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E m p l o y e e T h e f t : M o r e o r L e s s
f e a t u r e
Employee Theft: More Or Less
by Bob Cumberworth
Retired CPA
Super Bowl Sunday finally arrived. I was anxiously awaiting the kick-off and the commercials. With only five minutes to go, the phone rang. Should I answer it or let the answering machine take it? On the final ring, I decided to grab it. I knew I could get rid of this person quickly and not miss the kick-off.
That phone call was disturbing news about a person from my past with whom I‘d grown up. Had I heard that he and his wife were charged with stealing from their company? I hadn’t seen or heard from this person for over 15 years and they lived in a state far from me. But that call, which caused me to miss the first quarter of the Super Bowl, intrigued me. With the information I’d been given, I searched the internet. I discovered that this person had destroyed a company and caused over a hundred innocent employees to lose their jobs through his fraudulent actions. He was given the maximum sentence of seven years in prison and required to repay $750,000. His thievery cost the county in which he lived and worked nearly $2,000,000.
Don’t think this could happen to you? Think again. I wouldn’t have suspected my old acquaintance of being a fraudster. Unfortunately, neither did his employer. Read on and you can learn what you can do to prevent fraud from happening to you.
F r a u d — t h e E l e m e n t s
To prevent fraud in your automobile dealership, it is essential to understand the elements that comprise it. Often called the fraud triangle, an acronym known as MORE may better define the elements — after all, the common fraudster wants MORE of what belongs to you.
M stands for motive — and the motive of every fraudster is financial. Their reasons are varied and may include debt or substance abuse issues. It could also be that they simply like living the high life. One key to prevention in your own dealership is to keep your eyes open. Make background and credit checks a standard part of your employment process. Also, beware of the employee that seemingly spends beyond their means.
O stands for opportunity. Who has access to your dealership’s assets? These individuals, more than any others in your organization, have the opportunity to steal, should they choose to do so. But, of course, as an employer, you would not hire someone you do not trust implicitly — especially if they are going to have access to your assets! So, just in case you hire someone with a hidden agenda, it is essential to have good internal controls in place. Internal controls serve to limit access to dealership assets and establish a system of checks and balances. Of course, it is important to remember that many fraudsters are quite cunning. Even with the best controls in place, they may just find a way to get around them — thereby making it your responsibility to keep a close eye on things.
R and E stand for rationalization and excuse. The typical fraudster has to rationalize and excuse his or her criminal act on the front end, and the back. It is almost like balancing scales. But, once they rationalize their heinous crime and excuse it a few times, they become hardened and fail to hear their conscience anymore.
Now, you have a basic understanding of the mind of a fraudster. The question is, how do you prevent your dealership from falling victim?
F r a u d P r e v e n t i o n
The key to preventing fraud is to attack the elements. If you dismantle and disengage M O R E , you will L E S S en the chance of falling victim to fraudulent behavior. What comprises L E S S ?
L stands for leadership. Setting
a good example is essential. Employees notice when their superiors operate with integrity. In fact, when employees witness good leadership practices, they often attempt to emulate them. The opposite is true, as well. If your dealings with customers, employees, vendors and others are lacking in integrity, your employees may choose to adopt the same methods of behavior.
E stands for education. No matter what business you are in, employees need to be subjected to routine ethics classes. Yes, instilling values was their parent’s job. Unfortunately, with the number of single parent families or dual income households, the media raises a fair amount of our youngsters. So, do yourself and your dealership a favor — train your employees. Be sure to include case studies like the one in this article. It is important for them to understand the consequences of inappropriate behavior. Finally, your own employees can help you keep a watchful eye out for fraudulent activities. Provide them with a discreet way to report any unethical behaviors. After all, they may know long before you do.
S stands for systems. As mentioned previously, establish systems, or controls, in your dealership. This will not only reduce access to your assets but, by keeping a close check on your controls, you may just be able to prevent a fraudster from skirting them.
S also stands for surprise. Checking transactions, balances, reconciliations, test counts of parts, cash and other assets on a surprise basis, can be a major deterrent to a fraudster. Utilize a CPA firm with dealership experience to make those unexpected visits either in person or electronically, or both. If your employees know someone is watching, they’ll think twice before stealing.
The most unlikely people can be involved in fraudulent activities, and just one fraudster can ruin the business you have worked so hard to build. By taking some simple precautions, however, you can decrease the likelihood of becoming a victim. Remember, attack MORE with LESS!
B o b C u m b e r w o r t h r e t i r e d a f t e r m a n y y e a r s o f w o r k i n g a t L GT. W i t h a t e a m o f d e d i c a t e d p r o f e s s i o n a l s , L GT ’ s D e a l e r S e r v i c e s t e a m p r o v i d e s a w i d e r a n g e o f s e r v i c e s f o r i n d e p e n d e n t d e a l e r s . Fo r m o r e i n f o r m a t i o n v i s i t l g t c p a . c o m o r c o n t a c t C o l l i n Ka n e l a k o s a t 214 . 418 .14 2 8 o r v i a e m a i l a t c k a n e l a k o s @ l g t - c p a . c o m .
