Workplace fraud costly

by 14 Nov 2006

DESPITE AN increased awareness among employers of risks associated with workplace fraud, a lack of action has left most exposed to significant economic loss from fraud, according to a national law firm.

Although workplace fraud is now estimated to cost the Australian community up to $14 billion each year, not enough is being done to address the problem, said Peta Tumpey, partner with Hunt & Hunt.

Many employers may not even be aware they have been defrauded by an unscrupulous employee, and so may consider the loss to be a bad debt or operating cost, she said.

“Workplace fraud is a very real problem in Australia and the consensus among specialists in the field is that not enough employers are protecting themselves sufficiently by deploying fraud detection and prevention strategies.

“Although a significant number of organisations have systems for anonymous reporting of fraud, far too much workplace fraud either goes undetected or, if it is detected, goes unreported.

The group most likely to commit workplace fraud is non-management employees, and the most common types of fraud are CV fraud (in which people misrepresent particular qualifications in order to secure a job) and timesheet fraud, which occurs when employees claim overtime or hours they have not worked, according to Tumpey. Timesheet fraud is more prevalent in industries requiring shift work and irregular working hours.

A common sign of CV fraud is an employee clearly lacking assumed competencies, or not appearing to know what they are doing or talking about. Timesheet fraud is readily detected when on scrutiny of monthly pay figures, it becomes apparent that a particular employee is consistently claiming more overtime over a period of time than previously.

“Employers have adequate legal remedies at their disposal if they detect fraud, the most common of which is instant dismissal in severe circumstances. However, it is extremely important that employers first investigate their suspicions and are satisfied these are well founded,” Tumpey said.

“For example, if CV fraud is suspected an employer can contact the institution with the employees consent and confirm someone’s qualifications. To counter suspect timesheet fraud, they have the right to implement camera surveillance to investigate when people are in fact clocking-on and clocking-off, providing that employees are informed they are under surveillance.

Tumpey said key steps in developing a fraud prevention strategy should include:

• Conducting a fraud risk assessment to identify areas of the business that are most susceptible to employee fraud

• Reviewing internal fraud control policies and procedures, HR policies, employee due diligence procedures and fraud awareness training for staff

• Developing an anonymous colleague ‘whistleblower’ reporting system

• Developing a program of routine fraud detection tests for key financial data

• Developing a robust fraud incident management plan

• Adopting appropriate policies and practice for the ethical conduct of your business.


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