The National Post reports that the City of Hamilton has fired 29 city road workers who allegedly ran personal errands when they should have been patching potholes. City work crews were secretly followed by private investigators armed with video cameras and access to GPS tracking devices on the City-owned work trucks driven by the employees. The city's investigation is continuing, and Hamilton police officials have been apprised of the situation.
Pretending to fill potholes or exaggerating the time spent filling potholes may not seem like such big a deal, but it is. Public works projects are essential to a city's upkeep and come with a high price tag. The New York City Department of Transportation, for example, keeps a running tally of the potholes its workers fill, which sometimes tops 5,000 per day, and the cost of a temporary repair can range from US $3 to $1,500 per pothole.
An employee commits fraud against his or her employer by accepting pay for work that he or she has not performed. This type of fraud, known as time theft, is costly to organizations and is not always easy to detect. Time theft includes falsifying time card/clock records, taking excessive work breaks, and using work computers for personal reasons (one of the most common forms of work time theft). Taking excessive employee personal time, including too much socializing, making personal calls, and doing personal business or errands outside of scheduled work breaks, also constitutes time theft. In the city of Hamilton case, the workers are accused of spending the day in coffee shops, bars, at their homes, and running personal errands.
How can internal auditors help prevent and detect time theft in the workplace? As part of a fraud risk assessment, audit plan, or audit engagement cycle, auditors should ask several questions on a regular basis:
Does the organization have a business/operational plan that clearly specifies work and performance expectations for critical — if not all — jobs performed by employees? These plans and expectations are essential to effectively and efficiently managing the workforce and to establishing clear direction to supervisors and employees (e.g., how many potholes should be filled in a work day and by what standard of quality). Also, performance monitoring standards and processes should be in place (e.g., production targets, camera surveillance, GPS tracking, and attestations on the work performed). However, in a unionized work environment, consultation or negotiation may be required.
Are necessary workforce policies in place to set and reinforce expected behaviors for supervisors and employees? This should include the implementation of a zero-tolerance theft policy that addresses time theft and clearly articulates examples of what constitutes time theft relevant to the organization's mandate and business lines. Where an internal audit function exists, ensure there is clarity in its mandate to detect and report suspected fraud activities.
Does the organization use an attendance system that allows supervisors to monitor when employees check in and out for the workday? Using time and attendance software allows for more accurate monitoring of employee check-in and checkout times as well as integration of punch clock hardware. A biometric time and attendance system or devices such as fingerprint and retinal scanners allow employees to clock in without the use of time cards and help prevent the occurrence of time card fraud and "buddy punching" (i.e., when one employee clocks in for an absent employee). In cases where work is performed in various locations, use of a mobile (e.g., phone or RFID) work completion monitoring system can help detect time theft.
Is there adequate monitoring and follow-up? Regular reports that permit comparison of time and attendance records with payroll are one of the first potential indicators of time theft fraud. Supervisors likely are in the best position to determine whether an employee's work history should be considered suspicious. These same reports also should periodically be provided to senior management and the organization's auditors for review.