Fraud

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.

With International Fraud Awareness Week kicking off on Nov. 14, now is a great time to look back at how the COVID-19 pandemic affected the level of fraud in the workplace and understand the roadblocks to preventing and detecting fraud in a post-pandemic work environment.

Fraud trends during the pandemic

To accommodate the effects of the pandemic, organizations had to make changes to their work environments, including:

Looking for a way to improve your game when it comes to cash receipting internal controls? Add the double count to your arsenal. The double count is as easy as the name suggestions: money should never transfer from one employee to another without being counted and documented first.

Though it's simple, the double count is a necessary addition to your internal control processes for minimizing the risk of loss . Let's walk through a few scenarios to illustrate the concept and its importance.

Scenario 1: Fundraising in a school

The State Auditor's Office received 410 reports of suspected or known loss in 2020. While some of these reports were from citizens and whistleblowers, more than 80 percent of reports came from management at state agencies and local governments.

That's because state law (RCW 43.09.185) requires all state agencies and local governments to immediately notify SAO of any known or suspected loss of public resources or other illegal activity, including cyberattacks and other activities that potentially affect financial records or systems.

Do you ever wonder if a key control can be a person? Maybe you have a long-standing employee that everyone goes to for answers, or perhaps an employee that really knows and understands a certain process. People are most certainly an important part of the control system, and governments benefit from these valuable employees that contribute so much.

OLYMPIA – Emergency federal unemployment programs launched early in the COVID-19 pandemic included provisions that opened state unemployment benefits to fraud, the Office of the Washington State Auditor found in three audits released today.

While Washington was not alone in being targeted, the state Employment Security Department continues to struggle in answering customer questions, investigating suspected fraud and retrieving important data from its systems, the audits found.

This presentation tells the story of Washington's Unemployment Insurance program during the COVID-19 pandemic in 2020, from the first American coronavirus patient diagnosed January 21 through the end of the year.

OLYMPIA – An audit released today provides the first, high-level accounting of some of the circumstances surrounding the major fraud scheme that targeted Washington state's unemployment benefits in the spring.

As part of its annual audit of the state's financial statements, the Office of the Washington State Auditor found that the Employment Security Department (ESD) did not have adequate internal controls to prevent the fraud. The Department also reported inaccurate fraud and recovery numbers for the state's financial statements.

Consider this recent case study. A smaller local government had a limited number of staff working in its finance department. The finance director had broad access and authority over many of the agency's financial operations, including wire transfers. As such, someone else reconciled the bank statement each month. A key element to the agency's control structure was a simultaneous review of the bank activity itself, looking for fraud red flags such as odd, unusual or unexpected activity or vendors.