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A newspaper in Eugene, Oregon, was recently forced to cease printing. Is this due to the recession in the publishing industry? A new competitor? Natural disasters? no. It was for embezzlement.
The management of Eugene Weekly, a 40-year-old publication with a circulation of more than 30,000 people, is facing unpaid bills and unfunded retirements thanks to a former finance employee, according to this New York Times report. They discovered that there were a lot of gold accounts. At some point during his five-year contract with the paper, he was paid tens of thousands of dollars. The paper’s editor-in-chief, Camilla Mortensen, said that a “trusted” financial staff member closely involved in the paper’s finances had spent $90,000 from the paper’s bank accounts starting in 2022 after inaccuracies were discovered in the paper’s books. He said that he had paid himself. The misconduct was so serious that management did not commit any wrongdoing. The company had no choice but to lay off 10 employees and cease publication completely around Christmas. “The losses are greater than most small businesses can bear,” the paper’s executives said in a published letter. “The scale of this moment is unlike anything we have faced before.”
Related: 4 types of scams that can destroy your business
Stories like this happen all the time. Just last year, a hospital employee in Doylestown, Pennsylvania, was charged with accepting more than $600,000. A high-tech executive is accused of making off with about $3 million in stolen funds. His IT director at a Rhode Island manufacturing company pocketed more than $1 million. A Pennsylvania Wendy’s manager has been arrested on suspicion of creating fake employees and accepting more than $20,000. An Atlanta car dealership employee walked away with $27,000. An Ohio company’s payroll clerk stole a whopping $26 million. There are many other incidents like this.
Reports of these unfortunate events often lack sufficient detail to shed light on what exactly happened. Usually all that is said is that the situation is still “under investigation.” Naturally, no private company likes to talk publicly about embarrassing details. However, the New York Times report contained two very interesting pieces of information.
The first is that the employee was “involved in the newspaper’s finances,” and the second is that the employee “left the office earlier this month when questions arose regarding the closure of financial records.” It was “Ta”.
As certified public accountants, we are trained to help our clients create and enforce internal controls so they can minimize the risk of employee theft, especially in the financial sector. We ensure that our clients have proper segregation of duties for cash such that valuable inventory is kept securely, payments require multiple authorizations, and cash is received, deposited, and recorded by separate individuals. I am telling you so. You also want to have an independent person outside your organization reconcile your bank account because you don’t know what’s going to happen.
All of the above is easier said than done, especially for small businesses with limited resources. Eugene Weekly had only 10 employees, and I’m sure they were all busy with their own jobs. This is why many small businesses do not have these internal controls in place.
But regardless of your resources or number of employees, here are some simple things you can do to reduce your risk of financial fraud. That’s asking for time off. Yes, I will request time off. Especially for those who handle your finances. There’s nothing cool about being a workaholic. Working too much is bad for your mental health. This will negatively impact performance. And, just as importantly, financial fraud can be hidden. It seems the same was true for Eugene Weekly.
I don’t have the complete facts, but I’m sure the financial people accused of taking the paper’s funds didn’t get much time off. They were always at their desks and must have been territorial about their areas. And I’d wager that the paper’s management, busy running a profitable organization, had more to worry about at a time when the entire industry is in decline due to the coronavirus pandemic.
Related: Why embezzlement occurs most often in small businesses — How to prevent embezzlement from happening to you
Also, I would wager that all the companies I mentioned above could have discovered fraud easier and sooner if they had required their finance employees to take time off. . Doing so not only helps you cross-train others to do the job (useful if an employee is unexpectedly absent), but it also helps bring fresh eyes to the deal. . Even if you don’t have enough bandwidth to cross-train, it’s still worth paying to bring in economic temp work while the person is on vacation. It is very difficult to hide a fraudulent scheme if no one else is involved.
Eugene Weekly’s leaders are tough, but they’re not throwing in the towel. “We believe in the mission of this newspaper and remain determined to keep EW alive,” they pledged in the letter. I hope they succeed. Perhaps you already needed a vacation and the loss was simply not detected. I’m not sure, but I doubt it. But at least I hope we can all take at least one thing out of their misery. The bottom line is that vacations are good for both employees and employers.
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