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Are you a Control Freak?

The following is a true story.

As director of membership and customer service for a small trade association two decades ago, one of my responsibilities was to manage all of the purchases that members and customers made with our association. We managed over 35 events annually, and also processed several thousand orders for different products we sold. This was in addition to the 500 members that renewed and joined each year. All told, we were processing well over 6,000 distinct transactions annually, more than half of which were paid for by credit card.

Having clear financial controls, and ensuring that they are followed by all staff, will help minimize the opportunity and likelihood of these events occurring at your organization.

This happened in the age before ubiquitous online transactions. All of our credit card orders were processed using a point-of-sale (POS) machine, very similar to the type you see at your local grocery store. A keypad allowed a staff person to enter in the fee along with the credit card number and expiration date. A confirmation (or declination) came back, and a small printout was attached to the order form, thus providing a paper trail for the transaction.

It was mid-January when the accounting manager and the finance director came into my office and explained to me that they had found four refunds processed via the credit card machine with no paper trail to back up the transaction. That is, they could find no paperwork that explained the reason for the refunds (which would typically be a cancelled order or event registration).

The accounting staff had found the anomalies during their monthly reconciliation process. They had done some investigating and discovered that all four of the transactions occurred the week between Christmas and New Year’s, when the association was operating with a skeleton staff. As it happened, there was only one person on my staff who was working that week. We agreed that this staff person was the likely culprit but had nothing other than the strong circumstantial evidence of timing and access (i.e., she was there when it happened and she was the one staff person who most commonly used the POS machine). When confronted with this evidence, the staff person immediately confessed, explaining that her friends had given her the idea of refunding money to their credit cards. She was immediately terminated and I had the unpleasant task of escorting her from the building.

I learned three lessons from this experience:

  1. Financial controls are an absolute must. At this association, the director of finance was particularly strict about our financial controls. She made sure that all monthly reconciliations were done within 10 days of the month’s close. She made sure that those who were processing money were not the same people doing the bank recs. And she made sure there was back-up documentation for every financial transaction we processed. We called her the “finance Nazi.” But she was right; those financial controls helped us catch a thief in our midst that we otherwise may have not caught for a long time.
  2. You never know who might steal from you. The woman who eventually confessed to this crime was a 19-year old part-time worker. She was a sweet, soft-spoken girl, who showed up and did her work, and caused no trouble for anyone. If you had asked me to pick a thief among my staff, she would have been pretty low on the list.
  3. Deal with the situation quickly and firmly. The elapsed time between when the finance staff came to me and the vice president spoke to my staff person was less than three hours. By confronting her immediately and dismissing her as soon as she confessed, we were able to address the issue and move on quickly, explaining to staff what had happened. It also sent the not-so-subtle message that this kind of behavior was not tolerated.

Every organization, regardless of size, regardless of culture, and regardless of perceived staff loyalty is susceptible to staff embezzlement. Having clear financial controls, and ensuring that they are followed by all staff, will help minimize the opportunity and likelihood of these events occurring at your organization.