Employee Dishonesty General Information Every organization must develop a system to protect its assets from the dishonest actions of its employees. Listed below are several tips that have been developed over the years to help firms establish internal controls to reduce the possibility of loss. Remember, each entity is unique and there are no universal controls that will work for everyone. Use these ideas as tools to develop your own unique controls and safeguards. The Accounting System A well-planned system generates clear and simple reports for all levels of management that clearly points out discrepancies. Audits Every year have an outside CPA prepared audit on at least a review basis. A compilation may not be objective enough. Cash Receipts All cash receipts should be deposited intact daily. Use pre-numbered invoices that require cash be posted by invoice number. If possible, don't let anyone work alone, two or more at all times - for their personal safety as well. Don't let cash accumulate in the cash drawer, skim to a bag below the counter. Develop a system to deposit large amounts in a "drop box." Disbursements All disbursements should be made by check. Require two signatures for the checks exceeding $500 or so. If possible, restrict authorized signatories for all checks to the Manager and/or Treasurer. Review the daily check register. Accounts Payable Develop a system of accountability and note each invoice as paid to avoid duplicate payments. Purchasing Establish a purchase order procedure requiring prior approval. Let your suppliers know the system. Use pre-numbered purchase orders. Bank Statements Bank accounts should be reconciled by someone not authorized to deposit or withdraw. Check the endorsement on all checks carefully for possible forgery. The Manager or Treasurer should periodically review cash receipts and deposits on several bank statements, about twice between annual audits.		Mail The Manager or Treasurer should receive and open the mail occasionally. Stamp all incoming checks "For Deposit Only" immediately (the bank will help you design the stamp).Journal Entries Carefully review all journal entries. Be alert to a large number of unnecessary entries. Vacations At least two weeks each year. This allows the substitute an opportunity to review daily procedures. Automation Off the shelf software usually has some built in controls. Be certain to make back up copies of the accounting records and store off-premises. Losses Should you become aware of an embezzlement, call the police immediately. Then notify your insurance company. Hiring Practices Check references. Have each new employee complete a special bond application. Order background checks. Inventory Inventory "shortage" is specifically excluded by most employee dishonesty policies. An annual inventory will however, give rise to evidence that theft may be taking place and, when used with other evidence, lead to reasonable suspension of dishonest acts taking place in the firm. An annual inventory of all property should be conducted as a loss prevention technique. Why Employees Steal Gambling debts, substance abuse, extravagant living standards, unusual family expense. Employee Theft Warning Signs Unexplained fluctuations in inventory Employees who ask for lots of overtime or refuse to take vacation time Workers who are good at math and never make a mistake Employees who are always looking into someone else's job Customer of other employees complaints

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