Employee Fraud
“Fraud can occur at all levels of an organization. Obviously, when employees have more access and control, they have greater opportunities to commit acts of misconduct.”
You may not realise that employee fraud is not just stealing $ from a business bank account!
An accountant colleague of mine didn't realise that either, so today I am going to share a case study with you that shows the different types of fraud and embezzlement that a “trusted assistant” can get up to!
In a case study published in “Fraud Magazine”, March/April 2012, Trusting Assistants With Access, Monica Dalwadi and Aaron Raddock explore the investigation of Evelyn Reynolds, who was a trusted executive assistant, and who embezzled more than $100,000 from a children’s charity for her own use
The case study highlights how easily an employee with more access to information than they should can do damage in a small business. Key points from the article are that Evelyn:
had direct and indirect access to a variety of functions from credit card purchases to purchase order requests
had a good relationship with her supervisor and other members of the organisation
had an excellent work ethic, went above and beyond her normal duties, and employees viewed her as a friend and co-worker
Why she stole
After working as an assistant for about a year, Evelyn’ s personal life came crashing down. She divorced her husband, was involved in a property dispute, couldn't afford to take her kids on their traditional summer holiday and didn't have the funds to participate in her friends expensive activities.
Evelyn was suffering emotional and financial stress. She began to feel like she was underpaid for all of her extra duties and great work ethic….. and so the fraud began.
Method of Embezzlement
Evelyn used a technique known as “Salami slicing”, probably without knowing what it was colloquially called! This technique is when the fraudster steals money or resources a bit at a time so there is no noticeable difference in the overall size. The fraudster gets away with these little pieces from a large number of resources and can therefore accumulate a considerable amount over time. ( ref: Salami Slicing Attack – Fraud Fighting).
How she did it
Forged her bosses signature for personal purchases on the company credit card
Diverted funds donated for charity to her own children
She added a few hours of “work” each week to her timesheets
She was in charge of petty cash
Used a company phone to talk to friends and family after hours
Her misappropriations
Procurement card $16,600
Cheques $61,800
Blackberry charges $7,000
Illegitimate overtime $13,900
Petty cash $400
Accounts payable $7,300
Total = $107,000
Source: Fraud Magazine
How she got caught
Evelyn made two crucial mistakes at once - there was a duplicate request for funds in need for a child (which happened to be her daughter); and she had dropped a credit card approval form under her bosses desk (and he spotted the forged signature).
The organisation began an investigation.
The evidence
Purchase requests lacked documentation
Credit card purchases were in the vicinity of her home without explanation
Cheques written were made out to plastic surgeons and an RV dealership and to vendors that the business didn’t recognise
The lessons for your small business
There was a lack of supervision of Evelyn by her boss
She was trusted!
She often had authority to initiate and approve transactions
She stole not only funds, but time (time fraud)
She diverted funds to others
Small business owners are busy people. They are good at what they do, but setting up systems that protect their cash, their stock, or their time might not be a strong point.
By taking our Fraud Risk Score quiz, small business owners will receive a score that determines what the fraud risk is within their business.
To learn how to improve your Fraud Risk, Easy Fraud Solutions will work with the small business owner to provide suggestions presented in a customised report.
Take the FREE fraud risk assessment quiz now!