In today’s world of immediate communication, we continually hear about instances of employee fraud at school districts. How can you keep your school district’s name out of the newspaper and off the internet?

It all starts with developing an ethical culture and establishing strong internal controls to deter employees from committing fraud.

Developing a strong, ethical culture begins with setting a strong tone at the top. Management should set the proper tone through their actions, which will encourage employees to adhere to the value system that the district has defined.

The school district needs to communicate its ethical values through a written code of conduct that emphasizes the importance of integrity and ethical behavior. Administrators should disseminate the written code of conduct to all employees and could potentially go as far as to ask each employee to sign it annually.

Also, having a positive workplace environment is extremely important in establishing and maintaining an ethical workplace culture. The school district should take definitive steps to create a work environment where employees have a clear understanding of what is right and wrong, and feel free to discuss and ask questions about ethical issues and to report any violations.

Consider implementing an anonymous and confidential fraud hotline, in conjunction with a whistleblower policy at the district. A confidential service for reporting suspected fraud through email, telephone, or a website provides employees the peace of mind that they can report suspicious activity without pressure or threat.

Hiring is another key factor in developing a strong, ethical company culture. It is important for school districts to establish and maintain policies for hiring and promoting individuals with high levels of integrity, especially in positions of trust or areas where fraudulent activity is commonly found. These hiring policies might include drug screenings, integrity testing, pre-hire investigations and bonding.

New employees should be trained and informed about the school district’s values and code of conduct at the time they are hired. Once your employees are on board, the training needs to continue periodically to ingrain those ethical behaviors.

Finally, employees who commit fraud or perform unethical activities need to be swiftly terminated and prosecuted. Termination and prosecution emphasize the tone at the top and can be a powerful deterrent for wrongdoing.

As an employer, you must pay federal unemployment (FUTA) tax on amounts up to $7,000 paid to each employee as wages during the calendar year. The rate of tax imposed is 6% but can be reduced by a credit (described below). Most employers end up paying an effective FUTA tax rate of 0.6%. An employer taxed at a 6% rate would pay FUTA tax of $420 for each employee who earned at least $7,000 per year, while an employer taxed at 0.6% pays $42.

Tax credit

Unlike FICA taxes, only employers — and not employees — are liable for FUTA tax. Most employers pay both federal and a state unemployment tax. Unemployment tax rates for employers vary from state to state. The FUTA tax may be offset by a credit for contributions paid into state unemployment funds, effectively reducing (but not eliminating) the net FUTA tax rate.

However, the amount of the credit can be reduced — increasing the effective FUTA tax rate —for employers in states that borrowed funds from the federal government to pay unemployment benefits and defaulted on repaying the loan.

Some services performed by an employee aren’t considered employment for FUTA purposes. Even if an employee’s services are considered employment for FUTA purposes, some compensation received for those services — for example, most fringe benefits — aren’t subject to FUTA tax.

Recognizing the insurance principle of taxing according to “risk,’’ states have adopted laws permitting some employers to pay less. Your unemployment tax bill may be influenced by the number of former employees who’ve filed unemployment claims with the state, the current number of employees you have and the age of your business. Typically, the more claims made against a business, the higher the unemployment tax bill.

Here are four ways to help control your unemployment tax costs:

1. If your state permits it, “buy down” your unemployment tax rate. Some states allow employers to annually buy down their rate. If you’re eligible, this could save you substantial unemployment tax dollars.

2. Hire conservatively and assess candidates. Your unemployment payments are based partly on the number of employees who file unemployment claims. You don’t want to hire employees to fill a need now, only to have to lay them off if business slows. A temporary staffing agency can help you meet short-term needs without permanently adding staff, so you can avoid layoffs.

It’s often worth having job candidates undergo assessments before they’re hired to see if they’re the right match for your business and the position available. Hiring carefully can increase the likelihood that new employees will work out.

3. Train for success. Many unemployment insurance claimants are awarded benefits despite employer assertions that the employees failed to perform adequately. This may occur because the hearing officer concludes the employer didn’t provide the employee with enough training to succeed in the job.

4. Handle terminations carefully. If you must terminate an employee, consider giving him or her severance as well as outplacement benefits. Severance pay may reduce or delay the start of unemployment insurance benefits. Effective outplacement services may hasten the end of unemployment insurance benefits, because a claimant finds a new job.

If you have questions about unemployment taxes and how you can reduce them, contact us. We’d be pleased to help.

© 2019

Yeo & Yeo CPAs & Business Consultants is proud to announce that Jamie L. Rivette, CPA, CGFM, has received the Women to Watch Experienced Leader Award from the Michigan Association of Certified Public Accountants (MICPA). The MICPA awards honor individuals within the accounting profession who have exemplified excellence through dedication, leadership, and service. Rivette was nominated by her colleague, Mary Kreider, Senior Manager in Yeo & Yeo’s Saginaw office.

“Jamie is a passionate advocate and a wonderful example for women in our firm,” Kreider said. “She is a mentor, a positive role model for both men and women in the accounting field, and a highly respected leader in the eyes of our clients and other accounting professionals.”

Rivette is a Principal based in Yeo & Yeo’s Saginaw office audit department and has been with the firm for 19 years. She leads the firm’s Government Services Group and is a Certified Government Financial Manager (CGFM). Jamie performs reviews for the Certificate of Achievement in Financial Reporting program administered by the Government Finance Officers Association. She is a board member for the Michigan Government Finance Officers Association and serves on its Accounting and Auditing Standards Committee. She is also a member of the Michigan Municipal Executives.

Ali Barnes, Managing Principal of the firm’s Alma office, works closely with Rivette as a member of the Government Services Group.

“Jamie has influenced those who have the privilege of working with her,” Barnes said. “Her commitment and diligence within not only the governmental industry but the accounting profession, as a whole, make her deserving of this award.”

Rivette leads the firm’s Career Advocacy Team, supporting Yeo & Yeo’s young accounting staff with resources and tools they need to be successful in their careers.She is an advocate for flexible work arrangements and spearheaded initiatives including a new parent checklist to help men and women at Yeo & Yeo transition into parenthood, career maps, peer-to-peer mentoring, and a career coaching program to further strengthen the future of the accounting professionals within her firm.

“It is an honor to receive this award alongside other incredible women role models in accounting,” Rivette said. “I look forward to continuing to provide support and encouragement to our future leaders as they develop in their careers.”

In the community, Rivette is treasurer of the Hemlock School Board of Education, volunteer cross country coach for Hemlock Middle School, a member of the Junior League Community Advisory Board, and is finance committee chair for Hemlock Board of Education.

Honorees will be awarded the evening of October 3, 2019, at the MICPA Awards Dinner in Novi, Michigan.