I wrote this blog post for William Vaughan Company’s general accountin blog titled, “Accountant’s Announcements.” That blog is geared more toward general accounting topics and not necessarily businesses.  Hopefully you recognize this blog is often more geared to the sophisticated accountant and business owner.  However, I feel the topic that I wrote about really is relevant in all facets of business and life.  I think that is unfortunate, but I also believe it is true.  I am not saying you should not trust people or always be skeptical, but just do not let the situation occur, and if it does well now you know better, if it happens again, well then shame on you.  I have some family members who were involved in situations where proper segregation of duties were not in place and unfortunately fraud occurred. One organization was an athletic club where one employee was in charge of all of the fiscal responsibilities including paying the bills. This person was owed money because the club could not afford to pay their employee over a period of time for his/her services. As a result, this employee decided to take matters into his/her own hands and not pay the clubs expenses, but instead take the amount owed to them by the club and leave. If someone else would have been involved in the club finances, then this employee would not have been able to do this. Another organization, a religious institution, also had a similar fraud situation. The pastor funneled money from the church over a number of years into a side business, which ultimately paid him. Of course the board of the church trusted their pastor and never expected something of this nature to occur. As a result the pastor had full authority and control. It only was uncovered when another situation prompted some of the church members to insist on an audit.

People want to trust others knowing that they will do what is right. All too often it is easy to say, “that’s not for me to worry about,” but everyone is involved in one way or another in some type of club or organization where money involved. Do your due diligence and make sure that the duties are segregated and no one is in a position to commit fraud. Most people that are honest want there to be the correct segregation of duties in place so that no one can be concerned that they are doing something wrong. So do the right thing and make sure that everything is set up correctly and segregation is in place. I am not saying it will not and cannot happen, but it greatly reduces the chance, and should mean you will catch it faster.

So what should you do?  There are many different activities surrounding cash, but some key things to think about would be:

• The same person that writes the checks should not be able to sign the checks
• All checks should be approved by the signer by viewing an invoice or other document.
• Ideally a third person would receive the bank statements at a location different than the bills and would question the check signer and check writer on various transactions to show that they are reviewing it.
• The same third person should also perform a reconciliation of all cash and credit card accounts.

I was not involved in these clubs and organizations in such a manner that I would have helped with any of this, but I do know people that were, and unfortunately they have now learned that it is best to run the groups in such a way that it greatly mitigates the chance of fraud.  I would anticipate every day of your life you are involved in work and life in a scenario that segregation of duties is important.  Won’t you do your part?