Fraud in Transit

​Organizations need processes and monitoring to deter employees' numerous time-and-attendance fraud schemes.

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​The new inspector general (IG) of New York's Metropolitan Transportation Authority (MTA) has issued 30 backlogged reports on misconduct within the agency, according to the New York Daily News. The reports detail incidents in which MTA employees were disciplined for overtime abuse, conflicts of interest, and corruption since 2017.

The most glaring incidents included a railroad foreman who received $280,000 in pay when he wasn't working, an MTA police officer who was using his company car for a second job, and a subway maintenance employee who used sick leave to take a European honeymoon. The reports came out six weeks after IG Carolyn Pokorny took office.

Lessons Learned

It seems that the MTA, with the help of its IG, is achieving some success in uncovering time, attendance, and other forms of employee fraud. However, after reviewing the IG's annual report and recommendations covering the various cases in this news story, further measures may be needed to more systematically address widespread employee fraud. Here are three suggestions that might be applicable:

  • Increase the scope and frequency of audits and monitoring of time and attendance processes. Continuous monitoring, along with regular audits, can reveal risks from employee time theft, and the processes needed can be implemented using technology. A simple way to do this is having managers and supervisors run monitoring reports or even audits on random employees' time reporting, whether they are paper- or electronic-based.

    There also should be separate scrutiny of managers' and supervisors' behaviors to determine whether they are monitoring and approving employee time and attendance reporting appropriately. This scrutiny also can help uncover collusion between employees and managers.
    Further, the payroll department should run weekly reports to determine whether certain departments are consistently over budget for payroll, which may be caused by time and attendance fraud. Alternatively, this spending may be legitimate, but could point to the need for improvement, such as in how work is scheduled. Either way, monitoring and auditing can identify patterns and misinformation, and it may indicate that the time-tracking method currently in place is not the best option.
  • Integrate time and attendance with payroll functions. This can help reduce errors and fraud in employees' time reporting. When attendance and payroll functions are separate, human resources (HR) staff must re-enter information and move the data between the two programs, creating an opportunity for mistakes and fraud. Employees may collude or engage in nepotism. An HR employee may purposefully record fraudulent time information for himself or herself, HR colleagues, or other co-workers.

    By integrating the two systems, information from the time and attendance program moves to the payroll program automatically, reducing the risk of fraud. Of course, this approach's effectiveness will be enhanced by good communication of what is expected of employees and establishing methods to facilitate their compliance. Such methods include encouraging employees to enter data timely and automating that process.
  • Cross-check time and attendance. Verifying that employees were truly present when they say they were is key to helping reduce time-and-attendance fraud. Although there are many methods for such cross-checks, a biometric time clock may be best suited in organizations with a large and diverse workforce. Mobile timesheets and web timesheets include time stamps and make it easier for employees to enter their information. By connecting timesheet data to other apps and tools, such as user engagement metrics or biometric data on employees' physical attendance, auditors can verify whether employees were present and working when they say they were.

    This story also references the fact that the MTA recently introduced global positioning system (GPS) units to track the location of employees and their company vehicles. The MTA should expand the use of GPS units, which employees can easily carry while working in many varied situations.
Art Stewart
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About the Author



Art StewartArt Stewart<p>​Art Stewart is an independent management consultant with more than 35 years of experience in internal audit, financial management, performance measurement, governance, and strategic policy planning.​​​</p>


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