Caution. Cold Weather is Coming. Employers Beware

Today’s economy may pressure more employees into theft.

Prior to the Wall Street crisis I followed the climbing fuel costs that started in the Spring. Increases in gas and diesel prices caused sharp increases in virtually everything over the past six months. Many people effected by these increases found ways to manage their household budgets through the summer months by altering their driving and spending habits. The warm summer months did not require regular heating oil deliveries.

Now that fall is here fuel prices will inevitably rise again as they do every year, further impacting most family’s household budgets. Combine the increased pressure to afford the higher fuel costs with a rise in unemployment, foreclosures, upside down mortgages, diminished property values, tighter lending and the pending impact to consumer borrowing in the form of credit cards, and the result may be the highest level of personal financial pressure to exist in most every household. So what does all this have to do with an increase in fraud, and specifically employee thefts and embezzlements? Crime levels have an inverse relationship to the state of the economy.

Employees are put into positions of financial trust, whether it is ringing on a register, making the company’s deposits, paying company bills, processing payroll or controlling inventory. In their positions most employees have opportunity or access to funds (just not funds they are entitled). Opportunity is the first corner of the “Fraud Triangle.” The financial pressures likely to be experienced by even the most trusted employees, the ones who have been with the company since inception and handle virtually everything, creates the second corner of the fraud triangle. The last corner of the fraud triangle is an employee’s ability to rationalize their behavior.

What does this mean. In order to pay for this month’s delivery of oil I will simply use some of my employer’s deposit this week and keep track of it until the end of the month. Then with my next check I will put it right back and no one will be the wiser. In order to make the mortgage payment this month and stave off the bank I will write a check from the company’s non-operating account. The account has plenty and is never used anyway, so I can put it right back at the end of the month. The company is not harmed in any way as they didn’t need the money anyway and it is back in their account. So many frauds I have investigated started this way.

There are two problems with the idea to “borrow” funds from the employer. First, it is stealing, and stealing however rationalized and justified is still stealing. Second, if it happened once and was put right back, it would not likely be found or create a financial loss for the employer. The real risk is that it is almost never put back by the employee, and more funds are taken in the second month. Then again in the third month… Much like gambling, the hope is that the next month will enable the employee to repay all the past months.

There is a famous saying, “the road to hell is paved with good intentions.” In this case the good intentions are nothing more than thefts, rationalized by the employee thief as “loans” only after being caught. If you have employees – beware. Watch your employees and monitor your controls and procedures over your funds. Check and double check things yourself. Do not rely solely on your employees, most notably your “most trusted” employees who you think would never steal from you. Otherwise you may be surprised one day, just as the victim of my most recent embezzlement case was when I told them their bookkeeper had been stealing cash receipts for the past eight years.

One comment on “Caution. Cold Weather is Coming. Employers Beware
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