Sustaining Business Newsletter

Publication Date: August 2010

Search for news items concerning “embezzlement” on the web and you’ll get more than a thousand results.  Here are some of the most recent:

A shipping logistics manager in South Carolina creates phony invoices and embezzles $5M from his employer over ten years.

A city clerk in Minnesota issues herself $800 in duplicate paychecks in a short amount of time.

A company bookkeeper in Maryland skims cash payments and alters checks that amount to nearly $900K.

A South Dakota woman skims more than $38K from her employer in just seven months.

These aren’t just accusations, these stories tell of individuals who’ve either admitted guilt or have been found guilty of embezzling monies from their company.  It doesn’t matter what position the offender held, whether they owned the business or not, how they took the money, how long it took them, or what they did with it.  Read more about cases like these and you’ll see that the only common cause across all the instances of embezzlement is very basic:  They had the opportunity.

The balancing act is tricky.  A company needs to show that it trusts its employees while simultaneously denying anyone the opportunity to embezzle funds.

Some businesses can prevent loss due to embezzlement with a simple dual-control system.  You see an excellent example of this every time you go to the movies.  The employee who takes your money and sells you the admission ticket is not the employee who takes that ticket and admits you to the show.  A cashier who takes money from the register is quickly caught because the receipts don’t match the tickets taken at the door.  The only way around the system is for that cashier to collaborate with the ticket-taker.  Such collaboration greatly increases the chances of getting caught, both parties know it, and thus avoid the risk.  Opportunity is denied yet both employees are still entrusted with their roles.

If you’re serious about preventing embezzlement (and a whole host of other maladies) in your organization, you need to undergo a healthy business audit.  An important part of Hendrickson Business Advisors’ healthy business audits include a review of your internal checks and balances – a review that may reveal opportunities for those who may experience lapses in their ethics.

Embezzlers aren’t always high-profile employees or gambling addicts or rich or poor.  They are, however, usually caught.

Getting your money back is another matter altogether.