The other day I was fixing my sprinkler system in my front yard, and I started thinking about fraud.
I have a thing for fraud. When reviewing mortgages, I always got a special tingle when I realized I was uncovering a potentially fraudulent loan. When I returned to school for Accounting, I took a Forensic Accounting class and I loved it. I enjoy reading about fraud. It is just a very interesting subject to me.
What does this have to do with a sprinkler system? You see, most work place fraud is not committed by people who took their job with any intention of ever committing fraud. Fraud is a crime of opportunity. Water going through a pipe just goes until it reaches the end. If there is a crack in the pipe, water will take the opportunity to exit out the crack. Workers go through their job with the thought of getting the job done. Then one day they may discover a crack in the system. At this point, the analogy ends. Water will simply take advantage of the cracked pipe regardless of the situation. The worker usually does not, until something triggers a justification.
The justification might be an unexpected bill, such a medical emergency of a loved one. Often, the justification is a feeling the company owes the worker something. A potential fraudulent employee might think he/she got passed over for a raise they felt they deserved, or feel they work harder and do more then they get credit for. Perhaps it’s just a way to stick it to a bad boss. So one day, a perfectly law abiding citizen takes advantage of the crack in the pipe to get extra money or benefits.
And while most employees who commit fraud may say “just this one time” once the crack in the pipe is open, much like water, it just keeps coming.
How to prevent fraud is the question. Most business owners conduct extensive back ground checks, but because fraud is usually a crime of opportunity, a back ground check may do little to point out who might commit such an act. Volumes have been written about separation of duties and redundant checks and balances, but unless you are in a very large company, such measures are usually too expensive and impractical for most small business owners.
While not fool proof by any means, simply being respectful to employees is a key. Of course, you cannot grant every raise or provide every bit of compensation to everyone who feels they deserve it. However, being nice, and not falling into the trap of being the hated boss can work wonders for moral, and make it less likely for anyone to steal, or at least less likely other employees will turn a blind eye to anyone they notice. Keeping an ear open to employees who are struggling can help you provide assistance before they potentially turn on you.
And oddly enough, forcing employees to take their vacation time is highly recommended. Not only can employees not commit fraud when they are not at work, but if they are diverting funds, such anomalies will suddenly become apparent during the days or weeks they are gone. Not to mention a well-rested employee is less likely to feel the need to stick it to their employer in the first place.
However, much like the cracks in my sprinkler system, fraud is bound to happen sooner or later. I keep a box of sprinkler parts in my garage for just such occasions, and my forensic accounting book sits proudly on my desk just in case I need that too.