We are now upon the most beautiful days of the year, the Christmas holiday season.  I love everything about Christmas.  And, as the year draws to an end, it is time to reflect on the people who work for you and the contributions they make every day.

I want to talk about an employee that worked for me that was so special, I called her our ‘beautiful employee’.  I am not talking about beautiful in the normal sense of the word, but in terms of her generosity of spirit and her refusal to be caught up in the day to day tug of war among some jockeying for favor or position.  All she ever asked for was to be allowed to work in peace and quiet as a large part of her position was document keying.  Yet, she could juggle hundreds of small things a day including answering a busy phone.  She never complained about her workload so I had to try to remember to meet with her and ask if she was overloaded.  Everything was done with a smile.  I know how difficult this is because I can safely say my personality could use a big dose of patience.

As controllers, we are often unable to do things for our people that we would like to.  However, just sitting down employees who are above average and telling them how valuable they are to you, is probably worth more than many gifts you might think of.

So I salute all those ‘beautiful employees’ out there, that never complain, or cause conflict and are always willing to do what is asked.  All I could ask is for more of them.

To all of you, controllers or not,  I wish you a great Christmas, Happy Holidays, and a very Safe New Year.  I will return to posting on Monday, January 6, 2014.

Christmas 2013 pict


Good morning Controllers.  In my post last week, we talked about the ACFE’s 2012 REPORT TO THE NATION on OCCUPATIONAL FRAUD & ABUSE.

In Part IV, my final post specifically dedicated to prevention of fraud, I said we would visit the checklist included in the Report to the Nation.  Hopefully you were able to follow the link and look at it.  Let’s look at a few of the questions:

  • Is the Management climate/tone at the top one of honesty and integrity.
  • Does Internal Audit have adequate resources and authority to operate effectively and without undue influence from senior management?
  • Are strong anti-fraud controls in place and operating effectively?
  • Does the hiring policy (where permitted by law) include
    • Past employment verification
    • Criminal and civil background checks
    • Credit checks
    • Drug Screening
    • Education verification
    • References check

There were eleven separate questions but I listed the ones I thought were the most critical rather than repeating them all (but I still urge you to follow the link and print the checklist for yourself).

Just looking at the four above, I can’t overstate the importance of ‘due diligence’ in hiring, especially when it comes to accounting, finance, accounts receivable, accounts payable, treasury, sales, operations, etc.  Doing so is not a 100% bona fide guarantee you won’t make a hiring mistake, but it will certainly eliminate a significant number of bad hires.  Any time you can be proactive and not reactive, you are well ahead of the curve.  Finally, firing someone, at least for me, is gut wrenching.  Save yourself some pain.

Next, ‘tone at the top’.  I remember this kind of question on my CPA exam.  It’s not an outdated concept.  Yes, there are some successful executives who have ignored the importance of ‘tone at the top’.  But when you ignore it, you risk losing it all.  As a controller, there’s very little you can do about this if senior management is unconcerned.  As controller you can set your own tone with your people about honesty and integrity.  At least they will know where you stand.

Next, anti-fraud measures are critical.  To often as we all learned in accounting 101, segregation of duties is not possible because of the number of employees.  If you are a small company, this is a challenge.  However, as I have said, you do not want the bookkeeper reconciling the bank statement.  Do whatever you have to do to keep that from happening.  And remember that cross training, wherever possible is a significant step towards strengthening your internal control.

Internal Audit departments are generally the province of big companies.  It may be that as controller, you will have to become the Internal Auditor.  If your company uses an outside accounting firm, get with them and have them assist you in developing the internal audit questionnaire.

Fraud prevention does not have to be an expensive proposition.  There is much you can do to have fairly tight controls in place without a big dollar investment.  However, fraud losses can be very expensive, especially in smaller companies.  According to the ACFE report, average losses for small to medium companies from fraud:

  • 2012 – $200,000
  • 2010 – $231,000
  • 2008 – $278,000

Note:  At least the averages are declining.

One last story, and then we will move on.  In our small town there’s not much choice among grocery stores.  However, there was a small independently owned grocery store that I loved.  They bought produce locally and you could buy exotic lettuces and beautiful herbs there.  They had good prices and many individuals and companies did business there.  He also had a very lucrative meat business.  But they closed their doors a couple of years ago.  All of us were heartbroken.  The owner went broke.  But I found out, through a confidential informant, that the ditzy little blonde cashier that had worked there after school for about five years (and then fulltime) had stolen almost $500,000 from the cash register through phony refunds and other manipulations.  To this day, I don’t know how that was possible, but sadly it happens everyday somewhere in America.  Somewhere in the world.  Be an advocate for your company and protect it as if it were your own.  Your job may depend on it.


Hope all of you survived Thanksgiving & Black Friday.  Today is cyber-Monday.  I am trying to resist.

I hope you had the chance to read last week’s blog about ‘The Spy’ at the EPA.  If you haven’t, I urge you to take time to read it.  The level of incompetence of those responsible for our taxpayer dollars at the EPA is almost incomprehensible.

Why do people commit fraud against their employers?  According to the ACFE’s 2012 Report to the Nation on Fraud, here are a few of them:

  • Financial pressures
  • Need to live beyond their means (social pressure)
  • Addictions
  • Marital instability

After reading the Wall Street Journal article, I think we can add one more – delusions of grandiosity.  I’ve met a few people in my career that suffered from this particular malady.  They can be very dangerous in some organizations.

Here are some frauds I have encountered during my career:

  • Plant manager buying an engine for a race car he was building
  • Retail manager buying groceries and building supplies on his company checkbook
  • Secretary endorsing over and depositing to her account a vendor refund check made out to the company
  • Salesman collecting cash from customers for invoice payments and failing to turn it in
  • Salesman turned in hand written tickets for gasoline purchases he never made
  • Traffic manager taking kickbacks from a vendor

The most frightening statistic in the report reflects that approximately 5% of all business revenue is lost to fraud.  What are we as controllers and cfo’s and consultants going to do about this?

I subscribe to the Wall Street Journal in order to stay on top of business trends and developments.  It’s never boring.  There is hardly a day that goes by that there is not a report of fraud by individuals or an organization.  I’ve lived in a third world country where the citizens were just resigned to fraud and waste.  I do not want to see that happen to the United States.

I’m going to give you a link to the ACFE report.  On page 70 & 71 is a “Fraud Prevention Checklist’.  Print it, review it and then grade yourself and your organization

Next week we will delve into the Checklist.

ACFE 2012 Report to the Nation

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