Preventing Fraud in Staffing Firms: Separation of Duties

Preventing Employee Dishonesty > Distributing Duties

In this series of posts, we’ve gone into depth about how to prevent fraud from occurring within your staffing firm. From running background investigations to checks and balances, there are a lot of preventative measures you can take to ensure your firm runs without incident. In this final installment, we’ll discuss the component that goes hand in hand with financial controls- separation of payment duties. Most importantly, protect your operations with a specialized Staffing Crime Insurance policy.

According to Baker Tilly, the separation of duties involves the custody of assets, authorization of transactions affecting those assets and recording/reporting of related transactions.  The underlying theory of separation of duties is that a single employee should not be in a position to both commit and then conceal fraudulent activities.

No matter the size of your firm, there should be at least two individuals who are responsible for financial controls. One person should be liable for recording and authorizing transactions, and another should be in control of the cash leger and managing assets.

In our last post, we mentioned the need for at least two people to sign checks. To build on that, separating these duties serves as an internal checks and balances process. In fact, this system would minimize unnoticed errors and reduce the opportunities someone would receive for misstating reports and financial statements.

The reconciliation of bank accounts is a huge factor in preventing fraud. Two people should compare cash per the balance sheet and per the bank statements. Depending on the size of the firm, this process should be completed anywhere from daily to monthly.

Finally, petty cash management should be monitored. To help strengthen the processes surrounding petty cash, sequentially numbered vouchers should be kept as well as disbursement receipts with the disbursement date, amount, purpose, and employee name.  Further, the petty cash custodian should maintain a reconciliation of the petty cash fund, reconciling total cash on hand plus outstanding receipts to the total petty cash maximum.

About World Wide

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage we have available to protect your staffing business, give us a call at (800) 245-9653 to speak with one of our representatives.

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