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EMPLOYMENT LAW BULLETIN
Vol. 05, No. 6
Courtesy of ESKRIDGE LAW
Are employee embezzlements costing your company a fortune? Recently, two employees who worked in the money room at security company Loomis, Fargo & Co. were convicted of conspiring to embezzle $12 million in ATM money.
Here are a few ways to avert many embezzlement situations:
- Conduct background checks. Prevent embezzlement early on at the start of the hiring process. Conduct a background check of accounting and finance personnel. This should include confirming references, reviewing credit histories, and checking for criminal convictions.
- Separate job functions. Do not allow the same person to approve purchase orders, prepare billings, handle collection, and perform accounting procedures. For example, bank statements and canceled checks should go directly to the manager or owner and not to the bookkeeper. Do not have the bookkeeper signing the checks!
- Watch check signing. Checks should be signed by two or more people verifying the amount and the payee.
- Be very careful with signature stamps and computerized signatures. Either do not have signature stamp or, at the very least, keep them locked up. If you feel you must have a computerized signature, guard the password to the signature zealously.
- Require authorization. Any transaction over a specified amount should require special authorization.
- Provide for accountability. Double-check accounting records against supporting documents.
- Review statements. Review credit card and bank statements often.
- Control use of forms. Use numerical sequences on all checks, invoices and purchase orders. This will help account for missing documents and help prevent duplicate invoices.
- Require vacation. Some of the most common embezzlement schemes are revealed when employee is forced to take time off. Make sure you have more than one person who is trained in accounting functions so you will not be tempted to let employees skip vacations.
- Set up a confidential hotline. A recent study by the nonprofit Association of Certified Fraud Examiners found that organizations with fraud reporting hotlines suffered half the losses of companies without one. This is because most fraud is revealed through tips rather than audits. Also, this hotline should be available to vendors and customers.
ESKRIDGE LAW may now be contacted by phone (310/303-3951), by fax (310/303-3952), or by e-mail (geskridge@eskridgelaw.net.) Please visit our website at www.eskridgelaw.net or www.employmentattorneys.net.
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