Developing a Fraud Hotline that Employees Can Trust

The following article is part 3 in a series on protecting your business from fraud, authored by Bill Morgan, CPA, principal at WNDE.
What is an Employee Fraud “Hotline”?
Employee tip hotlines are one of the most effective tools that organizations possess for detecting and preventing fraud. Because tip hotlines encourage and facilitate anonymous reporting, they are a proven fraud deterrent that can be implemented at a reasonable cost. Tip hotlines can be administered in-house, or “outsourced” to an independent provider. Tips can be accepted by phone, fax, U.S. mail, email and web-based systems. Tips must be anonymous and confidential; if there is any risk that an employee’s identity will become known, employees will not support the arrangement.
Noted below are some features of a typical “outsourced” hotline:

• Tip lines are usually available 365 days per year, 7 days per week and 24 hours per day.
• The outside hotline provider will normally provide “case management” services, to track the case from inception to resolution.
• Many hotline providers make multilingual services available.
• If a matter results in litigation and/or prosecution, the employer can outsource this function, or handle it in-house.

Keys to Developing a Hotline that Employees Can Trust
Noted below are certain keys to developing a hotline that employees can trust.
Education and Training: If employees do not understand how the hotline system works, then they are unlikely to make use of the hotline. Thus, employers (or an outside hotline provider) should train employees on the mechanics of the system and how the hotline reporting program works.
Ongoing Communication: To keep the program in the minds of employees, management should send periodic messages to employees about current developments in company ethics policies, the success of the program, changes in procedures that have been made as a result of information received on the hotline, etc.
No Management Involvement in Hotline: If employees are reporting issues with company management, they may be hesitant to use a hotline where employees report directly to company officials or other company employees. In this situation, it is usually most effective to use a third-party company to administer the hotline service.
Quick Responses to Employee Tips: If an employee has witnessed a fraud or some type of wrongdoing and reports this through a hotline, this can be a very emotional experience. The whistle blower might even be a victim, or might be at risk by coming forward. The concerns of the employee should be immediately addressed in a professional manner, and procedures should be put in place so that they are protected from retaliation.
If you have any questions about ways you can protect your business from fraud, contact your WNDE audit or tax services partner.