APT Apprenticeships (APT) which is a trading name for APT Health & Safety Training Solutions Ltd has a duty to its stakeholders to take all responsible steps to prevent fraud occurring, whether perpetrated by staff, partners, contractors and suppliers, other organisations or members of the public.
APT will maintain robust control mechanisms to both prevent and detect fraud. All line managers have a responsibility for maintaining documented control systems and must be seen to be setting an example by complying fully with procedures and controls.
All members of staff have a responsibility to protect the assets and reputation of APT and are expected to be alert to the potential for fraud. Line managers should brief staff on the common types of fraud perpetrated in their areas of responsibility.
Our Speak Up Policy has been established to allow staff to report suspected frauds to management.
APT’s procedure for fraud prevention, detection and investigation is set out below. The objectives of the procedure are to:
- encourage staff to be aware of fraud;
- bring suspected fraud to notice;
- provide a framework response plan for investigating and reporting fraud; and
- ensure both alleged and proven fraud are dealt with in a consistent and timely manner.
APT has a role to play in the community and any instances of fraud or corruption may be damaging to public confidence and support. Losses due to fraud, theft or corrupt practices can have a direct effect on jobs and the level and quality of service provision. Vigilance is essential since all staff are responsible for ensuring that the best possible service is provided to the APT clients and that value for money is secured from clients.
Successful fraud prevention involves creating an environment which inhibits fraud. Taking immediate and vigorous action if fraud is detected is not only necessary to prevent future losses, but also helps deter frauds. A manager who is alert to the possibility of fraud and who acts accordingly on a day-to- day basis is a powerful deterrent against fraud.
Fraud can be defined as ‘any act of wilful dishonesty to gain individual or collective advantage’. It is taken to include theft, misuse of property, corruption, the alteration of financial or other records or any unauthorised act which results directly or indirectly in financial gain to the perpetrator or a third party. Fraud can he perpetrated against staff, suppliers, Government Agencies or Departments, or the public.
Staff should be aware that gifts, including hospitality, offered by contractors, suppliers and service providers may place employees in a vulnerable position.
MANAGEMENT RESPONSIBILITY AND RISK MANAGEMENT
The prime responsibility for preventing fraud lies with management through:
- identifying risks to which systems and procedures are exposed;
- designing, implementing, documenting and operating of internal controls;
- establishing an environment that promotes compliance with internal controls;
- promoting fraud awareness amongst staff; and
- fostering an ‘anti-fraud’ culture.
However, while managers are responsible for assessing and controlling the level of risk within their areas of authority, it is the responsibility of all staff to be aware of fraud and to take the necessary steps to minimise the risk to APT.
Managing the risk of fraud is the same in principle as managing any other business risk. It is best approached systematically both at organisational and operational level. Managers should identify risk areas, assess the scale of risk, allocate responsibility for managing specific risks and implement and test controls to minimise the risks.
Management also have a responsibility to familiarise themselves with common fraud techniques in areas for which they have control. Managers should also ensure that staff in their areas of operation are familiar with common types of fraud.
Internal controls are the key element in preventing fraud. They include both financial and non- financial controls. The financial regulations are one example of these controls. APT’s financial and other non-financial procedures are the definitive guide and are available to all staff. It is the responsibility of management to ensure that controls in their area of responsibility have been documented and communicated.
In order to set a good example, managers should be seen to be complying with all controls. The emphasis should be on creating a culture of honesty and fraud detection, not increasing the volume of detailed operational and supervisory checks and controls, unnecessarily.
The prevention and detection of fraud and impropriety is only possible where strong internal controls are present and constantly applied. Routine checks and monitoring by management to ensure that procedures are being followed are, therefore, essential. The benefits of implementing a culture of strong management controls:
- a deterrent effect when it is known that management is actively involved in ensuring that procedures are followed, and
- the results of the checks will allow management to identify any operational areas where controls are not being uniformly applied and investigate whether systems have been exploited.
- Management should periodically monitor compliance with controls.
Common excuses for non-compliance with controls are that they are no longer applicable, insufficient time is available or they are not appropriate. It is important that such comments are reported to management so that the need for the controls can be re-evaluated.
Staff provide the best protection against fraud and corruption. It is important, therefore, that the APT policy on fraud prevention and investigation is fully communicated to all staff. The lack of clear guidance and ignorance of procedures will often be the first excuse used by offenders.
The recruitment of suitable staff is APT’s first defence in preventing fraud. Best practice recruitment policies such as detailed application forms including a statement on criminal records, communication with referees and past employers and verification of educational and professional qualifications will assist in this approach.
Staff awareness of policy and procedures is fundamental to the effective operation of systems. APT will comply with best practice, including:
- publication of APT’s policy on fraud, corruption and impropriety including easy access to it for all staff;
- instruction in and discussion of control and probity issues as part of staff induction;
- formal staff training on operational procedures;
- desktop instructions for specific tasks; and
- regular staff notices regarding changes to Financial Regulations and financial procedures.
The primary responsibility for detecting fraud lies with management through the implementation, documentation and operation of effective systems of internal control.
All staff have a responsibility to be aware of the potential for fraud and take the necessary steps to minimise the risk to APT.
Properly and consistently applied procedures for reporting and investigating fraud play an important part in preventing further fraud. APT expects that reported suspicions will be investigated. APT fraud response plan set out in the next section must be implemented where fraud is suspected.
3. FRAUD RESPONSE PLAN
Management and staff are likely to have little experience in dealing with fraud and when suspected cases arise, may be unsure of the appropriate action to take. The objectives of this response plan are:
- to provide a documented framework to which APT can refer in the event that fraud is suspected or reported; and
- to ensure that in the event of fraud, timely and effective action is taken to prevent further losses, identify fraudsters, safeguard evidence, minimise publicity, reduce adverse effects on the business and to learn lessons.
- Fraud investigation checklists for line managers are attached.
All actual or suspected incidents of fraud should be reported without delay to a director.
When staff report suspected fraud it is important that their suspicions are treated seriously and that all details provided by the reporting employee are recorded accurately and in a timely manner. They should be repeated to the reporting employee to confirm understanding.
It is essential that staff are put at ease, since the decision to report the suspected fraud may be traumatic for the individual concerned. Staff (or others) reporting fraud should be assured that all information will be dealt with in the strictest confidence and that their anonymity will be preserved if requested, unless that is incompatible with a full and fair investigation.
Regardless of the direction any future internal or Police investigation may take, the anonymity of any ‘whistleblower’ must be guaranteed during the initial investigation as outlined in the APT Speak Up Policy.
Having recorded the details of the individual case, the a director should, within 24 hours decide on the initial response.
At this stage the management should also take whatever steps are necessary to prevent further losses e.g. by changing procedures or suspending payments – without compromising the quality of evidence or alerting the fraudsters.
On receiving the details of the suspected fraud, the a director should undertake as limited review as necessary to establish whether further action needs to be taken.
If this initial investigation suggests that suspicions are confirmed, the director will decide which body is best placed to undertake further investigative work and will inform the Police as appropriate.
PREVENTION OF FURTHER LOSS
Where the initial investigation provides reasonable grounds for suspecting a member or members of staff of fraud, the director will need to decide how to prevent further loss.
Fraudulent or corrupt activity is regarded as a breach of contract and where there are reasonable grounds for suspicion then suspension, with or without pay, of the suspects is likely, pending the outcome of enquiries. The rights of staff on suspension must be acknowledged, for example their right to union representation and to be informed of the reason for their suspension.
It may be necessary to plan the timing of suspension to prevent the suspects from destroying or removing evidence that may be needed to support disciplinary or criminal action. Suspect(s) should be supervised at all times before leaving APT’s premises. They should be allowed to collect personal property under supervision, but should not be able to remove any property belonging to the institution. Any security passes and keys to premises, offices and furniture should be returned.
Advice should be obtained on the best means of denying access to APT while suspects remain suspended (for example by changing locks and informing security staff not to admit the individuals to any part of the premises). Similarly, access permissions to the APT’s computer systems should be withdrawn without delay.
At this stage, APT should decide if external parties including the Police are to be involved. Delays in contacting the Police may prejudice future enquiries and alerting them immediately is important since they will be able to advise APT on how best to proceed and the most effective methods to gather evidence.
CONDUCTING A FRAUD ENQUIRY
Once it is agreed that there is sufficient evidence to justify a fuller investigation, the director should meet with the Police, where appropriate, to decide who is best placed to undertake the further investigation. Should it be decided that an internal investigation is appropriate, either in tandem with a Police investigation, or on its own, it is important that it is undertaken by individuals with experience in fraud investigations.
For internal investigations, the director should agree the following:
- detailed remit and scope for the investigation; for example, is it to confirm that there is sufficient evidence to support the allegations, to gather evidence for the Police, or does APT wish to quantify the total potential loss? who should undertake the investigation
- reporting procedures and deadlines
- a program of regular meetings.
There is a clear requirement to record all details fully, accurately and in a manner that is accessible. The Police should be able to advise on an appropriate recording format. Developing a simple form to log all events and contacts made will provide a quick summary, ease the recording process and provide documented support for any future enquiries or possible prosecution.
RECOVERY OF LOSSES
It is important that any losses incurred by APT are fully and accurately recorded and that costs are correctly apportioned. In addition to the direct cost of losses attributable to fraud, all costs associated with enquiries should be recorded. These will be required under loss reporting procedures and may also be required by the courts if the decision to prosecute is taken and in determining any assessment of costs or compensation and insurance recoveries.
Where the loss is substantial, legal advice should be obtained without delay about the need to freeze the suspect’s assets through the court, pending conclusion of the investigation. Legal advice should also be obtained about prospects for recovering losses through the civil court, where the perpetrator refuses repayment.
HR have a role to play in ensuring confidentiality and protecting individuals who report fraud as per our Speak Up Policy. Of crucial importance in any fraud investigation is the need to conduct enquiries within the parameters of relevant laws and regulations. Employees have statutory rights and, if infringed, the likely success of disciplinary action or prosecution is diminished. It is vital therefore that any interviews with members of staff who are alleged to have acted fraudulently are undertaken strictly in accordance with established procedures.
Reporting during the investigation
A Director should provide a confidential report. The scope of the report should include:
- quantification of losses
- progress with recovery action
- progress with disciplinary action
- progress with criminal action
- estimate of resources required to conclude the investigation
- actions taken to prevent and detect similar incidents
CONCLUDING AN INVESTIGATION
At the end of a case, irrespective of the outcome, it is important that the progress of the investigation is reviewed to see what lessons can be learned and to assess the effectiveness of the action taken. Such reviews will help identify any weaknesses in internal control that initially led to the fraud and should highlight any deficiencies in these systems for reporting and investigating, enable more effective future enquiries and precipitate changes to internal procedures designed to prevent reoccurrence.
On completion of a special investigation, a written report should be created containing:
- a description of the incident, including the value of any loss, the people involved, and the means of perpetrating the fraud
- the measures taken to prevent a recurrence
- any action needed to strengthen future responses to fraud, with a follow-up report on whether or not the actions have been taken.
References for employees disciplined or prosecuted for fraud
Any request for a reference for a member of staff who has been disciplined or prosecuted for fraud should be referred to the director. The director should prepare any answer to a request for a reference having regard to employment law.
4. MANAGERS CHECKLIST
The following is a checklist of points for consideration following the reporting of an alleged fraud to management:
- Do not rush in – consider all options and plan the approach.
- Establish the facts without alerting anyone.
- Maintain confidentiality.
- Make an immediate note of everything reported. Confirm accuracy of the notes with whoever is reporting the details to ensure clear understanding.
- Take steps to minimise any immediate further losses.
- Secure any evidence.
- Inform a director
5. DIRECTORS CHECKLIST
The following is a checklist of points for consideration following the reporting of an alleged fraud by line management:
- Convene a meeting of the Group to consider the allegation.
- Conduct an initial investigation to establish the substance of the allegation.
- Consider legal implications.
- Agree if further investigation is required and who will undertake it.
- Agree a remit, and establish scope and reporting deadlines for the investigation.
- Ensure the investigating team has adequate resources, including secure storage.
- Prepare for interviews thoroughly.
- Ensure existing staff disciplinary procedures are followed.
- Secure any evidence.
- Assume the worst-case scenario in terms of losses and staff involved.
- If not already requested to undertake the investigation, inform the Police
- Hold regular progress meetings at which progress and agreed action are documented.
- Identify all internal and external sources of information and evidence.