When most of us think about employee time fraud, we probably have an image of a couple of young, teenage workers who have developed a “buddy punching” scheme at a small warehouse or fast food restaurant where they work after school hours. While this type of problem certainly does exist, employee time fraud can occur at all different levels, from teenage hamburger flippers trying to save up for college, to professionals climbing the corporate ladders wanting to pad their six figure salary. Recently, several instances of employee time fraud affecting school districts have shed light on how teachers are taking advantage of public, taxpayer money to unfairly increase their salaries and benefits. Below, we take an in-depth look at how this form employee time fraud is putting stress on school districts, and how leaders within those school districts can implement policies and protocols to avoid this increasingly common problem.
Time Fraud in School Districts
It is hard to determine exactly how much employee time fraud is costing employers around the country. According to one recent estimate, time fraud might be costing U.S. employers upwards of $400 billion per year in lost productivity. While buddy punching schemes that add 15 minutes to the time clock every day might seem like a negligible expense, it certainly can add up to major losses for businesses over the course of a year.
Furthermore, almost three out of every four employers are reportedly experiencing payroll losses due to buddy punching schemes. These losses might equate to 2.2 percent of gross payroll costs! Of course, buddy punching is just one form of time theft. For employers who do not necessarily rely on an hourly workforce, more elaborate time fraud schemes can be harder to detect and can lead to more serious economic losses.
In school districts across the country, many teachers, administrators, and other personnel have devised elaborate arrangements to unfairly add to their salaries. The Goldwater Institute recently published a study titled “The School District Fraud Formula: How to Prevent Fraud in School Districts and Protect Student Learning and Teacher Salaries.” The report, which looked at cases of time fraud in Arizona school districts found that:
“Over the last 20 years, the Arizona Auditor General has documented fraud involving taxpayer money and school personnel in 21 school districts—approximately 10 percent of all Arizona districts. After adjusting for inflation, nearly $26 million has been misused. The total losses are equivalent to the salaries of nearly 540 Arizona teachers earning the state’s average teacher pay in 2017.”
Similar statistics of time fraud in school districts are most likely occurring in states and school districts across the country. The Century Foundation recently reported that U.S Schools around the country are underfunded by an astounding $150 billion each year. Reducing the incidence of employee time fraud, then, is certainly one way to ensure that public taxpayer money destined for education is actually used to improve the quality and access to education for young people across the country.
How is Time Fraud in School Districts Occurring?
It should be evident by now that employee time fraud within school districts is draining needed funds away from the already underfunded institution of public education. How exactly is this occurring? While there are many different ways that teachers, administrators, and other school employees engage in fraud, two cases shed interesting light on how this occurs.
In Harrisburg, PA, administrators of the local school district simply did not track vacation or sick leave for their employees. They also did not have any sort of proper oversight of overtime. According to a recent audit of the school district, this lead to facilities and custodial departments averaging over 450 hours of overtime per pay period. These simple payroll management issues led to an enormous mismanagement of funds and employee time fraud practices. Similarly, in an Arizona school district, a school employee in charge of payroll was able to “alter work hours recorded in the payroll software for herself without being detected.”
In both of the cases mentioned above, a lack of proper oversight, supervision, and HR management allowed employee time fraud to occur.
Solutions to the Problem
So how exactly can schools implement policies and protocols that ensure that employee time fraud does not continue to drain needed funds from the students they serve?
The Importance of Integrated Payroll Software
Workplaces across the country are becoming increasingly digitalized, and school districts would do well to follow this trend. The Harrisburg, PA School District case explained above was caused mostly by a lack of integrated software systems. The school district was using three different software systems to process their complex payroll data, including separate systems for overtime and vacation/sick leave time. Because none of these systems could be integrated, the accounting department of the school district had to resort to manual comparison of employee’s time and attendance records with their “leave” records. This not only allowed for human error (there were over 900 employees in the school district), but also allowed astute and cunning employees to devise strategies to engage in time fraud.
This problem could have been easily avoided if the school district had invested in a more efficient employee time and attendance software. Mitrefinch, for example, is one company that specializes in offering time and attendance software packages that can be easily integrated with other parts of a company´s payroll.
More Rigorous Technological Oversight
Furthermore, many examples of time fraud within school districts occur simply because there is limited or no oversight of employees in charge of managing and administering payroll. This was the case in the Arizona example mentioned above. Transitioning to time and attendance software programs is not only more efficient, but also gives school districts a much more thorough, technological-based oversight over their payroll. The best time and attendance software programs allow for improved absence management, multiple Clock In/Out options, including biometric fingerprint terminals and swipe cards, and a full integration with district´s existing payroll and ERP software.
By embracing and implementing the best digital time and attendance options, school districts across the country can reduce the frequency of employee time fraud and help to ensure that funds are used to help advance the education of students.