Improving the Effectiveness of Your Claims Auditing Process

Local Government Management Guide

Red Flags

Claims with certain characteristics may have a higher risk of error or fraud. Officials should use common sense and reasonable skepticism when any claim appears to be out of the ordinary. Even when all required documentation is submitted, remain skeptical, especially of claims that are not routine. In today’s electronic environment, anyone with a computer and printer may be capable of replicating and manipulating information to produce false documentation. Particular attention should be paid to claims with the following characteristics:

  • Missing documents
  • Unavailability of original documents
  • Recurring identical amounts from the same vendor
  • Multiple remittance addresses for the same vendor
  • Inconsistent, vague or implausible responses arising from inquiries or analytical procedures
  • Excessive voids or credits
  • New vendors, especially if payment goes to a post office (PO) box
  • Items purchased that are not clearly identified
  • Goods delivered outside of a central location or to an unusual delivery point
  • Credit card charges with no original receipts attached
  • All travel and conference claims, as they are inherently risky
  • Alterations or questionable handwriting on documents Duplications
  • Payments to a vendor that have increased dramatically for no apparent reason
  • Payments to vendors for construction work not certified as completed by your architect or engineer
  • Unusual delays in providing requested information
  • Tips or complaints about possible fraud.

Understanding the symptoms of errors and fraud can help you identify claims that should be examined with greater scrutiny.