Pub. 1 Issue 2

10 www.glancda.org The most recent study analyzed 485 specific cases and offered the following conclusions: • The average loss was almost $1 million. • Most of the embezzlers took the money by either forging checks or writing unauthorized checks. • People whose jobs included f inance and accounting responsibilities were the most likely to embezzle funds; they accounted for two-thirds of the cases. • Women were more likely to embezzle than men. Again, they were the instigator in two-thirds of the cases. • Most embezzlement schemes went on for 4.5 years before anyone noticed that the money was gone, and shouldn’t have been. • Almost 20 percent of the businesses that were victimized were financial ones. Prevention Is the Best Remedy Ruth S. Crane, President of Auditors Inc., has a rule about embezzlement called the 10-10-80 rule: ten percent of the people who work for you will never steal; ten percent will always steal; and 80 percent will only steal under specific circumstances. When you hire someone, have civil and criminal background checks done, and consider doing credit checks, as well, since people who are dealing with financial problems are more likely to commit fraud than someone on a firm financial footing. In addition, make sure prospective employees know you are going to monitor bank and accounting records, then follow through. If an employee is going to have anything to do with money, then have that em- ployee bonded. Why is prevention so important? Look at the legal consequences for embezzlement. Marquet International was able to determine the prison sentences for 166 of the cases they analyzed. Some people had no prison sentence at all. The worst sentence was 30 years, but the average sentence was only 46.4 months. The length of the sentence seemed to have a relationship to the amount of money that had been stolen until the amount reaches about a million. Once the money has been spent, the source has dried up, and a sentence has been served, it becomes extremely hard for the person who stole from you to repay the embezzled money. You may get some of the money back, but the chances are good that you won’t get it all, or even all at once. You aren’t going to be able to stop people from embezzling, but you can at least reduce the likeli- hood of it happening. The best idea is to minimize opportunity. Embezzlement is an opportunistic crime. People are less likely to steal if they think they’ll be caught. Eliminate the opportunity, and you have probably eliminated the crime. Minimizing Opportunity The key to minimizing opportunity is mak- ing sure that one person does not have too much power or access to dealership funds. Segregate responsibilities and apply internal controls. This same advice would also apply, of course, to any small or medium-sized business. What are the right steps to take in order to prevent embezzlement from occurring? • Don’t rely on auditors. An internal auditor probably won’t find the problem. Financial statements are not designed to detect fraud, they are only meant to detect material misstatements. Much of what is stolen may be off the books; remember that embezzlement schemes are often quite creative. • Embezzlers are often found at the highest levels within your dealership, because that’s where the power is. Someone on a lower  Employee Theft — continued from page 9 EMBEZZLEMENT IS AN OPPORTUNISTIC CRIME. YOU AREN’T GOING TO BE ABLE TO STOP PEOPLE FROM EMBEZZLING, BUT YOU CAN AT LEAST REDUCE THE LIKELIHOOD OF IT HAPPENING. THE BEST IDEA IS TO MINIMIZE OPPORTUNITY.