Detecting employee fraud and theft – mission impossible?

By in Opinion

Early in 2016, Tessa Grant pled guilty to defrauding Waikato Diocesan School for Girls for a total of $795,000. Grant worked at the school as the commercial manager between December 2014 and August 2015. Prior, she worked at SkyCity Auckland from 2008 and 2013. It appears only after Grant’s fraudulent behaviour at the school came to light did alarm bells ring at SkyCity. An internal investigation was soon conducted, uncovering $1.98m in theft. In September 2017, Grant was sentenced to seven years and eight months in prison with the judge imposing a 50% minimum period to be served. Grant’s offences raise many questions and provides lessons for businesses in relation to employee fraud.

Employee theft can be difficult to detect for all businesses when faced with a sophisticated operator. In an effort to reduce the risk of employee theft, the following three points should be considered including, the key characteristics of a person who may commit employee fraud, some strategies to implement within your business to reduce the risk of employee fraud and finally and what to do if you detect fraud.

Characteristics

One of the main questions raised is why do people like Grant offend? With a six-figure salary Grant’s salary was nearly three times the average wage in Auckland.

Research shows it is rarely about the money. In a lot of cases, it is a sense of entitlement which drives the desire to commit fraud, while for others it is to fund a lifestyle way beyond their means and the ability to ‘keep up with the Jones’. Others simply justify the fraud they commit on the basis they are underpaid and are taking what should have been rightly theirs.

In a lot of cases, employee fraud takes place in a high trust environment where the offender, often at times covers several different roles in which they are provided access to company bank accounts and are involved with the payment of accounts. If the opportunity is combined with poor processes and systems, someone looking to commit employee fraud will often start offending in a minor way, taking small amounts to test the ability to get away with a larger theft.

Businesses should be mindful not stereotype what an offender should look like or their background, as this will contribute to making fraud harder to detect.

Are we fighting a losing battle against workplace theft?

Technology for all its benefits is being used cleverly to perpetuate workplace theft. In Grant’s case, it is likely that she used her employee access to the technology available to doctor invoices, so they would be paid without raising suspicion. The doctored invoices found during the trial included invoices to a contractor conducting work on both Waikato Diocesan School for Girls and Tessa Grant’s house. A total of $600,000 was paid to the contractor by the school for work on Tessa Grant’s house.

As most banks now provide the option of printing bank statements yourself and receiving them in an excel format, it has provided a new avenue for employee fraud to take place as they can be easily altered.

Reducing your businesses risk

Reducing the risk of employee fraud, is not mission impossible if the threat is taken seriously. The following steps can be taken to reduce the threat to your business:

Firstly, assess your current process and systems. Some of the key questions which you should be able to answer are:

  • Who receives invoices, checks them, signs them off, enters them into the accounting system, batches them for payment?
  • Who has internet access to the company bank accounts, who spot checks the access to check who logs in, when and why?
  • Who are the cheque signatories?
  • Is signing blank cheques an acceptable practice?

Secondly, look at how the systems have been implemented and followed. It is important to ensure that they are regularly reviewed for effectiveness. It is also advisable for the reviews to occasionally be conducted by someone outside the organisation.

Thirdly, there should be procedures and policies in place on how to investigate any suspected employee theft.

Lastly, it is crucial staff caught stealing are reported to the police.

If the possibility of employee theft is treated as a real threat, and adequate time and resources are allocated to ensure processes and systems are in place the Tessa Grant’s of this world will not be able to offend to the extend she did. By undertaking some or all of the suggested measures above and maintaining regular checkpoints, the threat of employee theft can be reduced in numbers and dollar value.

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