Corruption and Deviant Behaviour in the Public Sector

Jill McMahon - Thursday, March 03, 2016
Corruption and Deviant Behaviour in the Public Sector

Corruption is a significant issue in Australia’s public sector. It can exist in many forms with varying degrees of severity. But even though its existence is well documented, it remains difficult to address because witnesses can be unwilling to report their experiences. 

There can be many reasons for this, including social pressures, the use of legitimate processes to hide corrupt behaviour, and using co-workers to assist corrupt activities and prevent detection. 

How can it be defined?

We often think of corruption as being the most serious frauds or abuses of power, yet it can include what we would normally consider to be reasonably minor behaviours which violate the trust placed in employees. Examples of this might include fraudulently altering timesheets, or claiming sick leave while undertaking a second job during the time off.

Deviant behaviour can be defined as violations against group norms. This behaviour can be contrary to an organisation’s policies and rules. The two can battle each other as normal behaviour within the group can be seen as being more important than organisational rules and procedures. Although minor, this behaviour can spiral into corruption if left unaddressed. 

While corruption has the potential to and does indeed exist in both public and private sectors, government organisations seem uniquely challenged by corruption issues. This may be because of their large size and the geographical spread of employees, with managers sometimes working in different locations to teams, leaving teams with limited oversight and accountability. 

Social identity and the spiral into corruption

Social groups within a workplace can band together to promote or hide corruption.

Just like the schoolyard, people in workplaces can find themselves categorised or indeed categorise themselves into the ‘in’ or ‘out’ group. Some who are new to a workplace may want to associate with the ‘in’ crowd no matter what. If the group is engaged in corrupt activities or deviant behaviour, the new worker may be drawn in and pressured to participate. New employees can be socialised into corruption within the group or bullied to maintain silence.

Management may have knowledge of the strong sub-culture and choose not to intervene for a number of potential reasons. It may be that the group is performing well and meeting KPI targets, it may be that management is being bullied by staff not to intervene, or it may be that the status quo is being maintained through the use of corrupt alliance and relationships.

The ‘in’ group is all about informal power. A worker may not hold a senior role, but they have such strong personal power over colleagues that they end up being the leader within the group. Through use of this power, manipulation and persuasion, they may create and maintain these norms of corrupt behaviours.

Read more on: Social Identity and the Spiral into Corruption

Corrupting legitimate processes

When corruption is embedded into everyday routines and operations, it can be difficult to detect as behaviours become normalised. Often, these legitimate processes rely upon alliances within the workplace. For example, organisational processes might require a double sign-off on invoices for payment, yet two employees could work together to create and approve false invoices and transfer funds into their own accounts.

Speaking out against corruption can result in changes to a person’s employment conditions, such as redundancy, transferring a worker, cutting hours or changing shifts – all of which may seem legitimate until the timing is considered.

Use of alliances and networks

Employees can develop strong alliances and networks both within their close-knit group and more broadly across the organisation. These alliances can be used for corrupt purposes through an environment of secrecy, agreed rules and clique-like closeness. As employees get transferred to different areas and promoted, or even promote members of their clique, this network can grow both in size and the effectiveness of its corrupt activities.  

Once a corrupt employee has developed a network, there are plenty of people to help engage in corruption or to help conceal it. Sometimes, these people are manipulated into assisting through legitimate processes, and may not even realise that they are aiding corrupt activities.

Read more on: Use of Alliances and Networks

Protection from detection

People working together have tremendous power to be corrupt and resist detection. The strength of the ‘in’ group relies upon no one speaking out about the group’s activities. In cases where someone has spoken out, or alleged corrupt activities are suspected by management, corrupt group members can protect each other by providing false evidence that supports members or covers their tracks. This inhibits investigators from proving their suspicions and uncovering the corruption. 

Read more on: Banding Together to Avoid Detection

Silence and censorship

Silence and censorship are closely linked to social pressures. Once an employee group is engaging in corrupt behaviour, they can cover up their activities by insisting on the silence of others. 

Newcomers to the group can succumb to peer group pressure for a number of reasons, including:

  • Fear of being ostracised or bullied.
  • Wanting to be accepted into the group.
  • Being socialised into the normative behaviours of corruption.

Read more on: How Silence and Censorship can Enable Workplace Corruption

Can anything be done to prevent corruption?

Minimal reporting of alleged corruption makes it difficult to detect, with the wall of silence and supportive behaviours within the ‘in’ group enabling it to continue unopposed.

However, there are a number of precautions that employers can take to limit the impact of corruption and deviant behaviour:

  • Have a good understanding of what constitutes corruption.
  • Ensure complaint management systems are robust.
  • Ensure that there are various levels of accountability so that more than one person or group of people is responsible for important tasks. 
  • Avoid having just one person deciding on a procurement supplier. 
  • Physically locate the management team at the same site as the employees it oversees, or conduct frequent random visits. 

Corruption doesn’t just happen. It is made possible through enabling conditions, and then there must be motivators and benefits. It is not always a corrupt individual acting in isolation either.

Training can be effective

Another tool to limit corrupt activity is training. Wise Workplace offers the Certificate IV in Government Fraud Control, which is recognised by federal government agencies, and has been so successful in cost savings that some state and local governments now require public sector investigators to hold this qualification. 

The Certificate IV is a national qualification, aimed at investigators who wish to work in government, and government employees who wish to be promoted. The course focuses on:

  • Identifying fraud and corruption.
  • Conducting risk assessments.
  • Conducting investigations. 

Employee corruption and deviant behaviour is a huge problem in the public sector, compounded by the difficulty in identifying and proving it. There are many employees who observe corrupt behaviours but don’t report them because they are too scared to get involved. 

It’s difficult to know how best to deal with the problem, but it is clear that education, including an understanding of the enabling conditions and the motivators to look for, plays an important role. 

Employees need to be educated about corrupt behaviours, and if more staff can be engaged in higher-level training, the frequency of corruption may start to decrease. 

If you’re interested in implementing education and training around corruption, contact WISE Workplace about the Certificate IV in Government and Fraud Control.

Gifts and Benefits - Can they Land you in Hot Water?

- Monday, January 11, 2016
Gifts and Benefits: Could They Land You in Hot Water?

Everyone loves perks – they are quite often what makes a job just that bit more enjoyable. The benefits of on-the-job perks were clear in the film The Devil Wears Prada for example, in which the heroine sought a makeover at her fashion magazine employer as a last-ditch effort to save her job. She went from a bespectacled, frizzy-haired, lumpy jumper-wearing assistant, to a sleek perfectly coiffed professional with an enviable designer wardrobe. 
Unfortunately, this scenario is not the norm, and some perks can actually land employees, and sometimes their employers, in hot water.
Why is it an issue?
There’s a big difference between a perk that is provided by an employer and a gift or benefit that is given by an external party. Gifts and benefits can take almost any form, including: 
  • Cash or shares. 
  • Items promoting an organisation (for example, t-shirts with a logo). 
  • Air tickets, accommodation and car hire. 
  • Wine and meals. 
  • Theatre and sports tickets. 
  • Discounted commercial items.     
The risk of an employee accepting gifts and benefits is that the employee is not necessarily acting in the best interests of the employer or client; they are acting in their own interests. This is a particular issue in the area of procurement.
Gifts and benefits in the public sector
Sometimes in the public sector, gifts and benefits can be construed as undermining public confidence. The Australian Public Service Commission (APSC), in its Gifts and Benefits Policy, gives the example of a tender process that is supposed to be open and transparent. If the decision-maker has received a gift from the tender-winning organisation, there may be a perception that the decision was influenced. 

It is about actual or perceived conflict of interest. At worst, a gift or benefit could be perceived as a bribe that exposes both the recipient and the donor to bribery allegations. There is a maximum penalty of 10 years’ imprisonment for accepting a bribe. 
In the public service, all valuable gifts and benefits must be disclosed to the Gifts and Benefits Register, although “valuable” is not defined by the policy. The APSC recommends that all gift or benefits are disclosed, regardless of their value.
Gifts and benefits in the private sector
Gifts and benefits in the private sector are not usually governed by the same strict rules. 

While gifts of wine or flowers may be considered inconsequential, employers should be more concerned if the employee is treated to an all-expenses paid weekend away by an external party, season theatre tickets or some other gift or benefit of substantial value. 

While wining and dining are part of the norm for many private organisations, employers should carefully consider developing a policy dealing with gifts and benefits, in particular: 
  • Reminding employees of their fundamental obligations to act in the employer’s best interests. 
  • What is acceptable interaction with external parties. 
  • What gifts and benefits should be disclosed (for example, valuable gifts or regular lunches hosted by the external party). 
  • How gifts and benefits should be disclosed. 
  • Appropriate measures in place to prevent procurement fraud. 
  • Consequences for inappropriately accepting gifts and benefits, for example disciplinary measures and termination of employment. 
If, when or how to accept gifts and benefits can be a difficult issue for organisations and employees. Everyone benefits from clear expectations and guidelines, and so a properly drafted policy is essential.  

Procurement Fraud: Hitting Organisations Where it Hurts

- Monday, October 19, 2015
Procurement fraud

Procurement is big business in Australia – there are sections of government devoted solely to procurement and large organisations have policies and procedures in place to regulate procurement practices. It’s a huge area of growth but in recent years it’s also been increasingly exposed to abuse by unscrupulous employees and operators looking to gain significant financial advantage by skewing procurement processes in their favour. Government departments and large organisations need to be aware of the risks of procurement, and how to improve internal processes to avoid procurement fraud.

Procurement fraud on the rise

In its 2015 survey Fighting Fraud in the Public Sector, accounting firm PwC found that procurement fraud is now one of the top five economic crimes with around 33% of Australian survey respondents having experienced procurement fraud in the past two years. In the same period, the survey also found that procurement fraud had doubled in the public sector. In government organisations, procurement is a major area of expenditure, which also explains why there has been such an increase in procurement fraud. Fraud is most commonly committed at the payments stage of the process, as well as at the vendor vetting and selection stage. 

The survey identified some common ways in which procurement fraud can occur:

  • Awarding contracts without a tender process or without following established policy.
  • Contract terms that are too favourable to the contractor.
  • Collusion between the employee and contractor for financial benefit. 
  • Creating a fake supplier to invoice the organisation even though no services have been rendered.
A case in point

Ipswich City Council has recently come under scrutiny for its procurement activities. The council, one of the largest local governments in Queensland, was subjected to an assessment by the auditor-general. There were 11 major issues occurring over the past six years, including: 

  • Significant increases in contract costs.
  • Invoices being paid without documentary evidence that work had been finished.
  • Overpayment of GST.
  • Failure to comply with the council’s own procurement policy.  

The council claims that it has improved its procurements processes since the findings were released. 

Preventing procurement fraud

To prevent or minimise procurement fraud, there are a number of general precautions to take. Organisations should:

  • Be alert to the early warning signs of fraud.
  • Investigate any breaches of policy in a holistic manner.
  • Ensure that minor policy breaches don’t develop into major corruption.

The PwC survey also gives very detailed suggestions about preventing procurement fraud at each major stage of the procurement process. Examples include:

  • Procurement decision-making is centralised so that the decisions are not left up to unsupervised individuals.
  • Selection criteria are confirmed and properly communicated before the tender process starts.
  • The staff who order any goods are not the same staff who receive the goods.
  • Staff are regularly trained to look for procurement fraud risks and warning signs.
  • Invoices to be paid are matched to purchase orders.
  • Proof of delivery is confirmed before payment of invoices. 

The survey goes on to note that procurement fraud can be prevented or detected early if those working in procurement have a complete understanding of the “procurement framework and lifecycle.” 

As evidence that this approach can work, the 2015 Procurement Australia Awards award for procurement excellence went to the council procurement officer for the City of Holdfast Bay in South Australia. Her achievement was an overhaul of the council’s procurement system, including a new purchasing culture. Results included increased compliance, improved service delivery and most importantly savings of up to 35% in procurement costs.

Procurement fraud has increased over the last few years, but it is clear that increased diligence, centralisation and knowledge of the procurement process can have enormous savings for government departments and large private sector organisations. 

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Scheming and Plotting in the Workplace

- Monday, July 06, 2015
Corruption and Collusion
Corruption and Collusion: Working Together for Harm

It can be a shock to discover that an employee may be corrupt. An employer can be frozen with disbelief, deeply hurt by the breach of trust, and put in a dire financial predicament. These feelings (and the financial losses) can be magnified when more than one employee is involved in the corruption. Collusion is an increasing issue in the workplace.  

What is employee corruption?
Employee corruption is dishonest conduct in which an employee abuses their position of trust to gain an advantage for themselves or others. Workplace fraud is a form of corruption and includes lying to obtain a benefit (for example fraudulently claiming sick leave) and falsification of documents (for example forging a manager’s signature to gain a benefit). Theft is also employee corruption, and can include manipulation of accounts or systems to steal money from an employer’s bank accounts. 
Why is it a problem?
Employee corruption is a huge issue for Australian businesses, and the financial losses are widespread. The 2012 KPMG survey of fraud, bribery and corruption found that Australian and New Zealand respondents to the survey reported losses of almost $373 million. Employees were responsible for 75% of major fraud activity amongst those companies. And as other KPMG research shows, employees who engage in corruption very often don’t work alone.
How widespread is the problem of employee collusion?
The 2013 KPMG study Global Profiles of the Fraudster found that there was increasing collusion between employees to commit acts of fraud. The report noted that “the fraud is often too complex for one person to execute; it requires others to turn a blind eye, or to provide passwords or falsify documents.” 70% of the fraudsters analysed by the study had acted in concert with others, and in 33% of cases, the cost to the organisation exceeded $US1 million. The report also found that incidents of collusion more than doubled between 2007 and 2013. 
What leads to collusion?
What the study did not show was why employees collude, although it did find that most people are capable of committing fraud, given the right circumstances. In some cases, two like-minded employees may have combined their skills for a greater gain. In others, more junior employees may have colluded because they felt they had no choice but to take orders from their superior. It is possible that company culture contributes to the problem. If there is a perception that the company never checks up on its employees’ activities and “everyone does this kind of thing”, then employees may more readily collude. Also, if there is a widespread feeling that the company treats its employees badly, disgruntled employees may be quite open to taking money that they feel is rightfully theirs. 
Warning signs for corruption and collusion
Interestingly, the studies have found that fraud and corruption are usually committed by male employees who have been with the organisation for at least five years, but not necessarily in a management role. In other words, the person you’d least expect. The biggest reason for corrupt activities is greed and maintaining a certain level of lifestyle.  Lack of internal controls, or the employee’s ability to override internal controls, is how most corruption is committed – when an employee is highly trusted and respected, the employer sometimes stops checking to see what they are up to. While some corrupt employees believe they have an entitlement to the employer’s money, the other key warning signs for potentially corrupt employees are workplace dissatisfaction and financial hardship.

Employee corruption is a huge problem for employers and collusion makes it even more difficult to tackle. However, companies that regularly audit their accounts and have in place a range of preventative measures and procedures can often limit the impact of corruption.

NEED A SPECIALIST?  ENGAGE AN EXPERT
WISE Workplace provides training courses and masterclasses in investigations for HR practitioners, workplace investigators and managers.  Our courses are designed and taught by investigators specifically designed for those engaged in the investigation of workplace misconduct including bullying and harassment.  See below for upcoming course dates.

INVESTIGATIVE INTERVIEWING
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Date: 22-23 July 2015

CONDUCTING WORKPLACE INVESTIGATIONS - ADVANCED
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Date: 5-7 August

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Location: Sydney
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The Top 3 Red Flags for Workplace Fraud

- Monday, June 01, 2015
The Red Flags for Workplace Fraud
Red Flags for Workplace Fraud

It’s a bright, sunny day outside and an employee really doesn’t feel like going to work. They decide to call in sick and spend the day at the beach. It must be okay, because everyone does it. Right? Wrong. An employee claiming paid sick leave when they are fit to work is workplace fraud, and can lead to termination of employment. 

Workplace fraud can take many forms, whether it’s purchasing a few groceries on the company credit card, taking office supplies for personal use at home, right through to large-scale theft of equipment and money. While in many cases fraud is dealt with by termination of employment, sometimes it also involves a police investigation and possible imprisonment.
The statistics
A 2014 study by accounting firm PWC surveyed 5,000 organisations of various sizes and sectors across the globe. More than one-third of respondents said they had been struck by economic crime. The most common types of economic crime were: 
Asset misappropriation. 
  • Procurement fraud. 
  • Bribery and corruption. 
  • Cybercrime. 
  • Accounting fraud. 
KPMG’s biennial fraud survey of 281 companies in Australia and New Zealand found that respondents had a total loss through fraud of nearly $373 million in 2012. Employees were responsible for 75 per cent of major frauds. 

It is clear that fraud is a huge issue for all employers, as it adds significantly to the costs of running their organisations. 
Red flags for the risk of workplace fraud
Various analyses of workplace fraud carry a common message: Prevention is better than cure. If organisations are aware of the risk factors for workplace fraud, they may be able to take steps to prevent it. It may be surprising that greed is not considered to be the most significant motivator. Here are three of the main motivating factors behind workplace fraud. 

1. Workplace dissatisfaction 
Workers who are dissatisfied with their organisations or for whatever reason have an axe to grind may try to put things right (in their eyes, at least) by stealing from their employer. One example is the bookkeeper whose request for a salary increase of $100 per month was rejected by his employer. For the next 20 years, the disgruntled bookkeeper stole the amount of $100 per month until he retired. The lesson to employers is to strive to create a positive work environment in which employees feel happy and valued. Employers should also be alert to any rumblings of discontent. 

2. Financial hardship 
Workers who are strapped for cash may also turn to fraud. Fraud committed by this group often comes to the fore in times of economic hardship. An increase in job insecurity leads to people tightening their belts. This often fuels a temptation to use company money for personal expenses, for example using the company credit card to buy petrol for the family car. Also, gambling, and in particular playing poker machines, is known to be more popular in tough economic times and this activity seems to remain a key motivation for committing workplace fraud. Another reason why incidents of fraud seem to increase in tough financial times is because companies tend to scrutinise their books more closely in these periods, attempting to find ways to make savings. If companies are not as vigilant in good economic times, they may be unwittingly sending a message to employees that committing low-level fraud is okay because the company doesn’t pay much attention to that kind of thing. Employers should be on the lookout for fraud at all times, regardless of the economic climate. 

3. Opportunity 
The last major risk factor is opportunity. Some employees, especially managers, have opportunity to commit fraud because of their position in the company and their access to company funds. Recommendations to combat this include: 
  • Dividing responsibility so that no single person is responsible for managing company funds and assets. 
  • Establishing good regulation and controls so that books are regularly checked and employee activities are accounted for.
  • Continually educate staff about what constitutes fraud and what is unacceptable conduct. Workplace policies should also detail these things. 
Workplace fraud is a complicated and difficult aspect of running an organisation, but with identification of risk factors and adequate preventative measures in place, employers can successfully limit their exposure to workplace fraud. 


Sliding towards Corruption - Conflict of Interest in Government

- Tuesday, April 14, 2015
Conflict of Interest
Conflict of Interest: A Source of Corruption in Government

It is an unfortunate reality that supposedly small conflicts of interest can grow into fully-fledged corruption. Within government, conflicts of interest can at first seem like the most minor of issues. Certainly, small favours might be given or suppliers provided with minor inside information. Perhaps friends are awarded short-term contracts without an entirely complete tender process being applied. Especially when time and/ or money is a crucial factor, these can seem like small conflicts compared to the bigger task of getting the main job done. After all, aren’t we trying to become more business-like in our government practices? We explain why it is a slippery slope from ‘mere’ conflict of interest, to corruption in government activities.

Where’s the conflict?

Conflict of interest involves the unacceptable overlapping of personal and public interests. Let’s take an example from the political realm. We have all seen red-faced ministers admit that they own undisclosed shares in a company whose activities fall within their industry portfolio. One personal interest – the shares – has a direct clash with their public responsibility, being the privilege of holding elected public office. There is often a ‘can’t see the wood for the trees’ element to conflict of interest in government. After all, stakeholder engagement is an increasingly important part of public roles. Plus, all levels of government are now generally being driven towards private-style operational modes. In the face of this reality, it can be hard to separate good service from conflict of interest.

Navigating the space

One important element of identifying conflicts of interest is perception. In reality, a government worker might have absolutely no intention of using their privilege, connection to industry or policy knowledge to advance their own interests. Yet even if a conflict of interest is only perceived to exist – rather than actually being real – the damage might already be done. It is important for all public officers to declare and discuss potential conflicts, both real and perceived. What might only seem a minor issue can in fact have a large impact upon the public trust that is attached to a person, unit or department. In short, it is best to err on the side of caution when identifying and declaring potential conflicts of interest.

An insidious slide

Conflicts of interest left unchecked can become the perfect seeds for enduring corruption in government. When the initial conflicts go unnoticed or undeclared, a culture of corrupt action and decision-making will often begin to emerge. Particularly where a conflict produces improper gains that are small ‘in the grand scheme of things’, it can seem to the parties involved that nothing particularly bad is going on. For government workers who consider their pay insufficient, their outside activities more important or their ambitions essential, it can seem that a small beneficial conflict is completely inconsequential. Yet the ongoing repetition or development of the conflicted behaviour is a sure-fire pathway to outright corruption. Another way that conflicts of interest can evolve into full-scale corrupt behaviour is where the culture and/or senior management adopts a permissive attitude towards the practice – or even initiates it. Unethical and corrupt behaviour can then combine to become the new normal.

Maintaining integrity

When personal gains are made at the expense of public trust – or even when a perception of this prevails – the potential for corruption within government is pronounced. One ongoing challenge for public sector bodies is developing policy and training resources that actually embed themselves into workplace culture. Conflicts of interest and corruption can sometimes be given a simple ‘tick’ in terms of corporate documentation and practices. Thorough risk analysis and practical ethics training can go some way to ensuring conflict-minimisation, and the prevention of corruption within government workplaces.  

Preventing Employee Theft Without Losing Your Shirt

- Tuesday, March 24, 2015
The High Costs of Employee Theft
The High Cost of Employee Theft: Is it Happening to You?

It can be a shock to discover that theft is occurring in your workplace. Each of your staff may have shone at recruitment, with no visible trust issues apparent. So how can we reconcile our valuable personnel with the fact that theft regularly occurs in the workplace? What did we miss? Let’s take a look at the typical way in which workplace theft occurs, plus some startling statistics about the costs to industry. 

The many ways to thieve

On shop floors, at workstations and in warehouses, Australians are stealing an accumulated $2 billion from retail employers alone each year, according to the Australian Retailers Association. Cold hard cash and inventory are certainly among the most popular ways for staff to steal from the workplace. In fact, staff members tend to pilfer from workplaces at approximately the same rate as customers. And for ordinary customers, we enjoy a 3% added cost to our purchases, courtesy of employee theft. But there are other, less obvious methods by which staff can fatten their pay packets. False invoices, inflated petty cash claims, sneaky discounts to friends, personal activities in company time, irregular credit transactions, undeclared client gifts, falsified documents and inaccurate time sheet entries can all work to strip away from the employer’s bottom line. 

Who and why?
We would perhaps not be surprised to learn that a lower-paid cashier has had a hand in the till to help pay their rent or groceries. Yet such generalisations don’t necessarily hold in the context of the ‘average’ workplace thief. In fact, the staff who tend to steal the most from bosses are those in the higher-paid and higher-access executive roles. With access to financial resources such as company credit cards, cab vouchers and expense accounts, white collar managers unfortunately take the gong for the greatest theft in the workforce. And for those personnel involved in daily dealing with accounts, revenue and general finance, the temptation to thieve can also be extremely evident. It can be a simple case of opportunity meets temptation for those workers given the greatest trust. 
When the chips are down
It is perhaps not surprising that attempts by workers to steal tend to increase during times of economic downturn; costs climb and paying bills can become harder each day. And it is also at this time that employers are actually more likely to take a zero-tolerance approach to fraud and theft. It is important, however, for workplaces to take a measured stance on workplace theft reduction. This includes not making any hasty decisions once a thief is detected. 
Tips for employers
If an employee is suspected of theft, it is important for management to carry out an objective and professional investigation. Rather than jump to any conclusions, be sure to implement a process that adheres to the principles of procedural fairness. It is also important to regularly check and update your policies and procedures around fraud and theft. As part of this, ensure that the employment contract you use at recruitment has strong and clear explanations of the types of misdemeanour that will not be tolerated. Think also about your staff morale, including strategies for keeping employees content. There is a direct link between unhappy workplaces and the amount of theft engaged in by workers. Also think carefully about the right steps to take once theft is uncovered. It might be tempting to make an example of the employee who slips a stapler into his backpack, coming down swiftly and hard. Yet instant dismissal in such a case – particularly if the worker’s record is otherwise unblemished – might lead to unfortunate legal repercussions for the business. Work out if this is something with sufficient gravity to warrant calling the police, or if internal measures might suffice. 
Keep it clear
Humans are of course a rather self-serving lot. Petty thievery might unfortunately be here to stay. Yet employers can take assertive measures to reduce the likelihood of workplace theft. First, develop and regularly check or policies and processes related to staff fraud and theft. Secondly, take measured action in relation to any allegations, and seek advice if you are uncertain about the best response. And finally – aim for a workplace with high morale and clear communication, to help reduce the temptation for wrongdoing among your staff.  

Investigating Fraud? When Do You Have to Tell the Respondent?

- Tuesday, October 28, 2014
Investigating Fraud
Investigating Fraud? When Do You Have to Tell the Respondent?

The possibility that an employee might be committing fraud can raise many emotions. As with other misconduct, disappointment can be pronounced. When fraud is suspected against either the business itself or customers, plain anger towards the potential culprit can also arise. It is this high emotion that creates the necessity for cool heads in any fraud investigation. If you are involved in an investigation where fraud is alleged, timing and a methodical plan are crucial to ensure that the process is sound. Depending upon the nature and extent of the fraud, the time at which the respondent should be told and/or interviewed can vary. The quality of any documented evidence you collect can have a notable effect on admissibility or weight in any later court proceedings. For this reason, adhering to procedural fairness in the workplace investigation will be vital. 

Get prepared

Your workplace investigation plan should include a basic timeline of actions. Top of the list will be the gathering of information relevant to the allegations of fraud. Be careful about how and from whom this will be collected. At this stage, as few people as possible should be involved in order to maintain confidentiality and the integrity of the investigation. Collect interview notes, documents, relevant screen dumps and any other physical evidence that purports to implicate the respondent in the fraudulent activity. This is also a good time to fully assess any possible motivations or overt emotional issues with the informant/s. Any later interview with the respondent needs to be based upon available facts – not any aspersions cast by an angry individual. Make a decision on any need for immediate action, particularly whether police need to be called if an employee is AWOL with fraud proceeds, for example, or data or money is currently being misappropriated. Once you have enough valid information, decide upon your next steps. It may be that the allegations against the respondent are clearly groundless. Perhaps there was a mere accounting error, for example. But if the allegations appear to have some substance, it might well be time to draft appropriate interview questions. Sometimes, the first person you talk to after the claimant is the respondent - but only after other documentary evidence has been secured. This gives them an early chance to explain their story, plus reduces the chances of workplace gossip or slander about the respondent snowballing unfairly. 

The interview

Having secured an interview time with the respondent, think through the nature and order of questions that you need to ask. The basic purpose of the meeting should be explained, without any blunt statements or accusations about the alleged fraud. It can help to be quite specific about the concerns raised by any informants: “There are concerns being raised about some anomalies that Brian found in the customer invoicing drive,” or “Your employer has some concerns about repeated discrepancies in reconciliations over the last six months”. Recalling the imperative for procedural fairness in the workplace investigation, maintain this objectivity throughout the remainder of the interview. Allow sufficient time for explanations, and ask inquisitive questions that demonstrate your open mind throughout the process.

Cater for reactions

Fraud is a serious accusation. Whether or not the respondent is involved in such behaviour, their individual emotions of indignation, shame and/ or anger might well surface. Assess whether the interview needs rescheduling, if a support person is needed, as well as any requests for legal representation. Also give the respondent options for response. Indicate that an immediate response is not required and they might prefer to respond at a later (agreed) time. Explain the remainder of your investigation plan and associated timeline for actions, in order to provide some sense of order to what might well be a moment of shock for the respondent. 

Cool heads rule 

The alleged fraud might tempt employers, owners and managers to simply confront the respondent in angry indignation. Perhaps understandable – but such action must be avoided in order to maintain the integrity of the investigative process. Remember, your objective in carrying out a well-constructed workplace investigation concerning the alleged fraud is to gather quality evidence in a fair and consistent manner. How and when to let the respondent know can be a delicate matter, dependent upon the nature and urgency of the facts in question. 

For training in the best ways of handling this type of investigation, WISE Workplace offers a Certificate IV in Government Fraud Control and a Diploma in Government Fraud Control.

Fraud and Corruption in the News

- Tuesday, August 06, 2013

 

Fraud and corruption were top of mind last week, and not just because the NSW’s Independent Commission Against Corruption handed down its findings in the Eddie Obeid investigation, while Greg Pearce, former NSW state Minister for the Illawarra, was stood down for corruption allegations.

At the same time, I joined some of the country’s top law enforcement and anti-corruption investigators at the Third Annual National Public Sector Fraud and Corruption Congress (hosted by Intrepid Minds) in Melbourne.

At the congress, the nation’s leaders in this field discussed recent cases of fraud, the challenges of public sector procurement, managing errant behaviour at a time of budget constraints and the new opportunities presented by social media.

One thing that stood out for me at the congress was the need for organisations to be alert to the early warning signs of corruption; their capacity to investigate even minor breaches of policy in a holistic fashion, and to ensure minor misdemeanours don't develop into major corruption networks.

An increasing number of professional standards officers are charged with employee misconduct in addition to corruption. The fact that Greg Rolph, APM, director of the NSW Police Professional Standards Command, observed at the conference, that he spends more time dealing with poor behaviour between police officers than cases of corrupt conduct, indicates a swing in this field.

Constant vigilance and action are required to manage fraud and corruption in our public service. Organisations can reduce their risk with these simple measures:

  • Identify those people or positions in the organisation with the opportunity/access to funds, banking and invoicing.
  • Review anti-fraud measures and accountability procedures. Ensure adequate procedures are in place.
  • Conduct audits to ensure procedures are followed throughout the organisation and regularly ask questions.
  • Educate staff and managers about appropriate and inappropriate spending.
  • When you find discrepancy, act. Nothing sends a clearer message about appropriate conduct than a case example.