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I hate to admit it, but I've been associated with a number of organizations that have been the victim of employee fraud.  As a result of past experience, a person develops a sixth sense about the possibility and circumstances.

In one small growing company where I worked, a woman in accounting created a number of false accounts.  She was responsible for accounts payable.  Because of the rapid growth of the company and its expansion world-wide, she was able to create a number of bogus accounts and authorize payment to them.  She pocketed the money.

The Chief Financial Officer had no real insight into what was going on until a routine audit by a good outside accounting firm showed that the woman had stolen $350,000.  Chances of recovery at that point were not good.  You don't often recover money from the perpetrator.

In another 'case' a new sales incentive was introduced by the Vice President of Sales.  He decided to highly compensate salesmen on new accounts.  One clever salesmen got a very large bonus cheque (six figures) for garnering many new accounts over a sixth month time frame.  All the products were shipped to a distributor, who in turn was supposed to ship to all the new accounts. 

In reality the distributor was in league with the crooked sales person and was shipping all the goods to major already existing accounts, who in turn paid for them.  So the company shipping the goods did not notice anything untoward until a routine overview of all these new accounts showed that most did not exist.  Meanwhile the salesman got away with the theft and was fired, but not prosecuted.

Of particular worry are volunteer groups or others that collect money from events for the public good.  Very tight accounting controls have to be in place.  Wherever there are  large events with lots of cash and confusion there is always vulnerability.

In the case of Pumpkinfest we see a very large event organized by a small Chamber of Commerce using lots of volunteers.  The most telling part of the theft was that the court could not access the full situation due to the poor record keeping or the loss and/or falsification of records.

In anything as large and successful as Pumpkinfest what is needed is professional oversight and the rotation and close scrutiny of any volunteer or employee having anything to do with cash.

Stung (... more than once and there were more than two.)

Saugeen Shores

Editor see:

Feature Former Pumpkinfest co-ordinator sentenced

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Thursday, March 03, 2011