A “Slush Fund” is a pool of money kept “off the books” to pay bribes. These are often created through over-invoicing. A vendor sends an invoice for $100,000 for work that only cost $80,000. The vendor keeps the $20,000 in a separate account to pay bribes on behalf of the company.
Detection Method:
- Inventory Reconciliation: Checking if the volume of raw materials purchased matches the volume of finished goods produced. If we “bought” 1,000 units but only used 800, the remaining 200 may be a “paper-only” purchase used to generate cash for a slush fund.
- Rebate Analysis: Monitoring “Marketing Development Funds” (MDF) or volume rebates that are paid in cash or to non-operating accounts.
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