Friday, September 26, 2008

Risk factor for fraud: employees (like SEDC's Carolyn Smith) who never take a vacation

Why didn't Carolyn Smith take a day off? Maybe she was afraid fraud would be uncovered.

Why No Vacation is a Risk Factor
September 11, 2008

...The [SEDC] audit states that Smith claimed not to have taken a day off for sick leave or vacation because she enjoys her position.

The audit then says this:

A risk factor for fraud in any organization is present when key employees work for many years without taking time off.

I talked to a source of mine who is familiar with these kinds of issues and asked the source why this is a fraud risk.

The source said one reason why certain employees don't go on vacation is because they're afraid that someone will step in their place and "their whole scam will unravel."

"It is very common in fraud situations that you will find people will either not go on vacation or not relinquish their duties to someone else," the source said.

The audit did find fraud in SEDC's hidden system of bonuses; Smith continues to maintain that the documentation her agency provided was sufficient.

Update: I heard back directly from Denise Callahan, the Macias Consulting Group partner that led the audit. This is what she had to say:

A risk factor becomes present when employees do not take vacations because there could be a desire to hide or conceal inappropriate activity. In fact, fraud tends to be uncovered when key employees had to be on leave/vacation and were not able to continue to conceal the activity.


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