Every year, millions of dollars are lost due to employee dishonesty. Unfortunately, having a trusted employee siphon money out of their employer is becoming a regular occurrence. Most of these acts are long-term schemes that last for years and years. For this reason, we recommend that every charter school carry crime insurance and, more importantly, ensure employee dishonesty coverage is included in the policy.

Employee Dishonesty Coverage

Employee dishonesty insurance protects your charter school from financial loss due to the fraudulent activities of an employee or group of employees. For a loss to be covered, the employer must suffer economic loss, and the employee must either obtain economic benefit from the act or directly provide financial benefit to another person or organization. The loss can result from the employee of the insured’s money, securities, or other property.

The coverage is typically bundled with your entire crime policy, including employee dishonesty, forgery or alteration, and theft or disappearance of money and securities. The coverage is usually pretty cheap, with premiums starting at just a few hundred dollars a year.

Loss Prevention

Just as important as having proper coverage is instituting the necessary controls to prevent potential claims. Three areas have been critical in determining whether an employee could steal from you.

  1. Opportunity. Without proper controls, even an honest employee may be tempted to steal.
  2. Pressure. Economic pressures from possible addictions, health problems, or family situations can make an employee desperate enough to steal.  
  3. Attitude. Employees who feel mistreated may justify their actions by saying the company owes them.

Controls

Every charter school should institute the following measures to help prevent potential losses:

  1. Create internal audit systems.
  2. Hire an independent accountant to perform a full audit annually.
  3. Have bank accounts reconciled by someone who cannot deposit or withdraw?
  4. Institute countersignature procedures.
  5. Create strict computer security operations.