Auditing, Education the Key to Safeguarding Against Benefits Fraud

After reports of 150 employees being fired or quit over an alleged multimillion-dollar benefits fraud at Baycrest, a prominent Toronto geriatric facility, the first question that often comes to mind is ‘why?’.

But for business owners concerned that such an employee crime could befall them, perhaps the greatest question to help them prevent the same thing from happening to them is ‘how?’.

For Baycrest, Audit Revealed Benefits Irregularities

Speaking with the National Post, a police spokesperson noted Baycrest administration led their own internal probe with a third-party auditor who uncovered one employee had allegedly defrauded Baycrest of over $100,000 in employee benefits misuse while others were above the $25,000 mark.

In a statement to the Toronto Star, Baycrest was noted as saying that the alleged employee benefits fraud was “inconsistent with our policies and procedures”.

How, then, was it able to happen?

Submission of Receipts, Reimbursement Allegedly to Blame

Baycrest spokeswoman Michelle Petch Gotuzzo noted to The Canadian Press that the alleged fraud scheme was carried out through the submission of receipts for “services or products that weren’t received,” or claiming reimbursement for medical items only to spend it on an illegitimate purpose.

Baycrest Plans to Increase Audits, Set Up Approved Network

So, what does the company plan to do to safeguard against employee benefits fraud in the future?

The company has been reported as saying that additional audits will be carried out by their external benefits administrator, and that additional educational will be provided to hospital staff.

But is this enough? And what else can business owners do to protect themselves?

Know the 3 Most Common Types of Benefits Fraud

According to Benefits Canada, 95% of Canadian plans have been affected by employee benefits fraud.

With occurrences so common, the first thing business owners can do to prevent themselves against benefits fraud is to know the three most common types to be on the lookout for.

The first is the rogue individual. In this scenario, a fraudulent claim is made for services, products, or procedures never received with forged receipts, with the individual then keeping the money themselves. In some cases, this can become a two-person operation with a plan member and the service provider working together to bill claims for services or products not received while splitting the money.

Next, the most common employee benefits fraud is a collusion ring. With a collusion ring, the service provider will work in tandem with a group of employees to submit false claims and split the proceeds. Oftentimes in this scenario, employees can believe it isn’t really fraud they’re committing, they’re entitled to benefits, and there will be no negative result of their fraudulent activities.

Finally, another of the most common types is misrepresenting service dates, details, and locations on receipts to increase the value of the claim.

And, while not necessarily fraudulent, maximizing the number of claims – especially when they’re not needed – is still viewed as an abuse of the employee benefits system.

Besides knowing what to look for, employers can also take preventative action.

Set Up Employee Benefits Audit Like Baycrest

Like Baycrest announced it’s doing, it’s important to conduct regular audits. Having both internal and external audits can help safeguard against employee benefits fraud within your organization.

Require Fraud Education Training for Employees

Along with auditing, employers can increase employee awareness of an appropriate use of benefits through education and training. By communicating the consequences of benefits fraud to employees, it can help mitigate and sometimes eliminate fraudulent behavior within an organization.

Get Creative with Your Company Benefits Plan

While no company wants to agitate their workforce with stringent controls on employee benefits, getting creative with the plan design can also help protect against potential fraud.

By limited benefits to individuals (and not dependents), applying maximums, strategically designing which benefits options are most optimal and legitimate for your industry, introducing co-payments, and introducing health-care spending accounts are all ways to help deter against employee benefits fraud.

Safeguard Your Business with Benefits Management

Protect your business with customized online benefits management. Tailor your benefits to your specific budget requirements, track health-care spending accounts, or even set up employee cost sharing.

Our experts are ready to help every step of the way. Log in to your PaymentEvolution account and check out the benefits link.

Don’t have a PaymentEvolution account? Get started in under 5 minutes.


  • Sam Vassa

    With a passion for technology, Sam looks for ways to help small companies to compete and save money. He's worked in Foreign Affairs for the Government of Canada, geeked out at Digital Equipment Corp and hung out at Microsoft. He founded to help businesses like yours.