicking this arrow.

If you select Sum, Excel adds the SUBTOTAL function.

But you can add a function to any cell you want. Select a cell. Then, go to the FORMULAS tab on the ribbon. Here, you have a whole library of functions.

Click AutoSum, click Sum, and the function is added to the cell.

Now, select the cells you want to add and press Enter.

Click More Functions to see all the functions available in Excel.

Up next, we’ll do more with formulas and functions.

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EMS Data Systems

Emergency Medical Services Section

Florida Department of HealthВ

4052 Bald Cypress Way Bin A-22В

Tallahassee, FL 32399В

Emergency Medical Services Tracking and Reporting System (EMSTARS) В

Prehospital Aggregate SystemВ

This system was implemented in 2002 and provides aggregated EMS agency response information. EMS agencies are required to complete a quarterly report of the volume and type of calls that were completed. Upon receipt of this report, EMS Section staff enter the information into a Structured Query Language (SQL) database. These data do not provide incident level specific information and cannot be used to assess the complete continuum of care. Agencies not currently reporting to EMSTARS utilize this system to report prehospital aggregate data to the department.

Emergency Medical Oversight Continuum of Care Data Warehouse В

The data warehouse currently hosts data from the EMSTARS patient care records that are linked with hospital discharge and emergency department data from the Agency for Health Care Administration (AHCA). A comprehensive data warehouse business strategy is under development to enhance this capability to ensure valid health information is accessible when and where it is needed to improve and protect Florida’s health and well-being.

Data Request and Use В

The department encourages the use of EMS data for the advancement of medical research. Additionally, EMSTARS data should be used for local, regional, state-level quality improvement efforts. Aggregated state-level reports and data request forms can be found at the department’s EMS Data Reports & Research webpage.

The Department of Health is dedicated to providing excellent customer service. For technical assistance or questions regarding the Florida EMS data, contact the EMS data staff at [email protected] You may also call 850-245-4440 or toll free at 1-800-226-1911 if you need to reach the section by phone.

For more information write to:

Florida Department of Health
Division of Emergency Preparedness and Community Support
Emergency Medical Services Section
4052 Bald Cypress Way, Bin A-22
Tallahassee, FL 32399-1738
Email: [email protected]
Phone: 850-245-4440
Fax: 850-488-2512

Under Florida law, e-mail addresses are public records. If you do not want your e-mail address released in response to a public records request, do not send electronic mail to this entity. Instead, contact this office by phone or in writing.

To view, print or edit some of the files on this page may require Adobe Acrobat‚ Use the link below to download a free version of Acrobat Reader

www.floridahealth.gov

What is the Freedom of Information Act?

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In brief

The Freedom of Information Act 2000 provides public access to information held by public authorities.

It does this in two ways:

  • public authorities are obliged to publish certain information about their activities; and
  • members of the public are entitled to request information from public authorities.

The Act covers any recorded information that is held by a public authority in England, Wales and Northern Ireland, and by UK-wide public authorities based in Scotland. Information held by Scottish public authorities is covered by Scotland’s own Freedom of Information (Scotland) Act 2002.

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Public authorities include government departments, local authorities, the NHS, state schools and police forces. However, the Act does not necessarily cover every organisation that receives public money. For example, it does not cover some charities that receive grants and certain private sector organisations that perform public functions.

Recorded information includes printed documents, computer files, letters, emails, photographs, and sound or video recordings.

The Act does not give people access to their own personal data (information about themselves) such as their health records or credit reference file. If a member of the public wants to see information that a public authority holds about them, they should make a data protection subject access request.

In more detail

What is the Freedom of Information Act for?

The government first published proposals for freedom of information in 1997. In the white paper Your Right to Know , the government explained that the aim was a more open government based on mutual trust.

«Openness is fundamental to the political health of a modern state. This White Paper marks a watershed in the relationship between the government and people of the United Kingdom. At last there is a government ready to trust the people with a legal right to information.»

Public authorities spend money collected from taxpayers, and make decisions that can significantly affect many people’s lives. Access to information helps the public make public authorities accountable for their actions and allows public debate to be better informed and more productive.

«Unnecessary secrecy in government leads to arrogance in governance and defective decision-making.» — Your Right to Know

What are the principles behind the Freedom of Information Act?

The main principle behind freedom of information legislation is that people have a right to know about the activities of public authorities, unless there is a good reason for them not to. This is sometimes described as a presumption or assumption in favour of disclosure. The Act is also sometimes described as purpose and applicant blind.

This means that:

  • everybody has a right to access official information. Disclosure of information should be the default – in other words, information should be kept private only when there is a good reason and it is permitted by the Act;
  • an applicant (requester) does not need to give you a reason for wanting the information. On the contrary, you must justify refusing them information;
  • you must treat all requests for information equally, except under some circumstances relating to vexatious requests and personal data (see When can we refuse a request? for details on these). The information someone can get under the Act should not be affected by who they are. You should treat all requesters equally, whether they are journalists, local residents, public authority employees, or foreign researchers; and
  • because you should treat all requesters equally, you should only disclose information under the Act if you would disclose it to anyone else who asked. In other words, you should consider any information you release under the Act as if it were being released to the world at large.

This does not prevent you voluntarily giving information to certain people outside the provisions of the Act.

Are we covered by the Freedom of Information Act?

The Act only covers public authorities. Schedule 1 of the Act contains a list of the bodies that are classed as public authorities in this context. Some of these bodies are listed by name, such as the Health and Safety Executive or the National Gallery. Others are listed by type, for example government departments, parish councils, or maintained schools. Executive agencies are classed as part of their parent government department; for example, the DVLA is covered by the Act because it is part of the Department for Transport. However, arm’s-length bodies are not considered part of the department sponsoring them, and they are listed individually in Part VI of Schedule 1.

Section 5 of the Act gives the Secretary of State the power to designate further bodies as public authorities. If in doubt, you can check the latest position at www.legislation.gov.uk.

Certain bodies are only covered for some of the information they hold, for example:

  • GPs, dentists and other health practitioners only have to provide information about their NHS work;
  • the BBC, Channel 4 and the Welsh channel S4C (the public service broadcasters) do not have to provide information about journalistic, literary or artistic activities; and
  • some bodies that have judicial functions do not have to provide information about these functions.

In addition to the bodies listed in the Act, with effect from 1 September 2013 the definition of a public authority now also covers companies which are wholly owned:

  • by the Crown;
  • by the wider public sector; or
  • by both the Crown and the wider public sector.

These terms are defined in more detail in the amended section 6 of FOIA.

For example, some local authorities have transferred responsibility for services (eg social housing) to a private company (sometimes known as an arm’s-length management organisation or ALMO), which is wholly owned by the local authority. This type of company counts as a public authority in its own right and needs to respond to requests for information. Where a company is wholly owned by a number of local authorities it is also now a public authority for the purposes of FOIA.

Individual MPs, assembly members or councillors are not covered by the Act.

For further information, read our more detailed guidance:

Further Reading

Public authorities under the Freedom of Information Act

When is information covered by the Freedom of Information Act?

The Act covers all recorded information held by a public authority. It is not limited to official documents and it covers, for example, drafts, emails, notes, recordings of telephone conversations and CCTV recordings. Nor is it limited to information you create, so it also covers, for example, letters you receive from members of the public, although there may be a good reason not to release them.

The Act includes some specific requirements to do with datasets. For these purposes, a dataset is collection of factual, raw data that you gather as part of providing services and delivering your functions as a public authority, and that you hold in electronic form. Your duties in relation to datasets are explained elsewhere in this Guide, where they are relevant.

Requests are sometimes made for less obvious sources of recorded information, such as the author and date of drafting, found in the properties of a document (sometimes called meta-data). This information is recorded so is covered by the Act and you must consider it for release in the normal way.

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Similarly, you should treat requests for recorded information about the handling of previous freedom of information requests (meta-requests) no differently from any other request for recorded information.

The Act does not cover information that is in someone’s head. If a member of the public asks for information, you only have to provide information you already have in recorded form. You do not have to create new information or find the answer to a question from staff who may happen to know it.

The Act covers information that is held on behalf of a public authority even if it is not held on the authority’s premises. For example, you may keep certain records in off-site storage, or you may send out certain types of work to be processed by a contractor. Similarly, although individual councillors are not public authorities in their own right, they do sometimes hold information about council business on behalf of their council.

Where you subcontract public services to an external company, that company may then hold information on your behalf, depending on the type of information and your contract with them. Some of the information held by the external company may be covered by the Act if you receive a freedom of information request. The company does not have to answer any requests for information it receives, but it would be good practice for them to forward the requests to you. The same applies where you receive services under a contract, for example, if you consult external solicitors.

The Act does not cover information you hold solely on behalf of another person, body or organisation. This means employees’ purely private information is not covered, even if it is on a work computer or email account; nor is information you store solely on behalf of a trade union, or an individual MP or councillor.

For further information, read our more detailed guidance:

ico.org.uk

Look up values in a list of data

Let’s say that you want to look up an employee’s phone extension by using their badge number, or the correct rate of a commission for a sales amount. You look up data to quickly and efficiently find specific data in a list and to automatically verify that you are using correct data. After you look up the data, you can perform calculations or display results with the values returned. There are several ways to look up values in a list of data and to display the results.

What do you want to do?

Look up values vertically in a list by using an exact match

To do this task, you can use the VLOOKUP function, or a combination of the INDEX and MATCH functions.

VLOOKUP examples

For more information, see VLOOKUP function.

INDEX and MATCH examples

In simple English it means:

=INDEX(I want the return value from C2:C10, that will MATCH(Kale, which is somewhere in the B2:B10 array, where the return value is the first value corresponding to Kale))

The formula looks for the first value in C2:C10 that corresponds to Kale (in B7) and returns the value in C7 ( 100), which is the first value that matches Kale.

Look up values vertically in a list by using an approximate match

To do this, use the VLOOKUP function.

Important: Make sure the values in the first row have been sorted in an ascending order.

In the above example, VLOOKUP looks for the first name of the student who has 6 tardies in the A2:B7 range. There is no entry for 6 tardies in the table, so VLOOKUP looks for the next highest match lower than 6, and finds the value 5, associated to the first name Dave, and thus returns Dave.

For more information, see VLOOKUP function.

Look up values vertically in a list of unknown size by using an exact match

To do this task, use the OFFSET and MATCH functions.

Note: Use this approach when your data is in an external data range that you refresh each day. You know the price is in column B, but you don’t know how many rows of data the server will return, and the first column isn’t sorted alphabetically.

C1 is the upper left cells of the range (also called the starting cell).

MATCH(«Oranges»,C2:C7,0) looks for Oranges in the C2:C7 range. You should not include the starting cell in the range.

1 is the number of columns to the right of the starting cell where the return value should be from. In our example, the return value is from column D, Sales.

Look up values horizontally in a list by using an exact match

To do this task, use the HLOOKUP function. See an example below:

HLOOKUP looks up the Sales column, and returns the value from row 5 in the specified range.

For more information, see HLOOKUP function.

Look up values horizontally in a list by using an approximate match

To do this task, use the HLOOKUP function.

Important: Make sure the values in the first row have been sorted in an ascending order.

In the above example, HLOOKUP looks for the value 11000 in row 3 in the specified range. It does not find 11000 and hence looks for the next largest value less than 1100 and returns 10543.

For more information, see HLOOKUP function.

Create a lookup formula with the Lookup Wizard (Excel 2007 only)

Note: The Lookup Wizard add-in was discontinued in Excel 2010. This functionality has been replaced by the function wizard and the available Lookup and reference functions (reference).

In Excel 2007, the Lookup Wizard creates the lookup formula based on a worksheet data that has row and column labels. The Lookup Wizard helps you find other values in a row when you know the value in one column, and vice versa. The Lookup Wizard uses INDEX and MATCH in the formulas that it creates.

Click a cell in the range.

On the Formulas tab, in the Solutions group, click Lookup.

If the Lookup command is not available, then you need to load the Lookup Wizard add-in program.

How to load the Lookup Wizard Add-in program

Click the Microsoft Office Button , click Excel Options, and then click the Add-ins category.

In the Manage box, click Excel Add-ins, and then click Go.

In the Add-Ins available dialog box, select the check box next to Lookup Wizard, and then click OK.

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