Fast Facts on Payroll Fraud and ABA Therapy

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The main goal of your ABA therapy practice is to provide quality care for your patients and their families, making sure that everyone is working as a cohesive unit towards a common goal.
The fact remains, though, that you are still running a business and need to be vigilant of all the dangers that a business can encounter. Regardless of the size of your practice, there are plenty of financial issues that can arise.
WebABA can help you monitor the many threats to your ABA practice. One of the most common issues that occurs frequently in all businesses, but which is not often considered, is payroll fraud.
As an ABA therapy provider, it is necessary to be familiar with what this type of fraud entails and what you can do to combat its effects on your practice.

3 Quick Facts on Payroll Fraud

Payroll fraud is exactly what it sounds like. Employees are not being paid out as they should be. Payroll fraud is the leading source of theft by employees and accounting malpractice.
The following should give you a quick idea to just how much of an issue this can be for your ABA therapy practice:

  • Payroll fraud affects 27% of all businesses. That means that more than one out of every four businesses will experience this type of theft.
  • The smaller your business is, the more likely payroll fraud is likely to happen. In fact, it occurs nearly twice as often in organizations with less than 100 employees than larger ones.
  • Payroll fraud is a problem that lingers. The average case of payroll fraud last about three years.

3 Types of Payroll Fraud

Like most types of crime, this type of company attack comes in different forms. These are the types you are most likely to encounter:

  • Timecard falsification: This is something that everyone has probably seen or heard about at one of their jobs. Employees misreporting their hours for additional pay is one of the oldest forms of stealing in the workplace.
  • “Ghost” employees: This tactic involves sending out a paycheck to a non-existent employee. These can be either complete fabrications or the result of keeping a former employee’s name on the payroll for use in this type of deception.
  • Worker misclassification: Of the three common types of payroll fraud, this is probably the worst. There are two ways that this usually pays out, though both are still damaging on many levels:
    • Deliberate misclassification: This happens when an employee is intentionally designated as an independent contractor or 1099 worker, instead of a regular W-2 employee. The goal is to avoid paying out unemployment, worker’s comp, and payroll taxes.
    • Unintentional misclassification: Many times a business owner will do this without any malicious intent. Certain conditions, like being paid the same amount weekly or monthly can disqualify an employee from 1099 status.
    • The penalties for these types of infractions are high. Every instance in California costs $25,000 plus additional taxes and fines, with most states carrying a similarly severe punishment.

Useful Tips for Fighting Payroll Fraud

As useful as being informed is, the reality is that your ABA therapy practice may encounter payroll fraud at some point.
The procedures you can put in place to spot these aberrations are all very easy to incorporate into your existing operations:

  • Compiling all your payroll data allows you the ability to spot tendencies of this type of theft like the “ghost” employees previously mentioned, strange hours reported, duplicate records of payments, etc.
  • Monitor the status of checks to see if any are not cashed.
  • Require your staff to physically pick up their paychecks from time to time, with a valid photo ID, to see if there are any unclaimed checks.
  • Check in regularly with parents of patients to confirm treatments, by phone or other methods.
  • Audit your payroll cycle piecewise, taking a separate month to verify different items like data entry, time sheets, etc.

As unpleasant of a topic as it is, payroll fraud is not going anywhere and poses harm to running a successful ABA practice.
For all you can do to be prepared for when it strikes, the best defense involves having someone on your side.

WebABA is here to help protect your company and keep your resources dedicated to your patients and their families.

WebABA practice management software is designed to help you better manage your payroll processes,  your clinic’s flow of tasks, better manage business aspects, and improve the billings and collections process to increase your finances.
Our WebABA can support your ABA therapy practice in a number of operations and tasks including:

  • Billing—private insurance, school, regional center or private pay
  • Automatically using correct CPT Category III codes for billing
  • Automation of ERA processes
  • Payroll
  • HR module
  • Electronic signature feature
  • Customizable reports
  • 24/7 access on any platform
  • HIPAA compliance
  • Management control

Contact WebABA today at 805-277-3392 and we’ll get you started on solidifying your company’s defenses against payroll fraud.



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