Breakdown in Financial
Costs CEBI Member Company $50,000
A CEBI Member was shocked this week to
learn that a salaried employee had given himself a raise!
How, you might ask? He had reported 15 hours of overtime
weekly on a project, at time-and-a-half rates -- the equivalent of
22.5 hours of additional pay each week for a period of 6 months
until the problem was discovered.
It turns out that his timesheets were
not being approved by a line manager, but rather the same clerk who
put them into payroll. The employee and clerk both claim a
"misunderstanding", and the Company is scarcely positioned
to call it collusion, having paid it for 6 months. A breakdown
in basic financial controls that cost a member a lot of
In a completely different case,
reported last week in local newspapers, a clerk was found guilty of
embezzling over $539,000 from her employer, a residential services
company. How, you might again ask? She was the
person responsible for receiving checks from the field mechanics,
posting the income to the accounting system and making the bank
deposits. Again, a classic breakdown in financial controls -- a
single person should not be doing all those functions.
In this reported case, the company (The
Service Company) uses "TSC" as its brand. She
opened her own checking account in the name of Teen Spirit Council.
Thus when she received a check made out to just "TSC", she
neglected to post it as company revenue, made out her own deposit slip
and deposited it in her own "TSC" account. The
business owner now knows why the company had been working so hard for
several years and not making money! He was quoted in the paper
as saying he knows she'll never be able to pay the money
What to do?
This time of year is a great
time to launch an "Internal Financial Controls
Review/Audit". Get it done before the year-end pressures
set in. It's probably worth some fees to your CPA or another
service provider to come in, have a third-party look at how you do
business and handle money, and give you the peace of mind of knowing
that you're as well protected internally as you can be. It
might also be a good time to check with your insurance agent to see
that your "employee theft" coverage is adequate. These
cases can add up to real money over time.
As always, this is an Alert based on
general information. Your situation is unique, and
you should rely on your own trusted advisors in making any