Tips from employees are the most effective method of uncovering occupational fraud according to the Association of Certified Fraud Examiners (ACFE). Anonymous hotlines are particularly effective and can also deter those who are tempted to commit fraud. However, simply having a hotline available is a far cry from encouraging employees to report possible fraudulent activities. Read on for some tips on how to promote use of your fraud hotline when appropriate.
Confidential and convenient
Ensuring that employees feel comfortable using your fraud hotline is critical. First, it must be available 24 hours a day, seven days a week. Few employees will risk making reports during working hours when co-workers might overhear them.
Also, the hotline should be more than a voicemail system that forwards calls to someone in the company. Employees are more likely to speak freely to a third party or a trusted individual within your company. Personnel monitoring the line should be trained to ask questions and gather information necessary to mounting an investigation. But don’t be tempted to use caller ID or other identifying features. The perception that calls aren’t anonymous will discourage reports.
Indeed, stress the confidential nature of your hotline to employees and reassure them that callers will be protected against possible retaliation. Also explain what callers must provide when reporting suspected wrongdoing. You can communicate this information in your employee handbook and company newsletter, on your intranet, and in employee breakrooms.
To demonstrate that you take anonymous tips seriously, track complaints, investigate them thoroughly and report their dispositions not just to internal audit personnel, but to the whole company. Without revealing details, indicate the number of reports you receive each month or quarter and how many disciplinary or legal actions result from them. If you also report the number of tips that proved to be unfounded, and why, you may be able to discourage frivolous attempts to discredit innocent co-workers.
Finally, remember that a hotline is just one factor in your overall fraud prevention efforts. You also need a company culture that actively discourages fraud from the top down, as well as a strong set of internal controls to make fraud difficult to perpetrate in the first place.
Providing a way for employees to report possible fraudulent behavior is one part of establishing a culture of integrity in your company. If you have questions or want help establishing an anonymous reporting system, JLK Rosenberger can help. For more information, call us at 949-860-9902 or click here to contact us.