Embezzlement – just a little more (no pun intended)

http://www.gmtoday.com/news/local_stories/2005/October_05/10262005_01.asp

In a recent story out of Wisconsin a church business manager was convicted for theft from the church. Here are a couple of germane quotes from the article:

Anderson was the business manager of the church from 1986 to 2003, the last three years of which she wrote checks to herself from church coffers, a criminal complaint said.

Other documents chronicling her history showed that she received a $450,000 inheritance after her mother died in 1998, but it was gone in two years as her family’s debt mounted. Anderson and her family took annual skiing trips to Colorado and annual golfing trips to Florida, the documents showed.

There are a few key things that clearly were not done in this situation.

First, the position of Business Manager at this church clearly had too much power. There can be no argument to this when someone was able to write checks to them self from a corporate account – period. The person authorizing disbursements should not be the person that signs the check. Dual control and effective auditing is essential to all financial controls

Second, only one person was “minding the store” and that’s just unacceptable. Forget the concern about theft (only for the next sentence). Accounting errors are all too common. So having a second person review records periodically is not just to avoid theft, although it’s a great by-product of the effort, but to prevent mistakes. These mistakes can be costly. How long would it take to find out that a vendor had been overpaid? How willing are they going to be to returning funds two or three years later? I know, I know, where is their ethical obligation in this, but that’s not the point and arguments can be made all around on the whole returning money after a year or two.

Third, background checks should be done ROUTINELY on individuals in positions of trust and not just upon hiring. There is nothing wrong with asking for consent to get a credit report on an annual basis. If this feels inappropriate (and I can understand your thinking if it feels that way) then you have got to tighten your controls way down. Lots of “dual control” throughout the process to ensure that one person is not able to manipulate the entire system. And a little more on this… Everyone talks to each other in a workplace. Salaries are known (at least the general ballpark usually is) so you just have to wonder where all the money comes from and how it goes. Living beyond their means is a COMMON cause of embezzlement. Let me say that one more time. Living beyond their means should be a key indicator of employee theft. They steal, and learn a new level of comfort, and then they have to steal to support this new level. No doubt they rationalize it with the thought that they’ll pay it back but it’s still gone.

Fourth, these thefts went on for years. Where was the auditing? Were checks matched to expenses, vouchers reviewed, and so on? Not likely, but if so then their auditor is practically negligent for not raising questions about cash disbursements to employees.

If you’re unsure whether your controls are adequate then contact AP Innovations, but at least speak with someone experienced in these loss opportunities.

Rob
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