Department of Defense employees pleaded guilty to defrauding the federal government of more than $35,000 each for overtime that was falsely claimed. Their work environment was ideal for this type of fraud because overtime was consistently used when management determined that the work involved was essential to meet operational demands. Also, the employees knew their supervisor was too busy and failed to review timesheets for accuracy. The fraud was uncovered after management requested a timesheet audit because there were accusations that many discrepancies occurred between the hours employees worked and the hours reported on their timesheets.

The Auditors Review of the Timesheet/Payroll Process

The auditors reviewed a sample of timesheets for 10 biweekly pay periods and other documents associated with an employees pay. They also conducted interviews with supervisors and their staff, and those responsible for processing timesheets. The auditors identified several aspects of risk within the payroll/preparation of timesheet process.

They found:

1. Timesheets did not include an affirmation which refers to an employee validating that time and attendance data was true, correct, and accurate.

2. More than half of the timesheets sampled were missing the signature of an authorizing official.

3. Supervisors approved timesheets, but before sending them directly to those responsible for processing them, returned the timesheets to the employee, which provided the opportunity for the employee to fraudulently modify them.

4. In some instances, overtime was paid to employees that were not eligible to receive overtime and there was no documentation to show that overtime was requested by an employee or approved by a supervisor.

The auditors determined there was a lack of controls to protect the agency from fraudulent activity involving timesheets and overtime. Those involved in the timesheet fraud admitted they took advantage of the weak internal control system and the fact that those responsible for processing timesheets were not adequately trained. Disciplinary action was taken against the employees, including recouping the monies they fraudulently obtained.

Recommendations

If you are the auditors, what are your recommendations to correct the problems identified and help mitigate timesheet fraud?

Recommendations for Supervisors, Employees, and those responsible for processing timesheets.