Each is an Avoidable Human Capital Risk.
At first glance three recent news stories seem completely unrelated: a USA Today article about thefts from a trust fund; NBC News stories (here and here) about deaths from a building collapse; and an Albany Times Union report about a sexual assault. As one reads the details of each story, the commonality begins to reveal itself; they each are examples of avoidable human capital risk.
Trust Fund Thefts: Lack of Internal Controls
The USA Today article describes a nursing home office staffer’s unlawful personal use of residents’ trust funds and her August 2013 conviction, in Vicksburg, Miss., on multiple counts of exploitation of vulnerable adults.
An administrator at a nursing home stumbled upon a highly suspicious debit from a resident’s trust fund that was missed, along with many similar debits, by a cursory audit. When the subsequent criminal investigation was complete, an office staffer working in the nursing home was charged criminally, and ultimately convicted, on multiple counts of exploitation of vulnerable adults.
The fact pattern reads like a Fraud Mitigation 101 course outline – lack of internal controls, no fraud control strategy, cursory internal audits, no external audits, no management focus on fraud risks, no fraud awareness training, no fraud detection strategies, complacency, lack of awareness of actual dangers or deficiencies, foregoing a “moment of insight,” tendency to make excuses, and blind trust.
According to USA Today, the convicted office staffer was solely responsible for managing all aspects of the trust account. Management trusted the staffer completely because she had been employed “a long time” and was “the ideal employee.” There were only limited internal audits and no independent external audits. Surveys conducted as part of the limited internal audit found problems with the trust fund, but the survey was never escalated to a comprehensive audit of the trust fund.
The theft, which totaled over $100,000 and lasted nearly a year, was an avoidable human capital risk. The solution is better internal controls, including implementation of fraud awareness training program and an effective internal and/or external audit program.
Building Collapse Deaths: Non-Existent Drug Testing and Vendor Due Diligence Programs
The NBC News stories are about six deaths and thirteen injuries from a building collapse in Philadelphia in June 2013 caused by an excavator operator with multiple prior drug convictions, operating heavy machinery while likely high on marijuana.
The operator has multiple criminal records, including drug convictions; and a post-accident toxicology report, witness statements and other evidence show the operator was likely under the influence of marijuana at the time of the accident.
The demolition contractor, building owner’s vendor, and employer of the excavator operator also has multiple criminal records, including charges involving drugs, assault and insurance fraud; as well as two bankruptcy filings.
The excavator operator was charged with six counts of involuntary manslaughter, six counts of risking catastrophe and other charges. The demolition contractor was charged with six counts of third-degree murder, six counts of involuntary manslaughter, 13 counts of endangerment, reckless endangerment, risking a catastrophe and criminal conspiracy.
The arrests stem from the collapse of a Salvation Army thrift store where an unsupported wall crashed down onto the neighboring thrift store during a building demolition, trapping and killing shoppers and workers inside.
These tragic deaths were an avoidable human capital risk. The mitigating solution is a comprehensive drug testing and vendor due diligence programs. A drug testing program could have prevented the employer from employing or continuing to employ an illicit drug user operating in a safety-sensitive role. A vendor due diligence program could have prevented the building owner from hiring a potentially dangerous, unfit and unqualified demolition vendor.
Sexual Assault: Inadequate Background Check Program
The Albany Times Union report describes a county district attorney’s criminal investigation of a nursing home in Albany, N.Y. where a worker, who is a registered sex offender with a prior rape and sodomy conviction, sexually assaulted a 91 year old resident.
The nursing home hired the convicted rapist as a maintenance worker in 2008, the same year he was released from parole after serving 16 years in prison for rape and sodomy, and while the rapist was a registered Level 3 sex offender. A Level 3 offender is the highest risk level. Overall the maintenance worker had four prior felony convictions and five prior misdemeanor convictions.
The sexual assault occurred when the rapist entered the resident’s room to change a light bulb. A co-worker witnessed the sexual assault and reported the worker to management. The nursing home fired the worker upon learning of the allegations, and a criminal investigation was opened. The worker was later convicted of sexual assault, and the nursing home itself is under criminal investigation.
This unnecessary harm was also an avoidable human capital risk. The mitigating solution is a background check program. Had even a basic background check been conducted on the perpetrator of this heinous crime, serious harm to a vulnerable elderly woman, as well as the employer, could have been avoided.
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