Overbilling

Overbilling (sometimes spelled as over-billing) is the practice of charging more than is legally or ethically acceptable on an invoice or bill.

Overview

Contractors and professionals

Overbilling in the medical industry can occur when doctors seek to overcharge the government or an insurance company for the actual services provided to their patients or by charging for services not provided.[1] Overbilling in the legal industry can occur with both large institutional clients and smaller, individual companies or personal clients.[2] Overbilling can be an issue in the consultancy and information technology industries as well. Stephen Northcutt, Cynthia Madden, and Cynthia Welti wrote that overbilling occurs more often within larger companies where there is less of a personal connection between employees or contractors and the firm being billed.[3]

Institutional overbilling

Overbilling can occur when larger institutions or governments create errors in their calculations of how much various individuals may owe.[4] Banks and credit card providers can also overbill clients, or indirectly facilitate overbilling through the method by which they allow vendors to charge a client after the client has accented to having their card billed.[5] It has been argued that overbilling is rampant enough in some industries that employees that refuse to overbill risk their jobs due to a lack of economic foresight or acuity in management policies or business plans.[6]

Laws

Overbilling clients can constitute an example of breach of contract and result in fines, lawsuits, or prison time.[7][8] Overbilling can also be a part of U.S. Racketeer Influenced and Corrupt Organizations Act schemes and other organized crime activities.[9] Some individuals that have been convicted of overbilling were done so under the charge of mail fraud, or under the False Claims Act in the United States.[10]

Leonard Vona wrote that, "Overbilling schemes differ from false billing schemes in that the vendor is a real vendor and actual goods or services are provided. The real vendor typically commits the scheme in collusion with a company employee. The real vendor over charges the company and an accounts payable manager approves the vendor invoice for payment. The vendor can commit the scheme without internal collusion by taking advantage of known internal control weaknesses." He also wrote that overbilling can occur via fictitious charges, inflated prices, inflating the quantity on a statement above the actual quantity delivery, providing sub-standard products, charging for goods or services a vendor knows a company does not need, charging too much, and others.[11]

Anti-overbilling practices

Overbilling is a part of many fraud audit infrastructures employed by large companies.[12] Computer programs and software is often used to screen a company's finances to check for overbilling or symptoms of overbilling.[13] Overbilling has been the focus of several infamous scandals, such as the Worldcom scandal[14] and the bankruptcy of W. T. Grant.[15]

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References
  1. "Over-billing isn't the Rx". Montreal Gazette. March 10, 1982. Retrieved July 8, 2013.
  2. "Beware of over-billing by lawyers, says CAP". The Star Online. June 20, 2008. Retrieved July 8, 2013.
  3. Stephen Northcutt; Cynthia Madden & Cynthia Welti (2004). IT Ethics Handbook:: Right and Wrong for IT Professionals. Elsevier. p. 387. Retrieved July 8, 2013.
  4. Mike Lindblom (January 28, 2012). "DOT identifies overbilling of Highway 520 tolls". Seattle Times. Retrieved July 8, 2013.
  5. Chwee Huat Tan (2001). Personal Finance in Singapore. NUS Press. p. 130. Retrieved July 8, 2013.
  6. David Callahan (2007). The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead. Houghton Mifflin Harcourt. p. 42. Retrieved July 8, 2013.
  7. John Fay (2006). Contemporary Security Management. Butterworth-Heinemann. p. 150. Retrieved July 8, 2013.
  8. Darlene Ricker (August 1994). "Greed, Ignorance, & Overbilling". ABA Journal. p. ff. Retrieved July 8, 2013.
  9. Paul A. Batista (2007). Civil RICO Practice Manual. Aspen Publishers Online. pp. 4–18. Retrieved July 8, 2013.
  10. H. Thomas Milhorn (2004). Crime: Computer Viruses to Twin Towers. Universal-Publishers. pp. 116–117. Retrieved July 8, 2013.
  11. Leonard W. Vona (2012). Fraud Risk Assessment: Building a Fraud Audit Program. John Wiley & Sons. Retrieved July 8, 2013.
  12. Leonard W. Vona (2011). The Fraud Audit: Responding to the Risk of Fraud in Core Business Systems. John Wiley & Sons. p. 169. Retrieved July 8, 2013.
  13. David Coderre (2009). Computer Aided Fraud Prevention and Detection: A Step by Step Guide. John Wiley & Sons. Retrieved July 8, 2013.
  14. "Overbilling issue may add to WorldCom's trouble". USA Today. March 7, 2002. Retrieved July 8, 2013.
  15. Caroline Sutton (2010). How Did They Do That?. HarperCollins. Retrieved July 8, 2013.
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