Glossary of Terms
A
Abuse: Taking inappropriate advantage of one's position for personal gain.
Accomplice: One who knowingly assists a perpetrator.
ACFE: Association of Certified Fraud Examiners.
Affidavit: A sworn statement.
Affiliate Bidding: A situation in which a single entity tenders multiple bids under multiple names to give the impression of competition.
B
Back Date: For a fraudulent purpose, to affix a date to a document earlier than the date of the transaction to which the document relates.
Bid Rigging: A procurement scheme devised among bidders in which the winning bidder and the winning bid are decided before the bids are submitted. This allows the winner to artificially inflate the bid without fear of over bidding.
Bid Rotation: A procurement scheme devised among bidders in which winning bids are allocated among bidders. This allows participants to artificially inflate bids without the risk of over bidding.
Bid Splitting: Dividing a larger procurement into a number of smaller procurements so as to avoid some of the controls or oversight that apply to larger procurements.
Bribery: The offer of money or other goods or services in exchange for favorable treatment.
Bundling: In medical billing, the act of adding a number of related services to the principal service rendered. The related services, though billed, are not actually performed, but because of their relationship to the principal service are not detected as fraudulent.
C
Check Kiting: In a kiting scheme, multiple bank accounts are opened and money is “deposited” from account to account, although the money never exists. Floating makes this possible. Floating is the additional value of funds generated in the process of collection and arises because the current holder of funds has been given credit for the funds before it clears the financial institution upon which it is drawn.
Code of Conduct: A formal, written set of ethical and behavioral standards adopted by an organization to which all employees of the organization are to adhere. In some cases, the code of conduct is extended to include contractors, suppliers and customers.
Coerce: To force someone to do something against one's will.
Collude: To act together to some, often fraudulent, end.
Conflict of Interest: A conflict of interest when an employee, i.e., one with a fiduciary responsibility to an employer, acts in a way that favors himself rather than his employer. The employee may be motivated by any number of factors, including personal gain, kinship, friendship, etc.
Conspiracy: Two or more persons acting together to perpetuate a fraud.
Cooking the Books: Maliciously altering books of account or accounting records to deceive or obfuscate.
Corruption: Bribery of a government official.
COSO: The Committee of Sponsoring Organizations
CSA: Control Self-Assessment
D
Defalcation: Another name for employee fraud and embezzlement.
Direct Effect Illegal Acts: Violations of laws or government regulations by the company or its management or employees that produce direct and material effects on dollar amounts in financial statements.
Documentary Evidence: Written records.
Dummy: Fictitious.
E
EBE (Emerging Business Entity): A term used to refer collectively to Minority Business Entities (MBEs) and Women's Business Entities (WBEs). In certain jurisdictions, preferences or set-asides are made in favor of EBEs.
Embezzlement: Theft from an employer by an employee. Embezzlement is usually covered up by the use of false accounting entries.
Employee Fraud: The use of fraudulent means to take money or other property from an employer. It consists of three phases: (1) the fraudulent act, (2) the conversion of the money or property to the fraudster’s use and (3) the cover up.
ERM: Enterprise Risk Management.
Errors: Unintentional misstatements or omissions of amounts or disclosures in financial statements.
Ethical: Adhering to a socially accepted set of morals or behaviors.
Expense Account Fraud: Seeking reimbursement for expenses not or in excess of those incurred.
F
False Claims: Claims for expenses not incurred, for services not rendered or for goods not delivered.
False Credentials: The misrepresentation of one's education or professional standing in order to secure employment or business.
Fiduciary Duty: An employee's obligation to act, when such acts are legal, in the interest and for the benefit of his employer.
Firewall: A software program that prohibits unlawful or unintended access, through the Internet, to a computer or the data it contains.
Forensic: Designed for use in a legal proceeding.
Forensic Accounting/Auditing: Accounting and/or auditing techniques, often used to discover or illuminate fraud, from which results become evidentiary material suitable for use in a legal proceeding.
Forgery: The fraudulent creation or alteration of documents or the authorizations related to such documents.
Fraud The theft of valuables (money, information, time, etc.) enabled by deceit.
Fraudster: One who perpetrates fraud.
G
Ghost Employee: A non-existent employee, created so that his pay can be redirected to a fraudster.
H
Hotline: A phone service maintained to collect information about fraud and potential fraud.
I
Identity Fraud: The use of someone's illegally acquired personal information to perpetrate a fraud.
Identity Theft: The illegal acquisition and use of someone's personal information by another; the latter uses this information to conduct transactions in the victim's name and for which the victim may be liable.
Incentive/Pressure: A motive a person experiences and believes is non-shareable with friends and confidants.
- Psychotic: “habitual criminal” who steals for the sake of stealing.
- Egocentric: Personal prestige, goal achievement.
- Ideological: Cause is morally superior, justified in making other victims.
- Economic: Desperate need for money, greed, economic achievement.
Improprieties: Wrongdoings.
Influence Peddling: The sale, by a government official, of his authority or influence, to obtain a favorable outcome for the buyer.
Informant: One who provides information concerning a fraud. The informant has information concerning, but was not involved in the perpetration of, a fraud.
Interrogation: An interview conducted to elicit information concerning a crime.
Interview: A structured question and answer session.
Inventory Inflation: The act of preparing fraudulent journal entries to cover up a fraud.
Inventory Shrinkage: The loss of inventory through theft.
Investigation: Those procedures (assembling documentary evidence, conducting interviews, etc.) designed to solve a crime.
Irregularity: Misstatements or omissions of amounts or disclosures in financial statements that are NOT unintentional; something out of the ordinary that may be the result of fraud.
J
Journal Entry Fraud: The creation or alteration of accounting entries to perpetrate or cover up a fraud.
K
Kickback: Most frequently, a payment made by a vendor to an employee, at the request of the employee, for his assisting in getting business or other favorable consideration for vendor.
Kiting: Issuing a check for insufficient funds in the expectation that the overdraft will be covered by the time the check is negotiated.
L
Lapping: The act of stealing one customer's remittance and covering the shortage with another customer's later remittance.
Larceny: Simple theft of an employer’s property that is not entrusted to an employee’s care, custody or control.
Lifestyle Changes: New cars, new clothes, new possessions and new habits that indicate that an employee's financial circumstances have improved beyond explanation. Lifestyle changes are frequently an indicator of fraud.
Lowballing: The act of submitting an intentionally low bid with the intent of more than making up for it with contract amendments or other ways of inflating the contract price.
M
Management Fraud: Intentional misstatements or omissions of amounts or disclosures in financial statements.
MBE (Minority Business Entity): A business owned wholly or primarily by persons classified as minorities. In certain jurisdictions, preferences or set-asides are made in favor of MBEs.
Medical Identity Theft: Stealing a legitimate patient's ID to be used in fraudulent medical schemes.
Misappropriation: Theft.
N
NASACT: National Association of State Auditors, Comptrollers and Treasurers.
NASC: National Association of State Comptrollers.
Negative Invoicing: The use of an invoice of a negative amount (in the form of a credit or adjustment) to reduce a customer's receivable balance. This is done to cover up the theft of the customer's payment.
O
OMB: Office of Management and Budget.
Opportunity: An open door for solving the non-shareable problem in secret by violating a trust.
- Weak internal controls
- Circumvention of internal controls
- The greater the position, the greater the trust and exposure to unprotected assets
Overbilling Scheme: Charging for more time, more materials or at a higher rate or for substandard materials than were originally contracted for or were necessary to do the job.
P
Padding: Adding fraudulent expenses to an invoice.
Perjury: Lying while under oath.
Perpetrator: The individual performing an illegal act.
Phishing: The act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.
Pilfering: The theft of physical goods such as office supplies or inventory.
Pingponging: Referring patients to other doctors in the same clinic in order to claim reimbursement for "consultations" rather than for actual treatments.
Predication: Any information that gives a fraud examiner (or another person who informs the fraud examiner) a reason to believe a fraud occurred, may have occurred, or may be presently occurring. The information may come from an anonymous tip, from an employee noticing something wrong, or from an auditor noticing something suspiciously wrong.
Plan Sponsor: An entity that provides health care coverage to those enrolled in a health care plan. The plan sponsor designs the plan, i.e., determines what procedures are covered, the schedule of copayments, etc., and takes care of filing plan documents with various government oversight bodies. It may take over some or all of the plan’s administration, e.g., claim payments, provider negotiations, etc., or contract with a third party administrator to manage plan operations.
Prevailing Wage: Trade and public work wages paid to the majority of workers in a specific area. The prevailing wage is usually an hourly wage and determines overtime pay as well as benefits for laborers in that field. The Davis-Bacon and Related Acts (DBRA) are administered by the Wage and Hour Division of the U.S. Department of Labor (DOL) USDOL's Wage and Hour Division. These acts require that all contractors and subcontractors performing on federally-financed or assisted construction in excess of $2,000 pay their laborers and mechanics no less than the prevailing wage rates and fringe benefits. In addition, some states have their own prevailing wage laws. There are federal and state laws that mandate prevailing wages in areas other than construction.
Pretexting: The act of creating and using an "invented scenario" to persuade victims to release information or perform an action, typically over the phone. Often uses pieces of known information (birthday, social security number, etc.) to establish legitimacy.
Q
Quid Pro Quo: A Latin term, meaning "something for something"
R
Razoring: Removing a pre-numbered instrument (receipt, check, invoice, etc.) from a pad of similar documents in such a way that the removal is obscured. The stolen instrument is used to falsely document illegal activities.
Reconciliation: The act of comparing and agreeing account balances using different sources of information. For example, one might reconcile the total all of one's unpaid invoices with the accounts receivable balance in one's general ledger.
Red Flag: Something that is often an indicator of fraudulent activity.
Request for Proposal: A formal solicitation for vendors to bid on a given contract.
Request for Quote: A solicitation for vendors to provide a quotation on the delivery of services or goods.
RFP: See Request for Proposal.
RFQ: See Request for Quote.
S
Short Shipping: To ship less physical product than is listed on the invoice or manifest in hopes that the shortage will not be noticed.
Shorting: Delivering less medication that than which was authorized or billed.
Social Engineering: The art of manipulating people into performing actions or divulging confidential information.
T
Tax Fraud: Intentionally underreporting one's taxable income so as to pay less tax than is actually due.
Theft: An unlawful taking that does not involve physical confrontation, threat or injury.
Third Party Administrator (TPA): A contractor hired by a health care plan sponsor to deal with some or all of the day-to-day operations, such as claim payments, provider negotiations, etc., required to operate a health care plan.
Tone at the Top: How management conducts itself and its apparent concern for ethical behavior and honesty.
U
Unbundling: In medical billing, the practice of billing separately a set of related services that would normally be billed as a single procedure. This is done when the practice results in a higher claim.
Unethical: A practice not consistent with the practices held by society to be moral, proper, honest, fair or just.
Unimpeachable Integrity: Unimpeachable integrity is the ability to act in accordance with the highest moral and ethical values all the time. This is practically impossible, so fraudsters will rationalize:
- I need it more than the other person
- I’m borrowing and will pay it back later
- Everybody does it
- The company is big enough that it won’t miss it
- Nobody will get hurt
- I deserve it
- It’s for the greater good
Upcoding: In medical billing, charging for a more expensive procedure than was actual performed.
V
Void: To deface some instrument that was not issued.
W
Waste: In governments, not fulfilling one's fiduciary duty to assure public monies are spent as effectively as possible.
WBE (Women's Business Entity): A business owned wholly or primarily by a woman or women. In certain jurisdictions, preferences or set-asides are made in favor of WBEs.
Whistle Blowing: The act of reporting to the appropriate authorities information about illegal acts.
White Collar Crime: Fraud perpetrated by people who work in offices and steal with a pencil or a computer terminal. The contrast is violent street crime.
X
Y
Z