Welcome to Monday Money Moments! In this video we’re discussing #employeefraud … to the tune of $1 million dollars! How did that happen and how can you prevent it from happening in your organization?
Watch today’s video to learn from this story, best practices for #frauddetection, and three hot tips on #fraudprevention.
Video Transcript:
“Hello, and welcome to the inaugural Monday Money Moments with your host, myself, Dana Miller, from Executive Financial Insights. And today we are talking about fraud and what could your organization do with an extra $1 million? Our story today is going to be about how an organization, a nonprofit organization, had a million dollars stolen by their CFO. How did that happen and how can you prevent it from happening in your organization?
Our story begins with a CFO who had been with an organization for over 30 years. He was good friends with the CEO, the board, the executive team. They would go on golf outings together, they would have meals together, they would enjoy one another’s company over the holidays. And the CEO was very appreciative of his CFO and also very forgiving. And so when he recognized that the CFO was having personal issues, he would be forgiving and flexible with schedules or with deadlines, and what have you.
What he also did not notice, the CEO, and what he did not call attention to was the fact that this CFO was living beyond his means. He had fancy cars, he had a second home, he had boats, and he was taking expensive vacations. So, that should have been a red flag for our CEO.
This was not a story of mine personally. A colleague of mine, who is a CPA, has relayed this story to me and I thought I’d pass it on to you because it’s important to know how not to have this happen.
This colleague of mine got on the board of this organization and went to the first board meeting. It was in an East Coast city. And so everyone flew in and they all had gone out to dinner the night before and spent some time together. Around two o’clock in the morning when they get back to the hotel, that’s when an email shows up from the CFO with the financial statements. So, that’s a big red flag. Nobody on the board had seen the numbers before the mornings meeting. And the executive team had also not seen the financials for a year. So, there’s a big red flag on that one.
Well, as it turned out, my colleague started, as a CPA, asking questions and the CFO had vague answers at the time. And so, as it turns out, my colleague continued to ask questions up to the point where the CFO had called the CEO and said, “Could you get this guy off my back?” So, there was another red flag because the CFO didn’t want to answer questions and he knew that my colleague was asking questions that were going to reveal things that he didn’t want revealed.
Well, long story short, as it turned out, this CFO had been embezzling money for seven years from the company. And one way he did this is that he had signing authority over the bank accounts and he had access to the financial records. He was hiding these transactions and hiding the cash abuse in the entries that he was making, because he could approve these entries. It turned out that he ended up over seven years stealing $1 million. And by the nature of the industry they were in, which had a banking type of industry, it now elevated to the level of a federal crime. So, the FBI is now involved.
He will be going to jail, he has lost his home, he has lost his wife. And the CEO and this organization lost a million dollars that they could have used for their mission, which of course we don’t want to happen.
So, some of the hot tips for you:
- You do not want to give one person all of the powers to sign and approve and review numbers.
- You want numbers to be reviewed by you more frequently.
- Even if they’ve been friends of yours for 30 years, you want to trust, but verify.
I hope these have been some good tips for you. I look forward to seeing you next Monday at EFI’s Monday Money Moments. If you’d like to learn more about it, you can visit our website at www.executivefinancialinsights.com. Thanks.”
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