How to Conduct an Internal Investigation at Your Agency
Karl Sakas — July 23, 2019 — July 23, 2019
My advice can help you conduct an internal investigation at your agency. But know when to escalate to an outside investigation by your law firm or the police.
Have you received a complaint about an employee at your agency? Whether it’s investigating suspected embezzlement, harassment, or something else, you need to take action promptly.
When this happens to you, it can feel like the worst time to be an agency owner—but now’s your chance to ensure things are handled appropriately and fairly.
Since 2005, I’ve conducted risk management investigations for one of my volunteer organizations—with cases ranging from hazing to embezzlement to alcohol violations to coverups. I also use my investigative skills to vet job candidates for my agency clients.
The good news is that you don’t need years of experience! Conducting an investigation involves a mix of mindset, process, and experience.
In this article, I’ll share my advice on what to do when you need to respond to something bad. CAVEAT: I’m not a lawyer—be sure to consult your HR and legal advisors. Sometimes you’ll want to escalate a situation to your law firm or even to the police.
Internal Investigations: Mindset, Process, and Experience
As I noted above, successfully completing an internal investigation involves three key components:
- Mindset: Your job is to find the truth, even if it means finding something uncomfortable for you or the organization. A commitment to the truth will also help you find ways to improve things beyond the specific situation you’re investigating.
- Process: Organize the investigation (including the questions you ask) in a methodical way. This helps you be confident about the outcome, regardless of what you do or don’t find. And it includes knowing when to escalate to an outside investigation.
- Experience: Conducting an internal investigation is a mix of art and science. Experience helps—my 10th investigation was better than the 1st, and my 100th candidate interview was better than my 10th. (But I hope you don’t need to conduct 10 investigations at your agency!)
Let’s look at my advice on internal investigation procedures.
Why not call the police immediately?
In some cases, you should call the police immediately—especially when you suspect criminal activity.
But if it’s something like embezzlement, your local police department may or may not be enthusiastic about investigating a white collar crime. And you may want to gather more information before you file a police report, especially since it could involve one of your most trusted employees (and a false accusation would create a range of problems).
In cases involving harassment, you may want to gather information initially and then escalate to an outside investigation by your law firm or someone they recommend.
Be careful—you never know what a suspect may do if they’re cornered; the results can be deadly.
10 tips for conducting an internal investigation at your agency
Proceed carefully—now or in the future, you may want or need to escalate this to an outside investigation.
1) Understand your responsibility and risk exposure
As an owner or another agency leader, you’re responsible for what happens at the agency. This includes doing the right thing, even when not in your personal interest.
Do you have insurance that protects you—individually—from legal claims around negligence? Ideally, you have an umbrella liability insurance policy to cover legal claims that exceed your usual liability coverage. Because umbrella policies are unlikely to pay out, it’s inexpensive once you’ve maxed-out your regular coverage.
2) Decide between external vs. internal investigation
You can investigate many things internally—but sometimes you need to escalate. If it’s a legal issue, consider whether to go the police and/or to enlist your lawyer.
Particularly in the era of #MeToo, “internal investigation” can be a negative phrase—there’s a sense that companies will tend to cover-up their own behavior. Even if you intend to do your best, there are reputational risks. If there’s a PR implication, an external investigation carries more weight.
Follow your gut. In extreme situations, internal investigations can be deadly.
3) Identify key questions you need to answer
What do you need to determine? Are there secondary questions you need to investigate? For example:
- Did someone embezzle money? If so, how much? Can you get it back? Is it continuing?
- Did someone harass someone? If so, what happened? Did the harasser also harass others?
- Were there instances of fraud? If so, to what extent?
- Did the problems involve illegal acts, or merely policy violations?
It’s important to be clear on what is appropriate—since you’re comparing results and behaviors against that baseline.
4) Understand your ideal baseline, as a point of comparison
What are the baseline appropriate behaviors you expect from your employees? Knowing this helps you compare what you find to the baseline.
For instance, these are norms to prevent embezzlement:
- You should have at least two people with signing authority.
- Someone without signing authority should review monthly bank statements for irregularities.
- Agency bylaws should have a clause indicating how to handle misbehavior allegations by an employee or contractor.
- Your agency should have insurance covering fraud and embezzlement.
- A bookkeeper would manage day-to-day accounting, and a third-party CPA would prepare the taxes.
When it comes to harassment, you should have policies in your employee handbook and other documentation. And every new hire should sign it as a condition of employment. (If you have current employees who didn’t sign it, you can go back later—but it typically requires providing some “consideration” in exchange for their signoff.)
5) Make a list of potential resources and allies
List your document-based resources—like bank statements, bylaws, tax returns, and internal communications.
Think about who your allies are in the situation. Is the bookkeeper, CPA, or a member of your advisory board an ally? What about your business coach and/or therapist?
Consider that there may be more than one person you need to be careful around in the situation if you’re still attempting to gather the complete story.
6) Gather data to confirm allegations
Get all the data you can surrounding any allegations. This may include bank statements and images of canceled checks, statements from employee(s) who were harassed, or other details to help you understand what happened.
Think about which people can help corroborate others’ accounts. “He said, she said” is the worst situation.
Which people might you interview to dig deeper? Consider interviewing the “suspect” last, since you need to understand the context first (and you don’t want to clue them in that you’re suspicious, in case they try to destroy evidence).
7) Secure critical information and physical materials
Your bank can provide duplicate statements, and securing any involved computers is important. Are those computers owned by your agency? If not, you would need the police to be involved, as you can’t seize someone else’s personal property.
You should also be careful to have a second party as a witness when you interact with the employee in question. Be aware that they will try to avoid you. A common ploy is making excuses for why they can’t meet, giving them time to destroy evidence and move money.
If it’s about embezzlement, be aware also that you may never recover any missing money, or would need to file a police report for insurance to pay a claim.
8) Take initial action
Once you gathered key materials, decide whether to escalate to the police or to confront the employee yourself. The key is to act quickly, while also protecting yourself against counter-claims that you’re the one harassing the suspected embezzler or harasser.
One option—depending on your employee agreement and local regulations—may be to suspend him or her immediately (with pay) and order him or her to preserve all documents, not destroy anything, and otherwise cooperate with the internal investigation.
You’ll want to be sure to have support from your fellow managers, in case the employee pushes back.
9) Be ready for things to go poorly
They’ll avoid you, they may threaten you, and it may lead to not getting the money anyway. You may not be able to prove any harassment claim.
You or someone may have to sue someone, testify in court, get sued yourself, and/or (at minimum) spend a lot of time and energy on this. There may also be negative press coverage, too.
If this goes to court (they’ll probably settle, like 99% of legal cases), they may not go to prison.
10) Consider your moral responsibility
You may not want them to go to prison, due to specifics of their life circumstances or your own feelings of guilt about what’s happened. Empathy is important—but if things unfolded as it appears, it’s their fault you’re in this situation.
Worried about destroying someone’s life if you press charges? Consider the nature of the violation:
- Embezzlers often strike repeatedly—at different companies—because it’s easier for those around them to not pursue prosecuting them, and they go on to steal more money from others in the future.
- The same can be true for harassers—this likely wasn’t their first time, and it may not be the last unless they face legal consequences. (In this case, whether they’re charged will depend on what prosecutors decide, not what you choose.)
I recognize you’re in a difficult situation—but this is your time to do the right thing. Good luck!
Question: How have you handled internal investigations at your agency?
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