Pre-employment Screening and Occupational Fraud in the Nigerian Public Sector


The cost of occupational fraud in Nigeria is enormous and there is need to do more to stem the tide. The ndependent Corrupt Practices and Other Offenses Commission and the Economic and Financial Crime Commission are doing their best at chasing offenders. However, it is better to defend public treasures from being plundered in the first place than trying to recover losses later as most victims in organisations including the public sector never recover all the losses. In order to be on the proactive, basic pre-employment screening should be introduced into the recruitment process in the public sector in addition to other government efforts. This process would help weed out potential fraudsters before they have opportunity to hatch their cruel schemes.
Keywords: Occupational Fraud, Pre-employment Screening, Public Sector, Recruitment.

Employees are the most valuable assets of an organisation as they determine to a large extent the continued existence and competitiveness of the organisation (Chin, Lin, Hsiung & Liu, 2006). An organisation that has in its employ persons with the right skills, right attitude and integrity is verily on the path to success. Selecting credible employees for the overall health and continuity of an organisation has received close attention by academics and practitioners in the field (Brody, 2010; Smith, 2012; Wang & Kleiner, 2012). Employing persons with doubtful characters can be the most devastating decision in the long run. Every employee has a motive for joining an organisation and it is the responsibility of every organisation to decipher possible clues to dishonesty at the point of recruitment in order to avert future consequences. Therefore, finding the right kind of employees is important for the continued survival of the organisation.

Engaging wrong persons can be very costly for an organisation especially with the rising wave of occupational fraud across industries all over the world. In a survey by Association of Certified Fraud Examiners (2012), an organisation losses five percent of its revenues to fraud and most of these fraud cases took 18 months to uncover and were perpetuated by trusted employees. Therefore, organisations owe themselves a duty to protect against internal thieves. The best way to tackle internal fraud is to be on the defensive, and to be on the defensive is to install a very good personnel control mechanism which includes pre-employment screening (background checks).

The Nigerian public sector is in dire need of morally credible persons who will transform the civil service to an enviable place for professionalism, transparency and integrity that all Nigerians could be proud of. The current wave of employee fraud in the Nigerian public sector has reached an alarming rate, hardly a year passes without reported cases of occupational fraud in our media (Sahara Reporters, 2011; The Nation, 2013). The anti-graft agencies: Independent Corrupt Practices and Other Offenses Commission ICPC) and Economic and Financial Crime Commission (EFCC) are working hard to stem the tide but as Osisioma (2012) puts it, fraud in Nigeria is ‘systematic’. Therefore careful planning is required to protect the public sector against internal thieves and other crimes. Courtenay (1998) asserts that pre-employment screening, which holds potentials for deterring fraud is ‘often overlooked’ by employers.

The purpose of this article is to highlight the connection between pre-employment screening and reduction of occupational fraud in the public sector. Specifically, the paper examines pre-employment screening as a factor in reducing occupational fraud in the public sector. This paper will benefit policy makers in the public sector charged with the responsibility of recruitment. Also, other human resource practitioners will find the paper helpful in decisions bothering on recruiting credible persons that would contribute to health of their organisations.

Fraud itself has been variously defined by scholars and various terms have been used to describe the phenomena including white collar crime, occupational fraud, internal fraud, etc. Gottschalk (2011) defines white collar crime as ‘crime against property for personal or organisational gain, which is committed by non-physical means and by concealment or deception. It is deceitful, it is intentional, it breaches trust and it involves losses’ (p.302). A look at the above perspective pictures white collar crime into two categories; corporate fraud and occupational fraud. Corporate fraud is fraud committed by a corporate body against other corporate bodies and occupational fraud simply means employee fraud. A more specific definition of occupational or employee fraud is as put forward by Association of Fraud Examiners (ACFE) in their 2012 report to the nations. Occupational fraud is ‘the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organisation’s resources or assets’ (ACFE, 2012 p.6). From the above definition, occupational fraud involves acts of deceit and deliberate concealment to avoid being caught for as long as it takes. This paper focuses on occupational fraud or employee fraud. These two terms are used interchangeably throughout the paper to mean fraud perpetrated by employees of an organisation.

Occupational fraud schemes fall into three categories: asset misappropriation schemes, corruption schemes and financial statement fraud schemes (Wells & Gill, 2007). In addition to occupational fraud schemes, certain characteristics such as employee position in the organisation, tenure, age and gender are predisposing factors in the perpetration of employee fraud. A strong correlation is reported between a perpetrator’s position, tenure of employment in an organisation and fraud (ACFE, 2012). Based on ACFE (2012) survey, reported cases of occupational fraud in Africa, based on perpetrator’s position show that employee fraud accounted for 46.7 percent, manager 38.1 percent, owner executive 12.4 percent and others 2.9 percent. Fraud cases by tenure of employment showed that the longer an employee spends on the job the more likely he may become fraudulent. The ACFE (2012) findings also suggest that fraud losses tend to rise with the age of the perpetrator and perpetrators within the age bracket 31-45 years caused the most losses. Also, in terms of gender, a man is more likely to defraud his employer than a woman.

Although it is very difficult to determine who intends to commit fraud, literature suggests that carrying out some basic pre-employment screening could help organisations including the public sector reduce the likelihood of hiring fraudulent persons. For example, Buckhoff and Colson (2003) in an analysis of three case studies concluded that fraud could have been prevented had the employers carried out some pre-employment screening. This implies that pre-screening applicants can reduce an organisation’s susceptibility to employee fraud as it provides an early signal of potential dangers which could be avoided (Schloss & Lahr, 2008; Hollman, Hayes & Mahurin, 2007). Although not empirically proven, Drysdale and Bonanni (2010) assert that the return on investment on pre-screening employees could be up to 26 times. The implication is that more resources would be at the disposal of employers in the long run for making the right hire decisions. Given the many benefits of pre-employment screening, it is imperative that those charged with the responsibility for recruitment into the Nigerian public sector pre-screen all potential employees before offering them employment as a way of reducing the risk of fraud.

A KPMG (2012) Africa fraud survey found that Nigeria had the highest reported value of fraud and the cost of fraud was put at N468 billion ($3 billion). Employees, government officials, and top executives of private companies were the worst offenders by the report. The report also noted that government was the hardest hit by losses (30 percent) from occupational fraud and corruption. Given the gravity of occupational fraud in the Nigeria, the government must take proactive steps to reduce the negative impact of fraud in the public sector.

Occupational fraud robs Nigeria of quality service delivery, quality education, quality infrastructure, quality health care and all the good things you can think of. Although Nigeria’s vision 20:2020 has a focus on ‘creating disincentives for corruption by addressing structural deficiencies that create the platform for corrupt activities’ (National Planning Commission, 2009. p.27), fraud in the public sector remains a challenge.

A look at Nigeria’s rating on Transparency International Perception index shows that Nigeria’s rating on the corruption index has not really improved: 130th, 134th, 143rd and 139th for 2009, 2010, 2011 and 2012 respectively. Given the above pathetic ratings the government needs to take bolder strides in addressing occupational fraud in the public sector in order to remedy the poor image created over the years by employee fraud.

On a global scale, occupational fraud is expected to rise as fraudulent employees keep devising new schemes to circumvent employers innovations aimed at arresting the trend (Hollman et al., 2007). Therefore, the Nigerian government as a matter of urgency should improve its employment processes in order to stay ahead of potential fraudsters. Many approaches such as installing an effective internal control mechanism among others are steps in the right direction but this paper advocates pre-employment screening of all would-be public sector employees in Nigeria while gradually phasing out the old employees through transfers and retirement.

Currently, evidence of pre-employment screening in the public sector is limited to surface checking of qualifications and employment is mostly based on of ethnicity, religion or political affiliation (who you know) without other checks on integrity (Gberevbie, 2009). Pre-employment screening has potentials of weeding out fraud prone persons before they have opportunity to hatch their cruel schemes. Also, some private sector firms in developed countries have used pre-employment screening to protect their organisations against occupational fraud (Sims, 2004). Therefore, pre-employment screening (background checks) can benefit the public sector and should cut across all ministries, educational institutions, health, the armed forces and other sectors of the Nigerian economy. In essence, failing to carry out pre-employment screening is ‘an open invitation to fraud’ (Courtenay, 1998).

It involves an investigation of all information supplied by a job seeker. Information supplied could be verbal or as complied in the submitted curriculum vitae (CV). Verification can be carried out either prior to or after selection and the main purpose is to give insight into the type of person the organisation is dealing with. It is also intended to streamline the selection process so that efforts could be channeled to more suitable candidates. Pre-employment screening also called background check includes a reference check, employment history check, educational and professional certificate checks, criminal record check and media check (AESC, 2006; Shepard & Duston,1998).

Most job seekers post very bogus claims about themselves on their CVs to capture the attention of potential employers. However, Griffith, Chmielowski and Yoshita (2007) and Brody (2010) find that applicants fake information on their resume in order to increase their chances of being hired. Educational and professional certificates should be thoroughly verified by contacting the institutions listed on the resume. This is particularly important because we emphasise too much of paper qualifications and many job seekers have found a way of obtaining cloned certificates. Merwe (2005) revealed that 24 percent of all job applicants carry ‘fake identity documents’ which belong to other people or are cloned. Also, age could be verified by working backwards to see when the applicant started nursery or primary school and you will be amazed at your discoveries.

Therefore, the government must verify all information supplied on CVs and should show zero tolerance for any act of deception.

Brody (2010) stressed that media search can be conducted to have an insight on the would-be employee, especially on how he/she has appeared in the press either in his personal, philanthropic or professional life. This check provides useful information on how previous organisations were managed in terms of financial health and business reputation during the would-be employees’ tenure. This is particularly useful for Nigeria in the selection and appointment of top public officials. Only those with impeccable reputation should be hired.

A search on person’s credit history gives insight to how financially responsible he is. An illiquid or insolvent individual is more prone to fraudulent schemes to meet his needs when employed and so this search highlights the life style of would-be employees (Brody, 2010). The ACFE (2012) report found a link between a lavish lifestyle and incentive to steal. Hence, excessive financial pressure is sure temptation to steal. The banks would be useful in providing information on the credit history however, the lack of a comprehensive database of all Nigerians could impede this process.

The referees on would-be employees’ CVs need to be checked. Although Brody (2010) showed that most referees may be unwilling to give unfavourable reports to questions from employers. However, organisations must check the references because some referees are ignorant of being listed as referees in a CV. They may not even know the persons listing them as referees. Also, referee reports should be verified by contacting the writer as such reports could be forged in order to gain advantage. In addition, past employers should be contacted to report on their experience with the particular job applicant and valuable information could be gathered in the process.

It is important to check the criminal history of a would-be employee to ensure that an ex-convict is not hired. Ignoring criminal history can spell trouble for an organisation that may discover too late that the fraudster was an ex-convict (Brody, 2010). Unfortunately, Nigeria has underutilised her capacity to account for all individuals within its territory. Little wonder you find persons dismissed for wrong doing receiving accolades for smartness from colleagues (Osisioma, 2012) and even finding new jobs.

Furthermore, in developed countries where accurate records of citizens are kept, a person’s driving record can tell a lot about him. An applicant’s honesty could be verified by getting information on matters relating to any violations of traffic and safety laws, suspension and revocations. It can also provide information on alcohol and drug abuse (Brody, 2010). Again, Nigeria is yet to have a comprehensive database for all persons driving within its territory. You hardly find instances of revocation of licenses for traffic offences .
In event of incomplete and inaccessible past records of applicants , Wiley and Rudley (1991) advocates the use of honesty test. Honesty test are psychological tests designed to identify job applicants tendencies toward workplace counterproductive behaviours like occupational fraud amongst others.

Another technique available though not yet scientifically proven is graphology (handwriting analysis). Graphology is still considered contentious as scholars are yet to agree on its efficacy. The technique assumes that a person’s personality can be revealed through his handwriting and this can assist in weeding out fraudsters or questionable persons (Brody, 2010).

Ensuring that people are hired is a necessity for continuity of the Nigerian public sector. However, current employment and placement of persons in the Nigerian public sector on the basis of ethnicity, religion or political affiliation has not done any good for the country. Pre-employment screening (if any) is rarely carried out to ensure that only persons with good moral standing are employed. The fight against corruption in the Nigerian public sector may get tougher if measures to employ the right persons are not explored by the government. The image of an organisation or country is mirrored in the behaviour exhibited by its employees or citizens. Finally, an employee selection process that incorporates an effective screening mechanism remains a formidable initial defense against occupational fraud.



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