There are a number of different types of fraud, from simple theft through to major corporate accounting scandals. Common types of fraud most relevant to nurseries are:
- misappropriating assets, for example, theft of cash, stock or other items
- failing to account for all income received from fee-payers
- making false expense claims
- receiving kickbacks or commission from a supplier
- having an undisclosed financial interest in a relationship with a supplier or other third party.
Warning signs of fraud
Look out for any warning signs that are potentially suggestive of fraudulent activities. While some of the examples below may not be warning signs in themselves, a number of them together could indicate a motivation by one or more individuals to commit fraud:
- Management dominated by one or two people, with no effective committee or board having oversight
- High turnover of staff who are involved in accounting and financial matters
- A failure by management to take appropriate action in response to departures from procedures on financial matters
- Excessive hours worked by staff who have some financial responsibility, or a lack of delegation of routine administrative tasks
- Indications that an employee has a lifestyle that varies from his/her actual income.
Dealing with the suspicion of fraud
It is likely, however, that an employer will only suspect fraud by an individual when a clear irregularity emerges. Where a real suspicion is held, the key is to ensure that a full and fair investigation is carried out and that no firm conclusions are reached until this is completed. Except in the very smallest of organisations, the investigation should be undertaken by someone different from the person who may ultimately have to take a decision to dismiss a dishonest employee. A third person, unconnected with events so far, can then hear any appeal. While the outcome of the disciplinary hearing is pending, staff should only be suspended when an employer considers a real need to ensure that the employee(s) under suspicion is away from the premises until the investigation is concluded. The nursery's disciplinary procedure should be followed.
Safeguarding against dishonest activities
Nurseries should have clear written procedures setting out in detail how financial transactions should be carried out at the organisation, with provision for monitoring throughout. For instance, if payment of fees can be taken in cash, parents should be informed that receipts for this cash should be signed and countersigned by two employees. It should be made clear to staff that any failure to follow the set procedures will result in disciplinary action. Even a minor breach should be treated seriously so that a strict culture of compliance is engendered.
Where an employer keeps a safe on the premises, it is important to have clear procedures in place and restricted access. It is also a requirement to keep a written log of all times that the safe is open and closed and the transactions carried out. Should any monies go missing, it should then be easier to identify the point at which this happened.
For further information, contact Karl Deakin, associate, Veale Wasbrough Lawyers, tel: 0117 314 5443, e-mail: kdeakin@vwl.co.uk.
