Stopping Employee Theft

Stopping Employee Theft
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Employee theft is on the rise, even in charitable organizations, and it’s not the occasional office supplies employees are swiping. Large sums of money are being stolen from employers, leaving devastating affects on businesses and Habitat affiliates alike. At the Habitat for Humanity Affiliate Insurance Program, we want to help your affiliate reduce the risk of such a loss.

To prevent employee theft, implement the following procedures:

Selecting the Right Employees

A good way to detect the character of someone you’re considering as an employee is to verify past employment. While a prior employer may not tell you more than the dates the person was employed, they may give an impression of the candidate through the tone of their voice. Ask if the applicant is eligible for rehire. Aside from past employment verification, verify their education and licenses or certifications as described on a resume, especially if the position will be handling finances.

You may also conduct reference checks. Many applicants list people with important sounding titles, expecting that the hiring manager will not actually look into the references they’ve provided. Call the references and ask about their impression of the candidate.

Check for prior criminal convictions, especially convictions that involved dishonest conduct or theft. Public record services such as Nexis and ChoicePoint have criminal conviction records for most large counties in the U.S.

You may need to obtain the consent of the candidate before conducting some of these checks. Numerous federal and state laws governing the gathering and use of information for pre-employment purposes, such as the Fair Credit Reporting Act, require that you obtain written consent from the candidate before amassing some types of information listed above.

Be consistent. If you choose to screen one candidate, you must screen all candidates.

Policies and Procedures that Help Deter Fraud

  • Treat Employees Fairly. Pay your employees fairly and try not to show favoritism. When employees feel cheated or de-valued, they are more likely to justify stealing.
  • Have an Open-Door Policy. Make employees feel comfortable discussing their concerns with management, and keep discussions confidential. When they do discuss their concerns, act accordingly. Ask questions, and be supportive.
  • Create a Perception of Detection. If employees feel the likelihood of being caught and ultimately fired is high, they will be less inclined to steal from you.
It is possible to create this perception by implementing these procedures:

Carefully review the employee theft prevention controls you currently have in place, if any. Determine if the procedures are followed and if they are effective in deterring employee theft. Management should always look for ways to improve procedures. Theft prevention is an ongoing process that requires continuous evaluation and improvement.

  • Conduct Regular, Unannounced Audits—Develop audits that focus on high-risk areas for fraud, including expense reports, payroll, purchasing, sales, accounts receivable, customer complaints, cash and suspense accounts.
    • Third Party Audits—Hire an independent CPA to perform an annual audit of the financial records and procedures. Have the CPA report to the Board of Directors.
    • Bank Statement Reconciliations—Hire an outside accounting firm to perform monthly bank statement reconciliations and prepare financial reports for the Board of Directors.
    • Cash Handling, Receipt of Donations, Check Writing and Expense Payouts—Draft and adopt best practices to ensure that there are multiple levels of oversight with respect to these transactions.
    • Make Vacation Time Mandatory—Many times fraud or thefts are noticed when a perpetrating employee is away from the office for an extended period of time, allowing another employee to take a look at the books.
    • Involve Your Employees—Your employees are the people who are most aware of areas vulnerable to fraud. Talk to them and ask them for their help in reporting possible areas of concern. Ask them to report any suspect behavior (i.e. theft, fraud, or any other dishonest conduct) via MySafeWorkplace, an anonymous and confidential incident reporting system utilized by Habitat for Humanity.

If you do catch an employee stealing from your business and can prove it, notify the police and press charges. This will demonstrate to your employees that Habitat for Humanity takes allegations of employee theft very seriously.

If you have any questions, please call the Habitat for Humanity Affiliate Insurance Program at (888) 553-9002.

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