Hotlines for Heroes

Why do employees often avoid using hotlines? Because they do not believe they are really anonymous, and their co-workers could label the employees "tattlers." Here are ways to debunk stereotypes and practical suggestions for constructing hotlines that work. 

The names, places and facts of the opening case have been modified to protect the identity of the victim organization and the employee sentinels who made the anonymous reports.

A message from a municipality's new employee hotline — no name, no contact information provided:

"Could someone please help us out here? It's terrible out here. No one listens. The employees are going crazy. We can't do our jobs! Please help!"

Message next day, same voice, no name, no contact information provided:

"Please help us. I work in the utilities department. We have people out here who aren't showing up to their jobs. And they are in charge! Things are falling apart! Please help us!"
Same day, different calm voice this time, no name, no contact information provided:

"I'm glad there's a hotline. I was so glad to see the press conference and finally know that there was someone who would listen. I've sent you a form from your website; it has details. Please, please, please, send someone out to see what's going on out here. Our director and deputy director are not working when they are supposed to be here. I'm pretty sure our director hasn't worked a full day in months and is getting full pay. And our deputy director is directing payments to a vendor where his wife works. I don't know how he's paying for it or how it got approved. I'm afraid to leave my name. Thank you for having this hotline. This has been going on for a while and I didn't know who to tell."

The inspector general's brief investigation confirmed that the director had falsified time sheets to show he had worked full time when he had not. Analysis of the vendor invoices showed hallmarks of fictitious billing, and the invoices did not substantiate the work the vendor said it had performed. A pretext call to the vendor confirmed that the wife worked at the vendor business. None of the participants in this case had reported the clear conflict of interest. The organization disciplined the director and terminated the outside vendor contract. The husband opted to retire rather than face disciplinary action. The municipality did not prosecute him.

SAVINGS THROUGH HOTLINES

Why bother with a hotline at all? After all, our municipality, a mid-sized city in the southwestern United States, was relatively free of fraud - at least everyone else thought so - and a hotline seemed expensive because of extra staff time or the involvement of a third-party provider. Our organization already had a bare-bones, ineffectual hotline. The only advertising for it was a poster inside the internal audit department office. An informal survey showed that virtually nobody knew that the hotline even existed, including the mayor. The previous hotline was not advertised, not shared with employees and not used. Nobody checked the voice mails for the hotline number. So why did we ultimately develop a full-fledged ethics and fraud hotline and have top elected officials announce it with much fanfare at a press conference?

The answer is that an organization with a hotline, on average, saves $145,000 per year on fraud-related losses, according to the ACFE's 2010 "Report to the Nations." Forty percent of U.S. frauds were detected through tips, and half of those tips came from employees. According to the report, organizations with hotlines detected most of their fraud internally via tips and internal audits, while those without hotlines detected more fraud by accident or via external sources such as external audit or police notification. Tips detected a larger percentage of frauds in Asia, Europe and Africa, but even in the U.S., tips still netted the majority of fraud discoveries. Providing employees with a way to anonymously report suspected fraud reduced both the monetary amount of the fraud and the duration of the scheme.

Over the years, we have had many conversations with CFEs who have launched hotline programs - some successfully, some not so successfully. A common theme in these case histories is that the hotline initially received calls, and some of the calls lead to investigations, but eventually calls tapered off to nothing. Another common theme was that CFEs often asked for advice on how to get upper managements' buy-in for hotlines' cost and time. When we constructed the hotline discussed in this article, we used the information gleaned from our conversations with CFEs to ensure that we had management's total support for an enduring program.

NOT JUST FOR FRAUD EXPOSURE

A hotline can do more than just give employees a place to file a suspected complaint of fraud, although tips on suspected fraudulent activity are obviously of great interest to CFEs. Leveraging your hotline for more than just fraud tips can have surprising benefits. Hotlines can provide open communication between management and employees, vendors, customers or clients. Hotlines can accept complaints about workplace safety, quality control issues or human resources concerns such as discriminatory behavior or sexual harassment. Hotlines can even become a central aspect of continual organizational improvement when they accept employee suggestions to revamp processes and save money. They also help counteract the employees' rationalizations that allow fraud to continue.

When top-level managers or elected officials publicize a hotline, management has a platform to take a strong anti-fraud stance and demonstrate the "tone at the top" that is so important for organizations combating fraud. The head of the organization, when visibly involved in promoting the hotline, sends the message, "This is important, and I support you contacting the hotline." Therefore, employees will worry less about retaliation. A hotline that includes a performance or quality improvement element also demonstrates management's commitment to organizational improvement.

Of course, there are other compelling reasons to have a hotline. The 2002 U.S. Sarbanes–Oxley Act (SOX) requires all publicly traded companies in the U.S. to have an anonymous reporting function. Some companies might incorporate a requirement in their corporate codes of ethics or similar policies to have hotlines. Governmental agencies might be required by statutes to have fraud hotlines, and some governmental entities require their vendors or contractors to have them as well. European Union citizens can call a hotline provided by Office Européen de Lutte anti-Fraude (OLAF), an agency that investigates frauds "against the community's interests."¹

When our municipality asked us to design and roll out a hotline and reporting program, the administration stressed that it should have a positive message and avoid emotionally charged words. We avoided words such as these, especially in first-contact marketing materials: fraud, waste, corruption, bribery, kickbacks, theft, stealing, embezzlement, investigation, crime, dishonesty and whistleblower. Though CFEs use those words every day in our jobs, they create high psychological barriers for tipsters to overcome and discourage them from using the hotline.

Instead, we used words such as stewardship, accountability, transparency, responsibility, ethics, citizenship, quality, efficiency and process improvement. These words allow tipsters to use the hotline without having to experience the pressure that comes from calling in frauds against co-workers or feeling that they have high legal standards to prove. After all, we are asking our employees to report wrongs that could mean their co-workers receive disciplinary actions or might bring disgrace to supervisors or even to the entire organization.

During our hotline rollout planning, the members of a focus group said our draft posters that would publicize the program were too vague and did not send a clear message. We started over with a different graphic artist, and we ultimately created positive message marketing materials that made sense to our employees.

Employees are naturally concerned about being labeled "tattletales," "rats" or "snitches" and fear they will lose the respect of co-workers and supervisors after reporting problems. Teachers and parents sometimes send these messages to children: "Don't rat out your friends!" "Don't tell on your sister," or "Stop being a tattletale." Even the term "whistleblower," which historically had the fairly neutral meaning of a sports official blowing a whistle to stop play, has become an emotionally charged word, associated with sensationalized reports of retaliation and reprisal. Using this word might stir up fear in an employee who is considering reporting a fraud or other wrongdoing. These stereotypes come from various sources, and while different terms are used in different places, they appear to be universal.

The ACFE presents the annual Cliff Robertson Sentinel Award to well-known individuals for "choosing truth over self" when they reported wrongdoings. Interestingly, the honor is not the "whistleblower award." Rather, Dr. Joseph T. Wells, CFE, CPA, founder and Chairman, specifically named it the "sentinel" award to avoid the pejorative connotation. Similarly, we wanted our hotline to be a way for good citizens and committed employees to become sentinels or heroes and circumvent the negative inferences.

HOTLINE HOW-TOS