Recently NSW’s ICAC, an anti-corruption initiative, has recognised the key role that employment screening plays in curbing corruption and helping to shape an environment less prone to corruption.  Government News reported the story earlier this year, and our sense is that the momentum is building in favour of screening best practice.

The NSW Independent Commission Against Corruption (ICAC) has recommended to the State Government that it adopt stronger employment screening practices. It says that this will help combat employment application fraud, which if left undetected can ultimately allow other corrupt conduct to occur.

ICAC Chief Commissioner Peter Hall said that employment application fraud is common in NSW, and that between 20 and 30 percent of government job applications contain false information.

“The detrimental effects that poor employment screening practices have can be very wide reaching,” he said. This puts agencies at financial risk and impacts upon their ability to discharge their public service functions efficiently and effectively.

The recommendations are contained in a new ICAC report, ‘Strengthening employment screening practices in the NSW public sector’. The report refers to a number of its published investigations that examine the conduct arising from undetected employment application fraud.

These include gaining improper financial benefits. It gives the example of ‘Operation Sonet’, which resulted in an individual with an undetected fraud conviction making a corrupt profit of $1.14 million after being appointed acting IC) manager and then overcharging for ICT project items.

“The report provides solutions that will help NSW public sector agencies weed out these problems earlier in the process, before they become a corruption burden on the agency and the state, said Mr Hall. “ICAC recommends that employment screening should not just be a one-off aspect of the initial recruitment process, but should also be applied during the course of the individual’s tenure, for example, if an individual is to be promoted to a higher position within the agency.”

Read more here.

It’s important to build a team you can trust, but unfortunately employee fraud is common.  Pre-employment background screening is a critical tool in reducing the risk of hiring the wrong person.  Here’s a story worth reading with some of the things to look out for in terms of employee fraud:

A business owner I know was seeing a slight decline in his gross revenues and gross margins last year at three of his five retail locations. He couldn’t understand what was going on. So he installed an enterprise resource planning system including a point-of-sale inventory management system. He hoped that these new systems would isolate the problem and improve his company’s profitability.

But things didn’t change. Product margins were less than expected; product sales were flat; cost of goods sold were inconsistent; and, the inventory analysis never reconciled with the company financial books and records. Something was radically wrong. The business owner contacted a management consulting firm for help. After an extensive review, the firm found that the company was a victim of fraud. Someone or several employees were embezzling money through misappropriation of assets.

That business owner isn’t alone. According to the Association of Certified Fraud Examiners, nearly 40 percent of fraud occurs at privately held companies and 30 percent occurs at companies with fewer than 100 employees. The association estimates that fraud causes average revenue losses of 5 percent annually.

Read more here.

An earlier post brought to light some of the legal implications involved in screening new hires using a criminal background search. Criminal record cases for existing employees can be even more difficult to handle than applicants. In Australia, companies must be able to prove there is a relationship between the criminal conduct and employment in order to legally dismiss an employee. Human Capital Magazine offers some advice on these situations:

• Review your company’s criminal offence policies; make sure that employees are aware of requirements to disclose any charges against them
• Apply these policies consistently to avoid disputes of unfair treatment
• When a conflict arises, make sure the employee is given the opportunity to explain themselves before the company takes action

Read more here.

In another fraud case, a woman was found guilty of stealing $30,000 from her employer.  As an administration officer, she allegedly used company credit and bank accounts for personal use.  While the condition of the organisation’s employment screening protocol and risk framework is still unknown, this is another clear reminder that employees, often those in important positions of trust, can pose a significant risk to their employers.

Read more here.