Circumventing Approval Requirements by Splitting Payments

Day 20 in 30 Days of Fraud

The Theft

The maintenance supervisor, Billy, wants to make multiple payments to a vendor (owned by a friend of his) for $9,900 each. They are questionable payments, so Billy wants to avoid any (unneeded) scrutiny. He knows that all payments over $5,000 require a physical signature (and review by the finance director)–all checks below $5,000 are signed by the computer. What’s a boy to do? Well, Billy can split the transaction–two checks for $4,950 each. That will work.

Picture is courtesy of

Picture is courtesy of

So, Billy tries the scheme, and it works—again and again. Billy’s friend rewards him with a free trip to his favorite hunting destination.

The Weakness

No one is querying the check register for payments just below the threshold. Also, no one is requiring bids.

The Fix

Download the check register into Excel (or any database package). Then, sort the payments and look for repeated payments–just below the threshold of $5,000–to the same vendor.

Require bids for large expenses; the bids should be retained as support for the payments.

Learning tip: The hunting trip is referred to as a gratuity rather than a bribe. Why? Bribes are defined as inducement payments made before the purchase decision, gratuities (a free trip in this example) come after the vendor payments are made. The purpose of the gratuity is to reward the complicit person (Billy). Then, in the future, Billy knows the drill and expects more free trips after he helps his friend.

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