control, and governance
STICKY-FINGERED CASHIER STEALS THOUSANDS
The Peninsula Daily News reports that a former Clallam County Wash. Treasurer’s Office cashier has been convicted of stealing more than US $617,000 from the county between 2003 and 2009. The former cashier stole the funds from a single cash drawer by exchanging real estate excise tax checks paid by the public for cash. The state’s attorney general estimated that money had been taken from the cash drawer more than 1,000 times.
The former cashier also made up false check amounts in officer records, altered and destroyed paper documents, manipulated office computer spreadsheets, created sophisticated passwords, and falsified records to the state Department of Revenue. According to the state auditor’s office, the former cashier committed the fifth-largest embezzlement of public funds in Washington state within the last decade.
This theft is a reminder that some of the simplest and oldest forms of fraud are still occurring. Despite advances in cash payments and electronic funds transfer technology, cash drawers still pose a high fraud risk. Furthermore, the financial loss can be staggering if adequate precautions are not taken to safeguard the funds.
At the heart of this fraud was the former cashier’s ability to take advantage of poor segregation of duties. Not only did she have access to the cash drawer but she also was not supervised when payments were received. Additionally, the cashier was responsible for producing financial reports. This access and lack of supervision enabled her to remove or alter the amounts of checks received for one purpose, and use them to replace cash that she took from the cash drawer. She then falsified spreadsheets and reports to cover up the stolen money.
Simple controls would have prevented this fraud from happening. For example, management could have assigned one person to open mail and receive payments, while requiring another person to prepare and make the deposit. Based on the amount of cash stolen, management should have been suspicious of the frequency of cash replacement and the amount required to maintain the cash drawer. Furthermore, internal audit should have conducted surprise audits of the cash drawer — several times a year given the amount of money passing through the drawer.
While auditors need to consider the fraud risks associated with newer technology, they cannot ignore areas where fraud has existed in the past.
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