Unfortunately, employee fraud and financial misconduct is a common issue for businesses in Australia, costing billions of dollars each year. WISE Workplace is often engaged by businesses to undertake investigations regarding financial misappropriation, theft and fraud – but organisations can do a lot more to prevent fraud before it can occur
“Misplaced trust, inadequate hiring and supervision policies, and a failure to implement strong internal controls create an environment that is ripe for an employee to commit fraud. Employee fraud is therefore about opportunity.”
The approaching end of the financial year provides business with an opportunity of their own, to refresh policies and safeguards which prevent employee fraud. Here are three helpful recommendations from our years of work in this area, to help your business reduce and control opportunities to commit fraud.
Third Party Audits
WISE Workplace has found that by the time concerns regarding employee financial misconduct are raised, the behaviour has been going on unnoticed for years at a time. This is especially the case in small businesses with a culture of trust, low staff turnover and in-house financial management.
By implementing an annual financial audit process, businesses are better placed to detect discrepancies early. An external audit process can also reduce the likelihood of employees doing the wrong thing, as the chances of being caught and facing consequences significantly increase.
A third-party audit created a culture of accountability, reduces opportunity for misconduct to occur, and may prevent major financial losses which can be a catastrophe especially for small businesses
Improving Financial Literacy
Another helpful way to reduce the risk of fraud and misconduct in your workplace is to improve the financial literacy of employees who hold a financial delegation. Have you noticed a tendency for team leaders and managers to sign paperwork without reviewing it appropriately first? This is an indication that there may be lack of awareness or understanding about the significance of the financial delegations they hold and of the practices required to meet these obligations.
By enhancing the ability of the leaders in your organisation to review, query and vet financial material, they will be well placed to identify matters such as purchase orders, invoices and contract terms that are not quite right.
Strengthening Procurement Processes
Another area which can reduce the opportunity for financial misconduct to occur is through good governance around real and perceived conflicts of interest. Conflicts of interest should be viewed as an important part of ensuring transparency, probity and due diligence in the procurement process.
Conflicts of interest are not the problem – unknown and unmanaged conflicts are. It is important that your staff understand the difference to encourage them to disclose conflicts. Once conflicts are identified, processes can be implemented to remove or manage the conflict.
When a business is aware of real and perceived conflicts of interest, the procurement process is strengthened. By checking the Conflict of Interest register when engaging in procurement, your business can review and quality assure tendering and contracting awarding processes with third parties. Without this kind of rigour, employees may exploit the procurement process, perhaps by awarding contracts and tenders to businesses that they have a financial interest in, or that are owned and operated by a spouse or family member.
If all else fails and you do have evidence of unexplained anomalies, employee fraud or financial misconduct, rest assured that WISE Workplace are experts in leading investigations into allegations and concerns of fraud and financial misconduct in private industry, the public sector and the not-for-profit sector. WISE Training also offers professional development courses for HR Professionals, Managers and Financial Leaders in relation to fraud investigation. For more information about how WISE Workplace can help your organisation, contact us on [email protected] or call 1300 580 685.