In the latest episode, an organization’s chief audit executive investigates a suspicious tuition reimbursement during the pandemic, uncovering a web of deceit involving an employee. Listen to “School Of Fraud.”
IIA members can access bonus content in the form of lessons learned by reading the full Fraud article.
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Hello, I'm Grant Wallstrom, contributing editor to internal auditor magazines, fraud department and senior manager of fraud, forensics and investigations at 80 T in Boca Raton, FL. I'm pleased to introduce this episode of fraud on the All Things Internal Audit Podcast, which provides fictionalized accounts of fraud based on actual.
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Events.
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All.
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Things internal audit fraud, school of fraud, Part 1, a walk interrupted Robert Shaw, CAE for Northern Micro strategy was enjoying a brisk fall day when his phone buzzed on the line. Was an employee with an expensive and troubling.
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Issue she'd been asked by human resources to repay an $11,000 tuition reimbursement overpayment. The overpayment occurred during the height of the COVID-19 pandemic, despite the employees efforts to resolve the mistake. Back then, the issue had resurfaced.
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Shaw's mind started racing with questions. Was this an isolated incident, or had other employees also been over reimbursed for tuition, and if so, how long has this been going on?
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Part 2 cash for classes, Northern Micro strategies tuition reimbursement program offered employees up to $4500 a year to cover tuition and books for courses that benefited the company. The process seemed simple. Employees fill out an application with their course.
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Details.
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Get their manager's approval and send it off to HR after completing the semester they just need.
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Provide proof transcripts and receipts and the reimbursement is tacked onto their next paycheck. But as Shaw would soon discover, a few cracks in the system were ripe for exploitation.
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Scholl's concern stemmed from an earlier incident. In 2018, an employee from the Dallas office had embezzled $40,000 through the same tuition reimbursement.
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Around back then, the program had glaring loopholes. Employees didn't even need to prove they were enrolled in an accredited college or provide supporting documentation. This design flaw had allowed one creative yet ethically impaired employee to create a how to cheat the system manual.
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Which he sold to Co workers for a 10% cut of their fraudulent reimbursements. This led to stricter controls, but it seemed those controls had slipped during the pandemic.
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Determined to get to the bottom of the problem, Shaw's first call was to the HR manager. The manager explained that the overpayment issue had come to light when the benefits administrator noticed multiple employees had been overpaid during the early months of the pandemic. The overpayments ranged from $11,000 to $30,000.
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Part 3A. Closer look cracks in the system. Scholl knew he needed to act fast to identify all the errors and stop any further losses. He decided to team up with the benefits administrator, Katie Blue, to walk through the department's disbursement.
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Process, which included more than just tuition reimbursements. The department also processed personal leave payouts and relocation reimbursements.
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Before the pandemic, blue would personally review the spreadsheets for accuracy and confirm eligibility with HR before forwarding them to payroll. But during the pandemic while working remotely, her team began sending spreadsheets directly to HR. Without her review, the human Resources information system.
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Hris manager would verify illegibility and pass the information to the payroll department. Once back in the.
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This blue began reviewing the spreadsheets again and noticed her team was making mistakes. She decided to audit the department and found that tuition overpayments had been happening since the start of the pandemic. She asked the payroll department for monthly disbursement reports and at Scholl's request, extended the review back to 2020.
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What she found was alarming.
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One name appeared repeatedly on the disbursement reports Stephanie Cruz, the HRIS manager. Cruz had received over $35,000 in tuition reimbursement in 2023 alone, far exceeding the company's annual limit, shall asked.
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Food to review all the original payment requests and disbursement reports.
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What they found was shocking.
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Cruz's name was never on the original spreadsheets. Scholl's suspicions grew, and after consulting with the human resources vice president, they decided to investigate further. A review of the HR files verified that Cruz had never applied for tuition reimbursement.
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Hard 4.
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The confession after Shaw and the HR vice president shared the supporting documentation with the Director of corporate Security. The team interviewed Cruz.
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It didn't take long for her to confess to adding her name and falsifying reimbursement requests before sending the spreadsheets to payroll, citing financial pressures caused by her spouse losing his job during the pandemic. She admitted that she had gotten the idea from the infamous tuition reimbursement manual that had circulated years earlier.
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Cruz's actions led to her immediate termination, and the company notified the police after completing the investigation. Northern Micro strategy overhauled its tuition reimbursement program. It implemented new internal controls, including appropriate review and sign offs within the benefits.
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Department. Moreover, the company modernized the process requiring disbursement requests to be sent via e-mail as read only documents to payroll so employees can't tamper with them. Limit controls were put in place so that no employee can exceed the policies annual maximum reimbursement.
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The company has begun monthly reviews to catch any discrepancies early on.
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In the end, what started as a single overpayment unraveled a much larger issue within the companies disbursement process. Thanks to Shaw's diligence and the team's swift action, Northern MicroStrategy was able to plug the holes in its system before more damage could be done.
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This has been the all things internal audit fraud podcast. Fictionalized accounts based on actual events brought to you by the Institute of Internal Auditors.
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IA members can access the full story in this month's issue of Internal Auditor magazine, including bonus materials on lessons learned to read more, visit internalauditor.theia.org for more fraud related resources.
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Including guidance and thought leadership from the IAA and the ACFS.
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Visit thecia.org/A CFE fraud.
