When your government becomes aware of a known or suspected loss of public funds, state law requires that you immediately report it to the State Auditor's Office. The most effective way to report is through the “How to Report a Concern” page on SAO's website.
Do you remember the Nigerian prince scheme—that long-running internet fraud where the bad actor drains your bank account after obtaining your information? Fraudsters made $703,000 in 2018 alone on that one. While some fraudsters are still working that old scam, others have moved on to impersonating your employees and vendors to redirect Automated Clearing House (ACH) payments meant for payroll direct deposits or vendor payments. In fact, Washington governments reported $4.7 million lost to these schemes in 2020 and 2021.
Wire transfers move money from one bank account to another. They are a fast way to send money and, if a fraudster intervenes, a fast way to lose it. Wire transfer fraud has dramatically increased in recent years, and more local governments are becoming victims of these scams.
Brandi Pritchard, SAO's Assistant Director of Local Audit and Special Investigations, receiving the 2022 Hubbard Award at the 33rd Annual ACFE Global Fraud Conference in Nashville.
The City of Tenino lost $280,309 in public funds after an employee sent the money out of state using a common electronic payment method, according to a fraud report released today by the Office of the Washington State Auditor (SAO).
A former state Employment Security Department (ESD) employee misappropriated at least $315,282 in 2020, according to a fraud report released today by the Office of the Washington State Auditor. The investigation also identified $121,503 in questionable unemployment benefit payments associated with the same employee.
When frauds happen, people are often left in disbelief that someone they knew would choose to deceive and harm their organizations. We've all heard stories of the “trusted employee” who proved to be anything but trustworthy. Outside observers often have questions like “how could this have happened?” or “shouldn't someone have noticed?” Answers to these questions usually require a deeper understanding of the “human side” of fraud.
Local governments are moving away from traditional paper checks to more efficient and lower-cost digital payments, such as direct deposit, automated clearing house (ACH) payments, electronic funds transfers (EFT) and wire payments. And the benefits are clear: You can pay a variety of vendors seamlessly, process employee payroll faster, and easily transfer funds between multiple bank accounts.
But alongside the benefits, beware: Digital payments also create new opportunities for employees to conceal and personally benefit from these payments.
The COVID-19 pandemic has likely forever changed how we purchase goods and services—at home and at work. E-commerce and contactless payment options have become the norm, and many governments have transitioned to using credit cards for the majority of purchases and for receiving payments. But as more online transactions occur, fraudsters also have more opportunities to steal credit card information. And judging from loss reports to the State Auditor's Office, the fraudsters are finding success in their schemes.
Employee fraud is on the rise in government, yet it often comes as a shock to those charged with oversight of a government when it happens in their own agencies. It shouldn't. Elected officials and appointed boards have a duty to understand their agency's operations. They also have a key role to play when it comes to fighting fraud.