Fraud Alert:
Is Your US Business Protected from Timesheet Manipulation and Time Theft?


Written by Asim Qureshi
By Asim Qureshi, CEO Jibble

Is your business still relying on manual timesheets to track employee work hours? 

If so, you may unknowingly be exposing your company to a host of inefficiencies and potential violations of federal and general laws concerning employee work hours. A significant risk you may encounter is employee time fraud, especially if your organization hasn’t switched to an automated time tracking system.

Inaccurate timekeeping and manipulation of timesheets are a lot more common in US than one would think. According to the American Payroll Association (APA), around 75% of U.S. businesses experience time theft each year. This issue results in annual productivity losses of $400 billion. That’s A LOT.

In this article, we will explore the pitfalls of timesheet fraud and highlight the importance of adopting more accurate and efficient methods for recording employee work hours.

In this article, I will go through:

What is Timesheet Manipulation or Fraud?

Timesheet manipulation or fraud, also known as time theft, occurs when employees deliberately overstate or provide false information about the hours they have worked in their timesheets, resulting in unjustified payments.

Typically, employees engage in timesheet fraud by manipulating their timesheets by small increments, such as a few minutes per day. However, over time, these minor alterations accumulate and can eventually amount to significant additional hours or even days.

Consequently, organizations bear substantial financial losses due to these deceitful practices.

How Can Timesheets be Falsified in the US?

While manual timesheets may serve their intended purpose, they pose a significant risk as they are susceptible to manipulation by various parties involved.

Instances of timesheet fraud can take various forms, such as the inflation of work hours, where employees manually input their working hours. Additionally, when attendance data needs manual entry into a time card or timesheet, dishonest employees can easily alter these figures to their advantage.

Management may also show favoritism by assigning specific tasks to a particular employee over others, potentially impacting the accuracy of recorded work hours.

The cumbersome nature of manual timesheets is exacerbated by delays in their submission, with some companies taking so long that employees find themselves working on timesheets for hours completed months ago. This delay increases the opportunity for inaccuracies and potential abuse of the system.

What Strategies Can be Used to Combat Timesheet Manipulation in the US?

Employers can implement several measures to bolster their company’s time tracking capabilities and mitigate the risk of timesheet fraud while adhering to legal guidelines.

Establishing a transparent and comprehensive company-wide timesheet policy that clearly outlines expectations and guidelines for accurate time reporting will be a first step towards approaching such measures.

Further, adopting an electronic time clock system or utilizing timesheet software, which enables streamlined and efficient tracking of employee hours will help to minimize the potential for manual manipulation and ensure accurate time recording. Companies will also benefit from generating error-free invoices, timely submission of timesheets, and accurate billing reports, among other advantages.

Lastly, introducing company-wide disciplinary measures for individuals engaged in timesheet fraud and effectively communicating the consequences of such actions to employees can deter unethical practices. This approach promotes a culture of ethical time reporting, fostering adherence to established guidelines.

Lawsuits Related to Timesheet Fraud in the US

Here we share with you now a number of cases related to timesheet fraud which could be helpful in understanding how the above-mentioned actions may be invoked in court proceedings and how they may be dealt with in each case:

1. Ex-Department of Defense Salaried Employee Sentenced to 4 Years in Prison in $1.4 Million Timesheet Fraud Case

In 2019,  52-year-old Michelle M. Holt from Mathews County, Virginia was sentenced to four years in prison by the United States District Court of Eastern District of Virginia for defrauding the federal government of over $1.4 million through a long-running time and attendance fraud scheme. 

During a law enforcement investigation, it was discovered that Holt fraudulently reported more than 42,000 hours of unauthorized overtime between December 2001 and July 2018, falsely claiming payment for hours she never worked, as well as holiday leave, sick leave, and annual leave over the 17 years period.

She manipulated computer time and attendance systems, using another employee’s login information without authorization. 

Holt’s overtime earnings in recent years exceeded twice the amount of her regular salary.

Holt has now been sentenced to four years in prison for computer fraud and theft of government property.

Key lessons from this case:

  • Implementing reliable and secure time and attendance systems can help prevent fraud by minimizing manual manipulation and increasing transparency.
  • Regular reviews and reconciliations can help identify discrepancies and potential fraudulent activities in time tracking.
  • Long-term fraudulent practices can accumulate substantial financial losses and increase the likelihood of detection over time.

2. Former NYC Administration for Children’s Services Employee Falsifies Timesheets and Steals Taxpayer Money

A New York City Department of Investigation (DOI) investigation led to the arrest of Bola Alade-Gbami, a former employee of the NYC Administration for Children’s Services (ACS), for falsifying timesheets and stealing taxpayer money. 

Alade-Gbami, who worked for the City of New York since 1996, allegedly claimed to be working when he was actually on vacation in Nigeria and Togo.

Alade-Gbami submitted fraudulent timesheets through the CityTime payroll system. He received payments of approximately $21,000 while traveling outside of New York City. 

Additionally, he misused ACS’s contracted car service for commuting purposes and falsified work records. 

The charges include grand larceny and offering a false instrument for filing. 

The investigation was initiated based on an anonymous tip and is being prosecuted by the Manhattan District Attorney’s Office, with support from the DOI’s Office of the Inspector General for ACS.

Key lessons from this case:

  • Maintaining channels for reporting suspicious behavior, such as anonymous tips can be helpful in uncovering time fraud along with being proactive in investigating and addressing such allegations.
  • Implementing reliable systems that detect discrepancies and ensure accurate record-keeping is crucial for preventing and detecting fraudulent activities.
  • Fraudulent actions can result in serious legal consequences, which may include criminal charges, fines, and imprisonment.
  • Cooperation and coordination between different agencies can strengthen investigations and enforcement efforts in combating fraud.

3. SEC Charges Silicon Valley Software Company and Executives in Accounting Timesheet Fraud Scheme

The US Securities and Exchange Commission (SEC) has filed charges against a software company based in Silicon Valley and two former executives involved in an accounting fraud scheme. 

The investigation revealed that Saba Software’s vice presidents, Patrick Farrell and Sajeev Menon, orchestrated a scheme in which timesheets were falsified to meet quarterly financial targets. 

The improper time-reporting practices enabled the company to manipulate revenue and margin figures over a four-year period. 

Saba Software agreed to pay $1.75 million to settle the charges, and the executives also settled the case. 

The SEC utilized Section 304 of the Sarbanes-Oxley Act (hereafter, SOX), commonly known as the clawback provision, in a separate order to require Saba Software’s CEO, Babak “Bobby” Yazdani, to reimburse the company and its shareholders $2.5 million in bonuses and stock profits, despite not being charged with misconduct. 

The investigation was conducted in collaboration with the Manhattan District Attorney’s Office.

Key lessons from this case:

  • The great potential financial losses and reputational damage that can arise from fraudulent accounting practices can be very significant
  • Various provisions serve exist within the law as a deterrent and reinforce the importance of executive responsibility in preventing and detecting financial misconduct.
  • Settling can help mitigate further legal proceedings and potential financial penalties.
4. NSA Contractor Falsifies Timesheets Working Full Time on Two Separate Contracts

In 2014, 33-year-old Lynette C. Jackson, a contractor at the National Security Agency (NSA), has pleaded guilty in the United States Attorney for the District of Maryland to making false claims to the government after simultaneously working full-time on two distinct NSA contracts.

Jackson was hired by a U.S. Department of Defense (DoD) subcontractor to work at NSA, but during a specific period, she simultaneously worked full-time for another DoD contractor. 

Despite working for the second contractor, she fraudulently claimed a total of 683.75 full-time hours with the first contractor, resulting in 79 fraudulent timesheets and a loss of $65,264.55 to the government.

Jackson faced a maximum sentence of five years in prison and a $250,000 fine. 

The case was investigated by the Defense Criminal Investigative Service, the NSA Office of Inspector General, and the National Procurement Fraud Task Force.

Key lessons from this case:

  • Engaging in fraudulent activities, such as making false claims to the government, can lead to serious legal consequences, including potential imprisonment and fines.
  • The need for individuals to be transparent about their employment arrangements and avoid engaging in deceptive practices.
  • It is essential to practice accurate and reliable record-keeping practices to prevent fraudulent claims and ensure transparency in government contracting.

Final thoughts

Relying on manual timesheets to track employee work hours may pose significant risks for businesses, increasing the likelihood of employee fraud, as inaccurate timekeeping and timesheet manipulation can occur. To mitigate these risks and ensure accurate recording of work hours, it may just be worth it for businesses to adopt automated time tracking systems.

By doing so, organizations can safeguard themselves against inefficiencies, potential legal violations, and the financial losses associated with timesheet fraud.

Implementing clear policies, using reliable timesheet software, and establishing disciplinary measures are all essential steps in combating deceptive timesheet practices.

Important Cautionary Note

When making this guide we have tried to make it accurate but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you seek advice from qualified professionals before acting on any information provided in this guide. We do not accept any liability for any damages or risks incurred for use of this guide.