You have all heard or read the news account of the bubbly, full of energy 30-year-old soccer mom with two small children who was very involved with the local PTO and a mainstay in community volunteering efforts. Last year, a local civic organization put her in charge of a major fundraising effort. However, as you scroll down through the article, you'll find the judge at her sentencing hearing asking her why she diverted $7,000 for her own personal use that included shopping sprees, car repairs, vacations that she otherwise could not afford. Her answer to the judge was simply, “Because I could. Everybody trusted me and nobody bothered to check up on me. I meant to pay it all back, but I had just simply taken too much and got in over my head.”
These kinds of stories are replayed in the news quite frequently, all with similar scenarios. Most of the time, these are honest, everyday people. They do not sit at home at night and think about robbing convenience stores or holding up banks but given the opportunity to oversee large amounts of money with no accountability, character flaws of dishonesty surface. Large corporations and small businesses alike suffer with this problem to the tune of billions of dollars each year from pilfering of petty cash envelopes to million dollar pension funds. Industry must wage an ongoing battle to confront this problem.
Thorough and extensive background checks, while certainly necessary, do not always reveal a problem with a trusted employee. That guy in the cubicle down the hall from you is the all- American guy. You picture him going home, sitting in his recliner, reading the paper, smoking a pipe with his dog, Rex, lying next to him, waiting for his wife to put dinner on the table. He is Ward Cleaver come to life. He has worked in the Purchasing Department for 23 years without much fanfare or appreciation.
One day a representative of a major vendor offers him some incentive to swing a contract airway. Politely, this is called a bribe. While initially he is stunned by the offer, he soon begins to rationalize and then finally justifies why he should accept such an offer. He has little self-esteem, and his modest income affords him few luxuries. The bass boat that he always wanted never seemed to materialize because of other financial constraints. His dream of owning such a boat is now made real by a vendor who offered him a bribe and made real ultimately by his dishonesty by accepting the bribe.
Well, we all have some character flaws to some degree, there will always be thieves and embezzlers among us, but the biggest problem dealing with this issue is that industry itself facilitates bad behavior. The soccer mom who embezzled $7,000: if a simple policy by the organization had been put in place, a simple statement that all fundraising activities will be audited on a periodic basis, this would, in most cases, eliminate this kind of behavior. Instead of standing before a judge explaining that she stole the money because she could, a simple signed statement and policy by the organization could have prevented her from ever taking the money. Employers must initiate policies such as this as well. While there are always going to be audits by corporate accounting teams and by governmental agencies, there is still ample opportunity to divert funds and to manipulate the system.
Surprise internal audits usually breed contempt, mistrust, and ultimately low morale. Individuals, whether they are working for large corporations, small businesses, or civic organizations who are entrusted with receiving and depositing, the movement of finances must always understand that the window of opportunity to divert funds for their personal use is a very small one and never worth the risk. If your company does not have a statement or policy, then draft one. It does two things: it illuminates an awkward situation between employer and employee with a surprise audit, and it alerts the employee from the start that embezzling money is a high-risk situation.
Let's keep honest people honest.