As the production manager at a cement factory, committing fraud is easy, since there are numerous avenues through which asset misappropriation can be perpetuated. First of all, the design of the fraud would extend across numerous functions to ensure accuracy in the cover-up and materiality of the benefits. The organization has a high volume of revenues and operations, making it possible to access a wide range of assets. In addition, the fragmented nature of the operations makes it possible for the fraud to go on unnoticed. This report outlines the process and approach through which I would perpetrate fraud in a cement company, working as a production manager.
Schemes for Billing
The first step would be to set up a dummy account to ensure that repairs and services can be perpetuated. The repairs targeted include maintenance of the motor vehicles, fueling, and other forms of repairs necessary for long-haul vehicles. In addition to this, the service station would ensure the replacement of some parts of the vehicles constantly to enhance the bills for repairs. For example, replacement of slightly worn-out tires with tires that are significantly worn out after some time. This would ensure consistency in the acquisition of these components. The replaced tires would then be disposed of for their market value. As a result, I will benefit from the disposal of such tires, and the expensive bill for a replacement which was not mandated in the first place.
Through collusion with the weighbridge manager, I would ensure that production is understated at the production units. Understatement of the product will ensure that the undeclared production is siphoned out of the facility through the weight bridge and disposed of for additional benefits. Understating the production will ensure that returns from the reports at the weighbridge tally with the production records. This would also involve understating the number of raw materials, or reporting wastages in the production cycle to ensure that the accounts are balanced.
In addition, duplication of bills would be done, since the organization has numerous vehicles, most of which might require multiple services. Duplication of bills would be done by billing for the same service twice on subsequent or similar days and varying the amounts, to ensure that it is not easily tracked. Such involves would be for amounts that are small and immaterial, to ensure that there are no red flags.
Servicing for personal cars would be billed to the organization’s expense account, thereby ensuring that personal expenses are catered for by the company. This includes services such as fueling, car service, replacements, and repairs. Since most of the services are similar to the services performed on the company’s cars, it would be very easy to hide such expenses.
The production cycle involves prospecting and excavation, which has an amorphous wage and cost bill. The process involves a trial and error approach, which makes it possible for costs to exceed. The labor requirements are also amorphous, making it necessary to acquire casual laborers on a seasonal basis and according to the needs, which I am the one who determines. As a result, I would enlist the services of several ghost workers in addition to active casuals to ensure that the wage bill is based on tangible work. These ghost workers would have wage bills synonymous with other employees, making it possible for the reliability of the report.
Expenses that are neither fixed nor tangible are easily manipulated to present figures which are higher than actual, while some expenses can be included in the bills while they were not incurred. Through this approach, I will be able to ensure that funds are channeled out of the organization.
I would ensure that out-of-office expenses are enhanced by acquiring overstated receipts for items such as lodging, meals, and travel. By requesting for billing of additional services not utilized, I would ensure that this results in an overstatement of the receipts. Most of these services would be sought from organizations and locations which do not utilize electronic billing systems, thereby making it possible for such inclusions to be done without a paper trail.
Most expense receipts rarely have amounts in words to accompany the numerical figures. Fraudsters add zeros to enhance the value. I would seek to change the figures and make it impossible for one to suspect since I would target figures that are least suspicious. Recycling receipts and acquiring blank receipts from service providers and filling out such receipts would also ensure that the returns from the scheme would be beneficial.
Disposal of organizational assets
Since I am not allowed to purchase more than one unit at a go, I would bid through employees who are not willing to purchase the vehicle and who are not able to afford it. As a result, I would utilize their opportunity to purchase the assets being disposed of and benefit from the transaction. Once the employees win the bids, I would finance their purchase and then buy back the vehicles from them, over some time, to ensure that it was not apparent. With a small finder’s fee, this would ensure that the discounts from the staff rates and the difference in the undervaluation and the market value would bring significant returns from the deals. Other assets on the disposal by the firm including computers, land, buildings, excavators, and pieces of furniture would also be acquired through the same approach, thereby providing a cash generation approach.
Teeming and Lading
Most of the appropriations for the departments are made before the actual data for payment. It is also possible to delay such payments, albeit for several days. Such payments include wages, expenses, and other costs of the replacement and other elements. As a result, I would divert those funds for quick-sale purchases and short-term investment opportunities such as forex trading and salary advances, making it possible to generate some returns from the funds before directing them to the deserving accounts. Since my job involves minimal office presence, it would be possible to source and place funds in the most beneficial accounts to avoid red flags. The fact that such appropriations are done constantly makes it for finances to lade to be available always.
Recommendations for Prevention of the Frauds
Prevention of fraud requires the presence of sufficient internal controls and monitoring of the activities of each individual. It is important to ensure that an organization has a clear understanding of the most common forms of fraud to ensure that these are prevented. One element of the prevention of fraud is to ensure that roles are separated. Individuals who propagate schemes for billing fraud do so because they can influence the activities of more than one department, thus making it impossible for the comprehensiveness of checks and internal controls. It is also necessary to ensure authentication and vouching of vouchers and receipts for expenses, especially for those expenses which recur. The easiest way to commit fraud is through duplication of resources and inclusion of fictitious expenditures and use of invalid receipts. As a result, it is necessary to ensure vetting of receipts, albeit on a random basis if the receipts are voluminous.
Performing headcounts for workers and casuals is an important element in preventing fraud in the form of ghost employees. It is also necessary to ensure electronic payment which ensures that cash is not handled by individuals who have executive decisions. The purchase and sale of assets should be monitored and any tendencies investigated. For example, it is important to ensure the acquisition of company assets is done transparently and that any subsequent transfers are monitored to ensure that management does not take advantage of the situation. Teaming and lading should also be prevented by ensuring that cash receipts are banked regularly and that authorization and expenditure of cash is done under different departments.