While employers think this may never happen to them and their staff wouldn’t ever do this, embezzlement happens. Sometimes it goes on for months or even years without detection. Small-business owners who fail to uncover embezzlement can suffer financially and may even lose their business. Employers who suspect embezzlement must identify and handle the issue as quickly as possible.

True stories from our files
We have had clients who found themselves in these situations—for real!

One client had an employee who was “paying” 941 payroll taxes in the accounting system, but never sending the payments to the Internal\ Revenue Service (IRS). The client began getting notices that their payroll taxes were not being paid. After the owner looked closely into this situation and asked for our help, we discovered that the entries were being made into their software but nothing had been remitted for several quarters. The actual checks were being written to the employee, not the IRS.

Another client had a staff member who was pilfering supplies. The employee ordering office supplies was ordering extra and taking them home as well as using the business owners credit card points for personal items. Theft doesn’t have to be all dollars and cents--it can be goods too.

Time theft is another horror story. Employees can steal massive amounts of time. One client had an employee pad time on his timesheet and was caught because the company vehicle had a GPS tracker that recorded start and stop times of the vehicle. When our client suspected time theft was happening, he looked at the logs to see where this employee was during the day in the GPS history. He found out that not only was he lying on his hours, he was going home for periods of time during the day!

Many business owners are so busy running their business, they may be less attentive to what’s actually happening to their business. Don’t be one of those unfortunate business owners who learns the hard way and finds out after significant theft has occurred.

What you can do
It is not a certified public accountant’s (CPA’s) duty to detect and prevent fraud. Nevertheless, CPAs can make suggestions to business owners about safeguards to detect and help prevent it. Following is a checklist of suggestions we share with our clients:

• Analyze financial statements and other accounting documents for unexplained changes in profit. Look for unexplained expenses recorded on the books. Expenses reduce the amount of net income. Check expense reports turned in by employees to verify all reimbursements of expenses are approved by authorized personnel.
• Look at recent and past bank records and credit card statements. Bank and credit card records show all of a company’s payments made to vendors. A sign of embezzlement is if your accounting records fail to balance with the information listed on your bank and credit card statements. Also look at the back of checks for proper endorsements.
• Pull accounting documents and look for any unexplained changes. Look for changes in vendor information and additional unapproved vendors. Check the address of vendors and employees to see if any match.
• Analyze accounts receivable records for too many past due accounts. If a large number of accounts receivable accounts are past due, it may indicate that an employee in accounting is not posting payments received to customers’ accounts.
• Review vehicle tracking records weekly.
• Implement an electronic system to replace manual timesheets.

Hire an outside accountant to take a larger overview of financials and make it known. If someone inside is aware that an outside pair of eyes is reviewing their financials, it could deter embezzlement.

Briana Reidle, CPA can be found at Accounting& Tax Solutions, Inc., Lakewood.

A longer version of this story appears in the January-February 2019 issue of Colorado Green. Get the whole story at www.alcc.com/cg.

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EPA proposes a revised definition of WOTUS
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