The petroleum business is a high dollar game. It doesn’t take much volume for millions of dollars to be trading hands. Although we like to think we hire honest people, the best way to avoid a problem is to eliminate temptation. The following list of questions came to Meridian via a South Carolina reader from a special conference held there on Embezzlement and Internal Fraud. Take this test and see where your company stands:
1. Are copies of bank statements forwarded directly to the CEO and reviewed prior to going to staff?
2. Are two signatures required on every check?
3. Are accounting personnel prohibited from being signers on checks.
4. Are checks received in the mail endorsed by whoever opens the mail before other employees come into contact with the checks and is a log of checks maintained?
5. After the checks have been endorsed, do you prohibit employees other than accounting from coming in contact with the checks?
6. Is the check amount on manual or typewritten checks protected with a check protector machine?
7. Does your CPA firm evaluate your system of controls annually and do you take their suggestions for improvement seriously?
8. Are all employees who handle checks cash bonded?
9. Do you require employees to take vacations?
10. Is the check supply under lock and key?
11. Do you use a high quality check stock that would be difficult to scan or erase?
12. Does your endorsement stamp include your bank’s name and account number?
13. Are two people involved in computing payroll and remitting payroll taxes?
14. Do you have written internal control policies, and is it clear that deviation from established policies could be cause for termination?
15. Do you periodically review the adequacy of your fidelity bond?
16. Does your CPA firm do unannounced checks on bank reconciliations?
17. Do you ever check the bank’s records as to authorized signers on signature cards?
18. Are the policies for cash transactions tested?
19. Do you have an effective computer backup system?
20. Are credit card applications shredded?
21. Do you have an effective audit committee?
22. When key employees terminate, do you have an exit audit?
23 Do you have an insurance committee?
24. Do you eliminate employee credit cards?
25. Do you use a bank’s automated pay service?
26. Do you prohibit making checks payable to acronyms?
27. Is your company known by its acronym, or do you encourage customers to make payments to your full formal name?
28. Do you use a bank’s Lockbox service?
29. Do you do background checks on key employees?
30. Do you investigate vendors and keep current vendor information?
31. Do you have key employees sign conflict of interest agreements?
32. Do you mail checks via the Post Office?
33. Do you have your bank statement, credit card statements and so forth mailed to a Post Office Box?
If you answered “yes” to most of these questions, you are protecting yourself. Where you answered “no” seriously consider changing your procedures. Two facts that the conference presenter, Ed Wilkerson, asked participants to remember:
• In almost every fraud situation, the guilty party is the person above suspicion.
The must gut-wrenching evidence of this truth was a northwest marketer. After years of struggling about leaving a jobbership to wayward sons, a marketer came to a decision to leave the company to his office manager, a woman that had become like a daughter to him. Shortly after completing his will, the company was involved in a fuel tax audit where it was revealed that the office manager had been embezzling funds over a period of years!
• It is becoming increasingly difficult to receive honest references from past employers.
Not too long ago, a marketer told us about firing a controller for embezzlement. She was a CPA and they had recruited her from their outside accounting firm. By accident, they discovered in less than two years of employment she had pocketed over $300,000 of company money.
Unfortunately, rather than incur the expenses of taking her to court, they opted for an arrangement whereby she repaid the stolen funds over time in exchange for no legal action. Although the marketer is getting paid back his $300,000, imagine the poor unsuspecting company where she now works, all because he didn’t take her to court!
If you suspect you need help in this area, for further information on embezzlement and fraud, contact the conference presenter Ed McMillan at [email protected].