AuditNet®
CAATT Tales
Running for Fraud
By Don Sparks, CIA, CISA, ARM
Audimation Services, Inc.
Experts in Data Analysis
Volume 1 Issue 7
I read an article in the newspaper the other day
that reminded me of a similar scheme I encountered before and it just
shows you that what is considered old can sometimes be viewed as
something new.
“Marathon of Lies"
A 55 year old woman was claiming workers
compensation benefits for a lower back injury that made her able to
handle only light duty work at her postal job. During the period of her
injury of almost 2 years, she competed in over 80 athletic events
including 5k races, 10k races, triathlons, and marathons including the
Boston Marathon. She stated that she received the injury while helping
at an annual letter carriers food drive. An investigator hired by her
employer was able to capture her in photos and on film during several
events demonstrating that she was able to swim, bicycle and run in very
grueling endurance events.
She now faces up to 5 years in prison for false statements and 10 years
in prison for health-care fraud.
“Running Business?”
A few years ago, I worked at a company that was a co-sponsor of a large
city annual marathon. Our HR department was concerned that worker
absences increased in the months before the race and continued for a
couple of weeks after. HR was aware that internal auditing had auditors
that were experienced users of data analysis software and asked internal
audit to come up with a way to see if there was a correlation between
the race participants and employee absences.
This was not all that difficult. As a co-sponsor of the race our company had access to the race registration information. Our analysis revealed numerous employees that were taking the day off for a long training run as well as the next day as a “recovery” day. The most blatant employee missed almost 55% of the time while training for the marathon as he had a recurring back injury that was being treated by a chiropractor. This employee worked at a service center in a neighboring state.
The Challenge
When looking for fraud, a significant problem is
differentiating between legitimate transactions and nearly identical
fraudulent ones. By definition a false positive transaction is one that
meets the fraud data profile, but is not in and of itself a fraudulent
transaction.
The challenge is to decide how to reduce or eliminate false positives
without missing the opportunity to capture the false negatives because
each loss may be very costly.
No one enjoys spending time working on what
appears to be exceptions only to find out that a valid reason exists.
However, in this situation the auditor’s lack of in depth knowledge
worked to the auditor’s advantage. Employees working in HR would
routinely ignore questioning the validity of an absence if it was for
things like jury duty, death in the family, injured on the job (WC),
taking care of an elderly parent or sick child, etc. These are
considered to be “innocent absenteeism” or non-culpable matters. .
The auditor looked at the sheer magnitude of absences and easily found the worst offenders.
Data Analysis
As the race was “sold-out” more than 6 months before the race day, we had access to a data file that was almost 100% complete. The race file data included first name, last name, gender, home address and birth date.
HR provided the attendance records that indicated similar data plus of course the days absent including a simple reason for absence.
Internal audit easily joined the two files together based on last name, first name initial, gender, age and zip code.
We then summarized the records by employee number resulting in one record per employee with a count of the total days absent. Working with HR, we decided to exclude records (employees) with less than one day absent per month.
The resulting file was sorted with the most days off first, which immediately identified the employee at the service cent er in the neighboring state. The remainder of the file was divided by department and sent to each department head for further analysis.
Take IDEA for a test drive:
If you would like to try this feature out for yourself, request a demo copy of the IDEA data analysis software [CLICK HERE].
To
respond to this solution or provide data analysis questions you would
like answered in future newsletter articles, please send an email to
dons@audimation.com
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