This was contributed by one of our employees, Ira Siegel. Ira is a brilliant CPA who joined our firm in the last year. He is getting a reputation for his great touch with clients - I've personally gotten some fabulous feedback!! Prior to joining our firm, Ira practiced in California....and had some clients from the entertainment industry (exciting, huh?)!!
Billions of dollars are lost by U.S.employers every year from embezzlement!! Small businesses are especially vulnerable because they do not have the monetary or human resources to set up internal controls that help protect larger companies (sometimes…). Embezzlement can rear its ...
...ugly head as cash misappropriations either before or after it is recorded in the company books, fictitious or overstated expense reimbursements, falsified wages or commissions, fraudulent disbursements for personal purposes, forged check endorsements, kickbacks, and many other forms. It happens a lot…more than you think. Don’t feel stupid if it happens to you. Take steps to prevent it—because there is no guarantee of prevention—and implement a well understood policy to prosecute those who are caught embezzling to serve as a deterrent (this sometimes helps…).
Good internal controls will reduce embezzlement opportunities; however, you must still pay attention. Performing background employment, reference, criminal, and credit checks can reduce the risk of hiring an embezzler. However, many perpetrators are first-time offenders, so don’t stop here. Bond employees handling cash, implement a system of segregation of duties and consider job rotation to the extent feasible, make surprise spot checks on employee duties, and insist that vacation time be taken as well as lunches. Be sure that these and other internal controls are in place and that management review is not overlooked (small businesses are notorious for being lax in this area).
Look for behaviors that might indicate embezzlement is at greater than normal risk to take place. These include an employee living beyond their means, unwilling to share duties, or one with an unusually close relationship with a customer or supplier. Financial, family, and drug or gambling addiction problems should also be viewed as red flags.
Being an embezzlement victim has both financial and emotional consequences. Take steps to prevent it and recognize that despite one’s best efforts, it can still take place.
DON’T BE EMBARRASSED IF YOU ARE AN EMBEZZLEMENT VICTIM UNLESS YOU LEFT YOURSELF NAKED TO IT TO BEGIN WITH!
I went to culinary school, and I was told repeatedly by instructors there that the biggest problem with bartenders was theft of cash. Do you know if this is true? What do employers do about this?
Posted by: Pamela K | November 12, 2008 at 04:00 PM
My embezzlement success story!!
I own a small business and had a bookkeeper embezzle money from me. It happened (at least once that I know of) when I was on my 10th Anniversary/Honeymoon in Hawaii. I had hired this very likable guy who finished top of his class in school. He worked for me for almost a year to this point. To make a long story short, my mother, who I bought the business from and who still helped out, called me at 4:30am (Hawaii time) to tell me this guy had confessed to stealing some money and that he was not returning to work. He did it by requesting my other offices to send in their petty cash for review and together with the petty cash from the main office, he ran.
What did I learn from this situation? First, ALWAYS check references AND former employers! This guy was a bit dodgy about why he left his former employer, and that was my first red flag, but he was very likable, so I gave him the benefit of the doubt. My second red flag was that he called in sick the very first day after his very first paycheque - which happened to be a Thursday, so he got a long weekend. This REALLY bothered me, but, because he was a minority, I didn't follow up on it - I didn't want to be seen as prejudiced in any way. Well this pattern repeated itself pretty much whenever payday fell on a Thursday, but sometimes on other days as well. It wasn't every payday.
The good news? I called the police on this guy and provided them with the evidence I had. Then I heard nothing for two years, at which point I got a letter from the Justice Department detailing a judgement against this guy. He was found guilty of theft under $5K and ordered to pay restitution to me and for the court costs. Also, for some reason, probably because he thought the next employer(s) wouldn't check with me, he put down his time at my company on his resume. Well, one of them called me. When I got back to them a few days later, they said, "Oh, don't worry about it. He's been working here for a few days now and is fitting in really well." To which I said, "Well, let me tell you a little story about him..." Needless to say he lost that job and one other where the employer bothered to call me. So, he's got a criminal record, which should keep him from being a bookkeeper in the future - if the employer does their homework, and he's lost 2 jobs out of it. So, sometimes there is justice in the world. :-)
Posted by: Cory V | June 30, 2009 at 09:35 AM