Background checks. What is legal information that employers are allowed to recieve on employees?

When is the appropriate time to pull these background checks? What questions are the employers entitled to asking the employee about their background? Our manager was fired for embezzeling lots of money from a library. Now, they are requiring checks on everyone. Public allegations have been made but no charges on this manager who has returned over 130,000 back to the library. Also he had been having sex in his office. All of the evidence was in his office, but other employees from different branches cleaned up the mess before GBI could actually see the condition of his office. Why now are they having the employees who have been working for years have background checks and what kinds of questions are these employers allowed to ask about the past?

All is fair game when it comes to background checks when you sign a release.

You actually only asked a couple of questions about background screening. I own a pre-employment screening company (a fancy way of saying background check company) and I work with a lot of different types of businesses.
A company should be performing searches on every employee that they have, if your company has not been running them, then they need to append the employee handbook, and then have all existing employees sign a release form. For new employees, they should be background checked BEFORE you hire them. A typical thorough screening takes about 48 to 72 hours to complete. I could go on and on about how important this is. Background screening companies are allowed to report all felony and misdemeanor arrests and convictions within a 7 year scope, after 7 years, only convictions can be reported.
The rest of your post is something that you need to ask an HR specialist. I know that there are VERY limited questions that you can ask a former employer, I am not sure about a current employee.
Also, the answer that you received from "Got Mice" is totally wrong. Hope this answers your questions.