This article published by CPA and Financial Advisor Kristin A. Bivona on October 13, 2011 provides sensible suggestions regarding how to avoid fraud in your company.  Some of the suggestions include careful hiring processes, a code of conduct, and open communication.

Our main clarification is that she indicates “and if necessary, employ a third party hotline employees can anonymously call to report any suspicious activity”.  An employee hotline can be implemented for less than the liability insurance that business purchase.  The cost is relatively low and the return on investment is significant!

In a workplace survey, 75% observed unethical acts and did nothing about it; they did not speak to the employee in question nor did they report it.  Reasons for non-reporting vary including:

• 68% feared retribution from their supervisors and/or retaliation, ostracization, retribution from peers

• 96% feared not being a team player

• 81% feared corrective action would not be taken

• 57% felt pressure to do “whatever it takes” to meet business targets

• 49% believe they are rewarded for results, not the means by which they achieve them

These statistics indicate having open communication with employees is not enough to identify employee tips.  Employing a third party hotline is necessary as is having a deeply ethical corporate culture that has created system-wide alignments between its words and actions!  Don’t wait until after the fraud occurs to realize these points…