CBA Record

oversee the functions on an ongoing basis (i.e., segregation of duties). Likewise, all purchases, payroll and disbursements should be authorized by a senior-level man- ager. And conflicts of interest arising from transactions with an employee’s family member or friend should be prohibited or, at minimum, closely supervised. In addition to mitigating risk, strong internal controls lead to detecting the fraud. According to Global Profiles of the Fraudster , more than 70% of fraud was detected by internal controls alone or in conjunction with other factors such as whistleblowing. Is Internal Whistleblowing Helpful? As noted above, internal whistleblowing and informal tips are the most common means of fraud detection. And, according to Global Profiles of the Fraudster , internal whistleblowing is critical to detecting sophisticated forms of fraud designed to circumvent even the strongest of internal controls. Businesses should establish a culture of compliance and promote, rather than discourage, internal whistleblowing. In addition to detection, a proper whistle- blower program has other benefits. For example, it demonstrates a “tone at the

What About Employee and Third Party Background Checks? Another key first step in avoiding fraud is performing proper background checks on all employees. A background check program begins with requiring the appli- cant to provide information (usually on an application form) and supporting docu- mentation concerning prior employment, education, certifications, addresses and criminal events. Independent checking of claims is critical, depending on the importance of the post. Even the most extreme resume padding can occur. Take, for example, the embarrassment Notre Dame suffered when it hired George O’Leary to be its head football coach, only to find out shortly thereafter that he had misrepresented his college football career and never obtained a masters from “NYU- Stony Brook University,” a school that does not even exist. Certain documents should be provided in their original form for verification, with copies retained by the employer. Requiring a certification or signature attesting to the accuracy of the information is helpful as well. Third party vendors should be employed to perform appropriate criminal records searches and

top” and an organizational culture that encourages a commitment to compliance with the law. A culture of compliance is critical when dealing with regulators under, for example, the United States Federal Sentencing Guidelines. The specifics of a strong whistleblower program depend on the unique characteris- tics of the organization. There are, however, core principles. A strong whistleblower program has the full support of manage- ment. It allows for anonymous tips to mitigate fear of retaliation from coworkers (note, however, some countries prohibit anonymous internal whistleblowing). A strong whistleblower program will desig- nate an impartial person to receive the tips. Reporting should be available around the clock via multiple means (phone, email and text). And those on the receiving end of the whistleblower hotline should imme- diately begin investigating any credible tip. Finally, a proper whistleblower program expressly prohibits retaliation. Indeed, anti-retaliation policies are essential in many industries, such as the securities and commodities industries governed by the Dodd-Frank Act.

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