Kelly J. Bullis: Embezzlement a reminder to have checks and balances in accounting
Dixon, Ill., is a nice, small middle American town. It is most known for being the place where Ronald Reagan grew up.
Turns out Rita Crundwell, comptroller of the city for more than 20 years and a trusted “pillar of the community,” embezzled more than $53 million from the city over 15 years.
She created a bank account called Reserve Sewer Development Account, which sounded official enough to others. She was the only signatory on the account. She then deposited funds from other city departments into a legitimate city bank account called Capital Development Fund. From there, she would transfer funds to the RSCDA account by creating false invoices to the City of Dixon, then issuing checks payable to treasurer from CDF to the RSCDA account.
This scheme fooled internal auditors, external auditors and city employees. It was not questioned until a city clerk stumbled upon a curious bank account that, when investigated, revealed purchases for jewelry, fancy clothes, a custom motor home, luxury cars, hundreds of very expensive horses, etc.
This is not be the first incident of somebody embezzling from their employer, and it will surely not be the last. Basically, there are numerous cases of folks with impeccable reputations who are responsible for large thefts from their employers. Dixon’s might end up being the largest so far.
What are some of the similarities shared by such thieves? Usually you will find the people are in a position without proper oversight. They are looked up to as honest people who “would never do anything wrong.” Their lifestyle doesn’t match their income. They prepare the accounting records, and they directly receive the unopened bank statements and then prepare the bank reconciliation. They can sign checks and make deposits, etc. If anything looks a little funny to anybody, its usually shrugged off as “I can’t accuse somebody like this of doing anything wrong; it must just be my imagination” and then there is no further inquiry. Such thieves usually do not take long vacations. They might get upset or offended if anybody asks too many questions and/or wants to look at their records closely. Such a thief’s first venture is usually to steal a small amount that could easily be explained if he or she were caught. When they don’t get caught, they get bolder and start taking larger amounts.
Please note that just because people might match the above list doesn’t mean they are a thief, but I would seriously consider investigating more closely and changing their duties to create better checks and oversight. Internal controls are very important!
If you are an employer (government or private), it might be a good idea to review your accounting system checks and balances and make appropriate changes. Do not exempt anybody. If you have any questions about how to go about this, contact your CPA. A good rule of thumb for you: question everything.
Did you hear? “A bumblebee is considerably faster than a John Deere tractor.”
Kelly Bullis is a certified public accountant in Carson City. Contact him at 775-882-4459 or on the Web at BullisAndCo.com.