Background 1. This organisation organisation has a commitment to high legal, ethi ethical cal and moral standar standards. ds. All members members of staff are are expected to share share this commitmen commitment. t. This policy policy is established to facilitate the development of procedures, which will aid in the investigation of fraud and related offences. 2. The Board already already has procedures procedures in place place that reduce reduce the likelihood likelihood of fraud fraud occurr occ urring ing.. These These includ include e docum document ented ed proced procedure ures s and systems systems of in inter ternal nal control and risk assessment assessment mana management. gement. In addition the Board Board tries to ensure that a risk (and fraud) awareness culture exists in this organisation. 3. This This docume document, nt, togeth together er with with the Fr Fraud aud & Malpra Malpracti ctice ce Respon Response se Plan Plan (see (see Append App endix ix ‘A’) ‘A’) is in inten tended ded to provid provide e direc directio tion n and help to th those ose staff staff and directors who find themselves having to deal with suspected cases of theft, fraud or corruptio corruption. n. These These documents documents give a framework framework for a response response and advice and information information on various aspects and and implications implications of an investigation. These documents are not intended to provide direction on prevention of fraud.
Fraud Policy 4. This policy policy appli applies es to any any irr irregu egular larity ity,, or susp suspect ected ed irr irregu egular larity ity,, involv involving ing employees as well as consultants consultants,, vendors, contractors, and/or any other parties with a business business relations relationship hip with this organisati organisation. on. Any investigat investigative ive activity activity required will be conducted without regard to any person’s relationship to this organisation,, position or length of service. organisation 5. Fraud & malpractice malpractice comprises both the the use of deception to obtain an un unjust just or illegal illeg al financia financiall advantag advantage e and intention intentional al misrepr misrepresent esentation ations s affecting affecting any aspect of company activity by one or more individuals among management, management, staff or third parties. 6. All Managers Managers and staff have a duty to familiaris familiarise e themselves themselves with the types of improprieties that might be expected to occur within their areas of responsibility and to be alert for any indications or irregularity.
The Boards Policy 7. The Board is absolutel absolutely y committ committed ed to maintain maintaining ing an honest, honest, open and wellintentioned atmosphere atmosphere withinand/or the organisation. organisatio n. It is therefore also also committed to the elimination of any fraud malpractice. Page 1 of 5 JHS/Fraud Policy/Issue 7 June 2010
Fraud & Malpractice Policy Statement
8. The Board wishes to encourage encourage anyone having reasonable reasonable suspicions suspicions of fraud or malpractice to report report them. Therefore it is also also the Board’s policy, which which will be rigoro rig orous usly ly enfor enforced ced,, that that no employ employee ee will will suffer suffer in any way as a result result of reporting reasonably held suspicions. suspicions. 9. All members members of staff can therefore therefore be confident confident that they will not suffer in any way as a result of reporting reasonably held suspicions of fraud or malpractice. For these purposes reasonably reasonably held ‘suspicions’ ‘suspicions’ shall mean any suspicions other than tha n those, those, which which are raised raised malici malicious ously ly and found found to be groundl groundless ess.. The organisation will deal with all occurrences in accordance with the Public Interest Disclosure Act.
Appendix ‘A’ Fraud & Malpractice Response Plan The following paragraphs summarises the actions to be taken following the discovery of fraud & malpractice or suspected fraud/malpractice 1. The PURPOSE OF TH E FRAUD & ensure MALPRACTICE PLAN PLand AN effective action is taken in purpose ofTHE this plan is to that timely the event event of fraud/ma fraud/malpra lpractic ctice. e. The plan plan acts and and increases increases the the chances chances of a successful investigation. The plan plan define defines s author authority ity levels levels,, respon responsib sibili ilitie ties s for ac actio tion, n, and repor reportin ting g Seniors Senio rs in the event of a suspected suspected fraud fraud or malpractic malpractice. e. The plan acts acts as a checklist of actions and a guide to follow in the event of fraud/malpractice being suspected. The plan is designed to enable enable The John Henry Henry Group to: a. prevent further loss b. establ establish ish and secure secure eviden evidence ce necess necessary ary for cr crimi iminal nal and/o and/orr discip discipli linar nary y action c. notify th the e Board Board of Directors immediately d. determ determin ine e when when and how to contac contactt the police police and establi establish sh Senior Seniors s of communication e. assign responsibility responsibility for investigating investigating the incident f. mini minimis mise e and and recov recover er loss losses es g. re revi view ew th the e re reas ason ons s fo forr th the e in inci cide dent nt,, th the e meas measur ures es ta taken ken to prev preven entt a recurrence, and determine any action needed to strengthen future respons responses es to fraud or malpractice h. keep all personnel with with a need to know suitably informed informed about the the incident as the investigation develops i. hel help p promo promote te an anti-fra anti-fraud ud culture culture by makin making g it clear to employ employees ees and others that The John Henry Group will pursue all cases of fraud or malpractice malpractice vigorousl vigor ously y taking taking appropri appropriate ate legal and or disciplin disciplinary ary action in all cases where that is justified.
2. ACTION FOLLOWING FOLLOWING DETECTION DETECTION Page 2 of 5 JHS/Fraud Policy/Issue 7 June 2010
Fraud & Malpractice Policy Statement
When any member of staff suspects that a fraud has occurred, he/she must notify notif y his/her Senior Senior Manager Manager immediatel immediately. y. Speed Speed is of the essence essence and this initial report should be verbal and must be followed up within 24 hours by a written report addressed to the Senior Manager which should cover: a. The amount/value amount/value if established. established. b. The position regarding recovery or company exposure. exposure. c. which the and irregularity irregula ritythe occurred, occur red, if known. knowfraud/malpractice n. d. The The period date over of discovery how suspected fraud/malpr actice was discovered. e. The type of irregularity irregularity and what led to it i.e.: i.e.: • •
was there a breakdown in the systems of internal control, or Is there any inherent weakness in the system of internal control which allowed it to occur?
f. Whether the person person responsible has been been identified. identified. g. Whether any collusion with others is suspected. suspected. h. Details of any actions actions taken to date. i. Any other other information information or comments comments which might be useful useful 3. CONSULTATION On verbal verbal notifi notificat cation ion of a possi possible ble fraud fraud the Senior Senior Manage Managerr immed immediat iately ely contacts his/her contacts his/her Main Board Board Director. Director. It is a matter matter for the Senior Manager Manager in consultation with the Main Board of Directors to decide whether there is prima facie evidence of fraud in which case the police should be notified immediately, normally by the Senior Senior Manager. On receipt of the follow follow up written report, report, the Senior Manager should forward this to his/her Responsible Main Board Director Our External Auditors also have an interest in fraud as the extent and nature of fraud fra ud withi within n Th The e Compan Company y can give an indica indicatio tion n of the soundnes soundness s of that that Companies systems. systems. The written report report sent to the Main Board Director Director should therefore there fore be copied copied to the Auditor by The Director Director.. The rapid rapid discovery discovery and proper reporting of fraud can also be an indicator of the strength of control within a Division. The Direct Director or respon responsib sible le for Human Human Resour Resources ces shoul should d also also be inform informed ed or consulted as necessary.
4. INITIAL ENQUIRIES Before completing the report above it may be necessary for Senior management to undertake undertake an initial initial enquiry enquiry to ascertai ascertain n the facts. This enquiry enquiry should should be carried out as speedily as possible after suspicion has been aroused: prompt action actio n is essenti essential. al. Th The e purp purpos ose e of th the e in init itia iall enqu enquir iry y is to conf confir irm m or repudiate, as far possible, the suspicions that have arisen so that, if necessary, discipli disc iplinary nary action action includin including g further further and more more detailed detailed investiga investigation tion (under (under intern int ernal al discip disciplin linary ary proc procedu edures res and/or and/or th the e police police)) may be instig instigate ated. d. Our external auditor, via the Board of Directors is available to offer advice on any specific course of action which may be necessary. 5. MANAGERS’ MANAGERS’ DUTY OF CARE Page 3 of 5 JHS/Fraud Policy/Issue 7 June 2010
Fraud & Malpractice Policy Statement
Managers conducting initial enquiries must be conscious that internal disciplinary action action and/or criminal criminal prosecution may result. result. If such action is later taken then under proper procedure the member of staff concerned has a right to representation and and may have the right to remain silent. silent. Utmost care is therefore therefore required from the outset in conducting enquiries and interviews. In addition, in order to protect The Company from further loss and destruction of evi eviden dence, ce, it the may mayallegation be necess necessary arybeen to suspen sus pend dorthe memb member er staff staff concer concerned immediately has made following theof submission of ned the manage man ager’s r’s initial initial verbal verbal repor report. t. Specif Specific ic advic advice e should should be sough soughtt from from The Director responsible for Human Resources before proceeding.
6. PROTECTION OF EVIDEN EVIDENCE CE If the initial examination confirms the suspicion that a fraud or malpractice has been perpetrated, then to prevent the loss of evidence which may subsequently prove essential for disciplinary action or prosecution, prosecution, management should: a. take steps to ensure that all original original evidence is secur secured ed as soon as possible; possible; b. be able to account account for the securit security y of the evidence evidence at all times after it has been secured, including keeping a record of its movement and signatures of all persons to whom the evidence evidence has been transferred. transferred. For this purpose purpose all items of evidence should be individually numbered and descriptively labeled; c. not alter or amend amend the evidence evidence in any way; d. keep a note of when they they came into into possession possession of the evidence. This will will be useful later if proceedings take place; e. remember that all memoranda memoranda relating to the the investigation must be disclosed disclosed to the defence in the event of formal proceedings and so it is important to carefully care fully consider consider what what information information needs needs to be recorded. recorded. Particul Particular ar care must be taken with phrases such as “discrepancy” and “irregularity” when what is really meant is fraud or theft.
7. APPOINTMENT APPOINTMENT OF CASE MANAGER MANAGER Should the initial investigation indicate that there is prima facie evidence of fraud it is critical that the Senior Manager requests the External Auditor (via The Board Boar d of Director Directors) s) to oversee oversee and control control the subsequen subsequentt investigatio investigation. n. The request should be in writing writing and Term Terms s of Reference should also be agreed. The External Auditor should arrange for an action plan to be put in place with, as far as is possible, a set timeframe timeframe and regular reviews. The External Auditor has has full responsibility for progressing the case whilst he/she can, and should, call on the as assi sist stan ance ce of vari variou ous s so sour urce ces s of help help at all all st stag ages es (t (tec echn hnic ical al as assi sist stan ance ce,, personnel, solicitors etc.) ultimate responsibility and accountability in progr pro gress essing ing the case case shoul should d remain remain with that office officer. r. The Externa Externall Audito Auditorr should shou ld therefor therefore e have the necessar necessary y authorit authority y to enable enable him/her him/her to properly properly discharge these these duties. The External Auditor Auditor should also also be independent independent from the matter in question. It is the responsibility responsibility of the External Auditor to keep th the e Board of Directors Directors abreast of developments. developments. In particular particular the External Auditor Auditor should report all material developments promptly to the Board of Directors. 8. POLICE INVOLVEMENT Page 4 of 5 JHS/Fraud Policy/Issue 7 June 2010
Fraud & Malpractice Policy Statement
If the Senior Manager, in consultation with the Board of Directors is satisfied that there is prima facie evidence of fraud, then they must report the matter to the police. Consultation with with the police at an an early stage is b beneficial eneficial allowi allowing ng the police to examine the evidence available at that time and make decisions on whether there is sufficient evidence to support a criminal prosecution or if a police investigation investigation is appropriate. appropriate. Alternatively the the police may recomm recommend end that The Company conducts further investigations and, generally, they will provide useful advice and guidance on how the case should be taken forward. If the police decide to investigate then it may be necessary for the External Auditor to postpone further internal action and make suitable adjustments to the action actio n plan. However, However, the External External Audito Auditorr should continue continue to liaise liaise with the police at regular intervals and report on progress made.
9. FRAUD REGISTER The External Auditor should ensure that the Fraud Register, which is held by The Director responsible for Human Resources, is updated with all the appropriate details including the value of any loss to the Company as a result of the fraud. 10. LEARNING LEARNING FROM EXPERIEN EXPERIENCE CE Follow Fol lowing ing co compl mpleti etion on of the ca case, se, th the e Extern External al Audit Auditor or should should prepar prepare e a summary report on the outcome and lessons learned circulating it to all other interested parties who must take the appropriate action to improve controls to mitigate the scope for future recurrence of the fraud/malpractice. fraud/malpractice.