How Strong Internal Controls can Save Nice People

Strong internal controls can save businesses and employees a great deal of pain.

I was walking up the stairs to my office when I heard Lisa say, “Do you know this guy?” She held her phone before me. 

There in the news was a good friend that I had known for over thirty years, a guy that had been in my home, a fellow I had gone to church with. 

He wore orange.

The headlines said, “$3.2 Million Stolen from Local Business.”

Jaw Drop

My jaw dropped. 

Some kind of a mistake. Has to be. 

My friend was someone of high moral character, a fellow I tried to hire many years ago, one of the smartest guys I’d ever known.

Surprise the Fraud Teacher

I’m the fraud prevention guy, the one always saying, “Develop your internal controls as though someone will try to steal, even though they are the most honest person you know.”

So, I shouldn’t have been surprised, right?

I was. 

I mean, this was my friend. 

Mom and Son in Cahoots

As I read the article, I saw that my friend’s mother, the company bookkeeper, was also accused in the theft. This surprised me as well since she was a sweet, older lady. Think Aunt Bee from Mayberry. 

Surprisingly, my friend, a supervisor in the same business, and his mother worked in tandem to steal over $3 million. Collusion usually results in higher losses.

How? 

She used a signature stamp to sign checks made out to her son, and she did so hundreds of times. I’m guessing she also entered those checks in the accounting system using fake vendor names, and she reconciled the bank statements. In other words, this business lacked strong internal controls.

No Management Oversight

I also believe the business owner trusted her and never looked at his bank statements or cleared checks. Why woudn’t he? This was Aunt Bee. 

Honest people become dishonest when you make it this easy.

Small business owners, like this one, can place too much trust in their bookkeepers, and when they do, they inadvertently tempt employees. 

Theft Motive

Why did my friend steal? 

I don’t know, but he had a reason, some unshareable need. They always do. 

We seldom know what’s percolating in the minds of those around us, their pains, their desires. But these can lead employess down the wrong path. 

Staring Out the Bars

Prison is a lonely place. 

I was saddened when this happened, but stories like this should prompt people like you and me to create sound controls, controls that lessen the temptation. 

If this business had done so, my friend might be home today enjoying his family rather than staring out the bars. 

Strong Internal Controls

Am I excusing my friend? Not at all. Each person is accountable for their actions, but businesses can save themselves and their employees a great deal of pain by creating strong internal controls.