In my last post, I highlighted some of the different areas that are susceptible to fraud within an organization. By no means was that list meant to be all inclusive, as there are numerous other exposure areas that your organization needs to be aware of. Given the broad nature of these posts, I don’t want to dive too deep into any one particular industry, but if there is something in particular you would like to learn more about, please leave a comment on this post and I will address it in a future post. For now, we’ll concentrate on the different types of cash theft opportunities.

One of the biggest opportunities in this area is a lack of segregation of duties. This occurs when one person performs too many interrelated tasks (such as having access to cash as well as having the ability to record and make adjustments in the accounting system). This creates an opportunity for someone to steal from the organization and make appropriate adjustments in the system to conceal the theft. Even if you have a one person accounting department, you can utilize an administrative assistant to open the mail and make a list of checks before it is given to the accountant for recording. Once the deposit is made, compare the list prepared by the assistant to the bank deposit to make sure the amounts agree. There are plenty of other ways to add segregation of duties into your organization, and sometimes it just requires some creativity.

An offshoot to this is having too many people as authorized signers on your bank accounts (this can also include having a “signature stamp” that is not adequately safeguarded). I know some of this may seem like common sense, but I have personally seen accounting clerks in organizations that have over $100 million in revenue have access to signature stamps. If I were the owner in that situation, I would be quite concerned. Along those same lines, if you are still using stock checks, be sure they are kept secured at all times.

All major financial institutions offer online banking and a majority of them offer Positive Pay services for their clients, yet there are still a lot of organizations not utilizing these services. Positive Pay, and the more advanced Payee Positive Pay, is a great control that helps ensure that the checks written by your organization are not being manipulated. (If you are not aware, Positive Pay allows the bank to match the check number and amount to the listing you provide them on the day of the check run, Payee Positive Pay goes one step further and verifies the payee as well). I’ve personally seen these systems help organizations save time and money when checks were “lost” in the mail and made their way into the hands of criminals. In one instance I’ve seen one client prevent a six figure check from fraudulently being disbursed from their account due to the use of payee positive pay. Need I say more?

The final area I want to cover with this post is the lack of timely preparation of the bank reconciliation and the related review of the reconciliation by someone independent of that function. Too many times have I seen organizations be months behind in their reconciliations, and this is very concerning. If there is fraudulent activity occurring, this may be detected through the preparation of the reconciliation and related review of the bank statements. Along those same lines, in conjunction with this review, the manual adjustments that are being made to the cash and related accounts also need to be reviewed, as all but the simplest frauds will require some sort of manipulation to the accounting records.

Hopefully the above has given you some good insight into some of the different opportunities related to cash theft schemes. In my next post we’ll start to explore the different opportunities related to accounts receivable. As I mentioned at the beginning of my post, if there is something you want me go into greater detail on, please leave me a comment. If you’d like to discuss any of these topics further, please give me a call.