Posted: 21 / 09 / 2023

We have previously written about instances of employee fraud that our team have investigated. Similar to employee fraud, employee negligence in a financial capacity can have a material impact on businesses, resulting in the need for an in-depth investigation.

An obvious difference between employee negligence and fraud is that the primary motivation for negligence is not typically personal gain. Generally, acts of negligence occur to cover financial mismanagement, for example, as a result of incompetence or to conceal disappointing financial performance when reporting to the Board or other stakeholders.

Acts of negligence and the resulting impact of these acts can increase incrementally over time. Often, the full extent is only realised when the employee in question has left, either of their own volition or prompted by evidence of poor performance. At this point, it may become clear that further investigation is required.

In previous investigations, we have seen organisations left in difficult positions. Generally, but not exclusively, financial mismanagement is the fault of the Finance Director/Financial Controller or other senior members of the finance team who have either not implemented sufficient controls or can circumnavigate them.

When employee negligence is suspected, we have been brought in to establish:

  • Where financial mismanagement has occurred;
  • The overall extent of the impact;
  • Short and long-term mitigating steps; and
  • How to prepare for an internal review and/or external investigation.

Previously, we have uncovered and investigated:

  • Huge amounts of hidden and unaccounted-for cash and uncashed cheques;
  • Issues with VAT and substantial unpaid fines from HMRC;
  • VAT incorrectly accounted for, and fines hidden within other costs;
  • Misappropriation of stock with significant financial implications;
  • Pension payments deducted from employees but not passed on to the provider; and
  • Reporting of management information to board members that did not reflect the underlying financials.

We undertake high-level reviews to identify preliminary issues and advise on key areas of risk. In agreement with clients, we establish a scope of work which will provide the client with a clear plan for addressing the existing issues, including any live issues, and a best-practice review to ensure accurate and transparent processes and reporting in the future.

At Sedulo, we pride ourselves on offering a holistic suite of financial solutions. As a Forensic Accounting division, we can work closely with our dedicated Tax and Audit teams to ensure that our clients receive expert advice on compliance and risk to futureproof their business.

Should you suspect financial misconduct, or that you might be vulnerable within your current framework, feel free to get in touch for a discreet and confidential conversation about how we might be able to help you.

For more information, please contact Head of Civil Forensics, Mark Strafford.