Bookkeeper embezzlements

[Phil Thien]

I do IT work, and I just had ANOTHER client tell me their bookkeeper was embezzling funds (just discovered last night). I'm hearing this quite a lot lately.

If you own your own business and have someone else do any bookkeeping or payroll for you, I'd strongly advise you to insist on checking your bank account statement/reconciliation each and every month. Never allow someone to tell you what your balance is, check it yourself.

Same goes with payroll reports from any processing outfit (Intuit, ADP, Paychex). You want to see, each and every month, a report that details the checks that were cut by the processing company.

You want to produce these reports yourself, not have the bookkeeper generate a report for you.

[Stephen Cherry]

I've heard about this sort of thing also. People will steal. Another tempting position is purchasing agent (buyers). They've been known to cut side deals.

[David Weaver]

There have been several stories of the same type around here in the last couple of years. Several may be a serious understatement.

Any organization that is doing well business-wise, that has an owner who doesn't go through the books in detail and who doesn't subject themselves to an audit is a target for it.

In one case, a bookkeeper took $10 million from a local car dealer.

http://news.yahoo.com/high-flying-au...ews-money.html

Local governments, schools, etc, also seem to be popular targets because of the cashflow going through and the budget audit work.

[Dan Hintz]

Or how about you keeping the ability to sign legal documents (such as checks and money transfers) to yourself. The bookkeeper does exactly what it says he does, keep your books, but when it comes down to transferring money or signing a check, you know exactly where it all goes because YOU wrote the check (or at least saw it when you put your signature to paper).

[Brian Elfert]

Or how about you keeping the ability to sign legal documents (such as checks and money transfers) to yourself. The bookkeeper does exactly what it says he does, keep your books, but when it comes down to transferring money or signing a check, you know exactly where it all goes because YOU wrote the check (or at least saw it when you put your signature to paper).

Sure, you can sign each check yourself, but unless you research every payment how do you know they are legitimate? Say you see periodic checks to XYZ Manufacturing. XYZ Manufacturing could be a shell business the bookkeeper set up to scam the company. You could pull the invoice, but unless the business is really small how would you know if you really bought stuff from that company or not?

They say the best way to stop such schemes is to have multiple folks dealing with finances. At the local Fair one person sells tickets and another person takes the ticket. They may only be 10 feet apart, but it is supposed to help deal with the employees pocketing money or giving free admissions.

[Phil Thien]

Sure, you can sign each check yourself, but unless you research every payment how do you know they are legitimate? Say you see periodic checks to XYZ Manufacturing. XYZ Manufacturing could be a shell business the bookkeeper set up to scam the company.

It would still help. Many years ago I was working with a temporary staffing agency that staffed hospitals. The owner hired a new bookkeeper and then she (owner) left for about a month and a half. When she returned, she asked the bookkeeper to bring in the check register "so we can go over things." He (new bookkeeper) was apparently a bit surprised.

She went through things check by check, and found three checks to company names she did not recognize. She asked about them and he make-up some crap about what they were for.

She said, "oh, well let me call them and introduce myself." Game up, they WERE shell companies and they didn't have any physical location.

Next call was to the police. It was only $1500 at that point, she was very lucky.

Gosh that lady was on top of her game.

So you are right that someone may not recognize a company name, but watching on a monthly basis will certainly familiarize one with who gets checks.

[Dan Hintz]

Sure, you can sign each check yourself, but unless you research every payment how do you know they are legitimate? Say you see periodic checks to XYZ Manufacturing. XYZ Manufacturing could be a shell business the bookkeeper set up to scam the company. You could pull the invoice, but unless the business is really small how would you know if you really bought stuff from that company or not?

I considered that, but at the point you (as business owner) don't know what businesses/accounts you're sending your money to, I think we're beyond the point of just a bookkeeper and into an accounting department (though I'm sure there's that fine line somewhere in between). If I saw a few hundred $ checks going to spots I didn't immediately recognize, I would probably ignore them... seeing them multiple months in a row would likely have me checking on them. Seeing a few thousand $ check to someplace I didn't recognize, I would check immediately. In the hundred $ check case, it would take someone many years to really get much money out of me... in the thousand $ case, it would be my fault for not keeping track of where my money goes (which makes me a bad business person).

[David Weaver]

I don't think you'd see the bad checks, they wouldn't be placed in a binder for you to find. You'd likely have to check transaction registers, and at that point you'd have to know every single place your money could go. I doubt most 30 or 50 person businesses have an owner who knows every place money could go.

In something like the car dealer I mentioned above, there are gobs of transactions and the ownership probably loses interest pretty quickly in verifying every single one.

[David Weaver]

A fresh one in the paper today, slightly different circumstances, and with some elder abuse involved:
http://www.post-gazette.com/stories/...s-loan-698415/

I wonder how much of the stolen money is used for things people wouldn't spend their own money on (gambling, etc). We have a big new casino right in the city here, and some of the stories have mentioned that the perps have been embezzling the money to feed their gambling habits. Hopefully the casino has records of what was spent, because if they don't, that might just be a convenient way to make it seem like the money is gone.

[Phil Thien]

I don't think you'd see the bad checks, they wouldn't be placed in a binder for you to find. You'd likely have to check transaction registers, and at that point you'd have to know every single place your money could go. I doubt most 30 or 50 person businesses have an owner who knows every place money could go.

In something like the car dealer I mentioned above, there are gobs of transactions and the ownership probably loses interest pretty quickly in verifying every single one.

I've seen everything from dumb to smart criminals. Sometimes the checks aren't there, but often they are.

And just watching for a company name is no guarantee. Here is something that actually happened: A bookkeeper noticed a lot of checks (each for several thousand dollars) going to a handful of vendors. So this bookkeeper created bank accounts at other banks with similar names. So, for example, the real company name may have been "ABC Plumbing Supply" which banked at Chase. The bookkeeper goes to Wells Fargo and opens a personal account with a DBA of "ABC Co." Now the bookkeeper cut extra checks to "ABC Plumbing Supply," but deposited those checks into their "ABC Co." account.

[Phil Thien]

I wonder how much of the stolen money is used for things people wouldn't spend their own money on (gambling, etc). We have a big new casino right in the city here, and some of the stories have mentioned that the perps have been embezzling the money to feed their gambling habits. Hopefully the casino has records of what was spent, because if they don't, that might just be a convenient way to make it seem like the money is gone.

Just about every single case I've known of has involved gambling. And I think there should be a claw-back law where the victim of the crime can get funds back from casinos involved. In one case, authorities had a list of ATM withdrawals made at a Casino by a bookkeeper, but there is no means of recouping that money. When it is as clear-cut as that, I'd say there should be a way to recover those funds.

[Mel Fulks]

We seem to have a lot of them in Virginia. Children's sports organizations and law offices are frequent targets . The clerk? Treasurer? Of one county sent couple hundred thousand to a guy in Africa with a hard luck story along with along with money belonging to her and her husband. A lot of red faces and changes in the county government after that.

[Dan Hintz]

I don't think you'd see the bad checks, they wouldn't be placed in a binder for you to find. You'd likely have to check transaction registers, and at that point you'd have to know every single place your money could go. I doubt most 30 or 50 person businesses have an owner who knows every place money could go.

But that's my point... what does it matter if checks disappear or bad ones don't ever appear, if you have control of the final signature? Only sign the ones that you reasonably know to be good, a blank check would have to have a forged signature, and that raises the stakes for a rogue bookkeeper. I would think a 50-person company would have their own accounting department (of at least two people), which reduces the issue of a single entity having direct control of your money.

[Jim Rimmer]

Sure, you can sign each check yourself, but unless you research every payment how do you know they are legitimate? Say you see periodic checks to XYZ Manufacturing. XYZ Manufacturing could be a shell business the bookkeeper set up to scam the company. You could pull the invoice, but unless the business is really small how would you know if you really bought stuff from that company or not?

They say the best way to stop such schemes is to have multiple folks dealing with finances. At the local Fair one person sells tickets and another person takes the ticket. They may only be 10 feet apart, but it is supposed to help deal with the employees pocketing money or giving free admissions.

I may be naive but I would think just the fact that you, the owner/boss, is seeing and signing every check would be a deterrent to a would be embezzler.