Of late, we have been working with an increasing number of clients dealing with significant issues involving fraudulent behaviour and serious misconduct. Such behaviours within a business are not new, but it does feel that there is a rise in occurrences which is concerning. All is not lost though, as you can take proactive steps to reduce the risk of dishonest behaviour in your business with some simple and effective methods.

Fraudulent activity in the workplace examples

First though, let’s take a look at some of the examples of fraudulent behaviour we’ve recently been assisting with:

1. Business expenses – in this instance, our client discovered that an employee was claiming, and receiving reimbursement, for expenses that occurred on nonwork days and for items and services that were in no way related to the business. Additionally, the employee was not meeting their policy requirements as to the timeframes expense claims needed to be lodged. This employee submitted claims for multiple months at a time, making it more time consuming and challenging to identify the issue around the inappropriate claims.
   
2. Deceptive activity - a senior employee took it upon themselves to employ, family and friends, created roles and gave pay increases with favouritism to those she had a relationship with at salary review time. Without knowing anything untoward was occurring, the business owner went looking for information to do with another matter when he stumbled over the pay disparities leading him to review the last applied increases which had been made without his knowledge or approval. At around the same time, an external audit was occurring and this too uncovered further anomalies and concerning matters regarding financial mismanagement were discovered.
   
3. Theft through billings – to round out the trio, a client discovered that an employee was billing clients the full amount for incomplete work. This employee added a cherry to the top of this disgraceful behaviour by providing these clients with his own bank details for payment, not those of the business, but weirdly, entered the invoices into the business’s system when asked for information on what work he had been undertaking. Imagine the customers’ surprise when they were contacted by the business chasing overdue invoices, that they were able to provide proof of payment for!

All three of these fraudulent activity examples have caused the relevant business leaders significant amounts of distress. The idea that a trusted employee has been lying to you or stealing from you in some way is extremely upsetting. It’s also very stressful for business owners to navigate these circumstances in which they generally have no experience.

Not only are these issues upsetting and stressful, but they have also caused each of the businesses to invest significant amount of time and money into investigations and evidence gathering, and the costs of engaging our services, and of holding appropriate meetings with the employees with a view to terminating employment as well. All nasty stuff, frankly. This is time and money that could be invested in much more positive, revenue generating activities in a business.

Could it happen to you?

It’s possible you are sitting there thinking that this could never happen in your business but are you sure? Each of these scenarios played out right under the noses of the business leaders and owners and were only discovered when managing completely unrelated matters. And each of the employees conducting this illegal behaviour sat in a position of trust within the business.

Before you start looking at all of your employees as potential threats to your business, let’s remember that the absolute majority will be hardworking, honest and productive individuals who are as horrified as you at the thought of fraudulent behavior. Unfortunately, when it comes to human behaviour, there is always the risk that a bad egg will take advantage of loopholes or lack of scrutiny.

Most of us are trusting souls and unless we see or experience bad behaviour, we assume those around us will choose the right path. It doesn’t mean we are foolish or naïve, we just want to see the best in people but when it comes to your business, you can be a little freer with the trust when you have a framework in place that mitigates risk.

Stop fraudulent activity before it starts

It’s easier than you think to get such a structure in place and first up is HR Staff n’ Stuff’s favourite accountability tool and that’s policies. We love policies for many reasons but first and foremost, they set up very clear expectations of behaviour, providing employees with clarity and understanding of consequences when they are not followed. Robust policies set the foundation for your business and well written, clearly communicated and easily accessible policies are very often the key to defending and winning an unfair dismissal claim. Yes, even employees whose behaviour could be deemed fraudulent have the right to lodge an unfair dismissal claim and you’d be surprised by how many win simply due to the lack of a clear policy!

Policies, policies, policies

Policies come in all shapes and sizes and aren’t just restricted to how annual leave is managed or details as to the dress code (remember when we only dressed casually on a Friday?). While there are a number that are required by law, there are plenty that a business should consider relative to the type of work they do, and the actions required of employees. When it comes to reducing the risk of fraudulent behaviour, policies to consider include:

• Code of conduct - amongst other information, this policy can detail what would be considered deceitful and/or illegal behaviour and the outcome of such activity.
  
• Recruitment – clearly define who has responsibility and approval authority for replacing or appointing new positions.
  
• Expenses reimbursement – provides clarity around the how, who, what and when of submitting expenses for reimbursement.
  
• Gifts and gratuities – are you open to your employees receiving gifts from suppliers? Is there the chance this will leave them open to bribery or lead them to choose a supplier based on what they will receive rather than what is best for the business. Get a policy in place that sets how you expect such ‘freebies’ to be managed or approved.
  
• Time in lieu – yes, a policy here can be important. We have seen examples of individuals signing off on time in lieu for themselves that is excessive and/or unearned providing themselves with additional paid time off that has not been earned and is in fact, fraudulent activity.

Policies can cover almost any aspect of your business where you need to outline behavioural or procedural expectations. By clearing outlining lines of responsibility and approval (e.g. stock control and authorisation limits – what and how much can be ordered by whom and where approval needs to be sought), you also put in place double check mechanisms so that no one person has authority in an area that is open to abuse thereby reducing the risk of fraudulent activity occurring or going unnoticed.

Division of power

Alongside policies, separation of duties or a division of power can go a long way to protecting your business and placing temptation out of reach. A clear example of two areas that can often be combined to the detriment of the business are HR and payroll. We highly recommend these areas of responsibility are clearly delineated as it is extremely risky to allow the person who hires, fires and recommends remuneration levels to also have the ability to manage the delivery of employee payroll unchecked.
Separating functions such as these puts in place a level of checks and balances when you have clearly defined roles and lines of authority.

Providing your team with clear lines of authority and responsibility protects them as well as your business. Allowing only one individual the power to recommend and then authorise expenditure leaves you wide open to abuse. When you have a line of command that allows multiple eyeballs to review and assess as well as authorise, a level of accountability and scrutiny comes into every purchase, payment, reimbursement, hiring and remuneration decision that occurs in your organisation.

Build the trust

Trust is incredibly important when it comes to our interactions with others as it allows us to work effectively together. But trust is also incredibly fragile – once broken, it can be difficult to rebuild and can cause you to become suspicious of innocent bystanders. Reduce the risk of damage and doubt out of your professional relationships by establishing frameworks within your business that drive a culture of accountability, responsibility, honesty and transparency.

If you need help with policies, establishing clear lines of authority and responsibility or perhaps an audit of your current areas of concern or risk, contact the HR Staff n’ Stuff team and we can discuss your options. Just keep in mind a favourite saying: ‘It’s all good, until it’s not’. Your proactive actions to minimise these types of risks in your business will assist you ‘when it’s not’.