In this article we take a look at receipt fraud.
Would Andy Griffith steal? Maybe not. But other law officers do. Thankfully, most don’t.
If you’ve watched Andy Griffith as much as I have, you may find it hard to believe a (small town) officer would steal–but it happens.
A friend of mine (we’ll call him John) audits a small Georgia city (this is a true story). One year he was reviewing the planning analytics for the audit, reviewing five years of comparative data. In scanning the comparisons, he noticed the police fines had fallen off significantly. So John asked the police chief why the fines were down.
The police chief (we’ll call him Robert) responded, “I took it.”
John laughed and said, “I’m serious, why do you think the fine revenue dropped?”
“I said I took it.”
John was stunned. It was hard for him to absorb what he was hearing. After all, fraudsters don’t generally confess on the spot–but this one did. And the chief was well-known and well-liked, a man known for his integrity.
The discussion continued as John inquired about how the chief took the money. Here’s the deal.
Robert had two receipt books, one for cash and one for checks. When checks were received, he would write a receipt from the checks receipt book–those funds were turned over to the city clerk. When cash was received, he wrote receipts from the cash receipts book–those monies went into his pocket. Simple, but effective, as he stole over $50,000.
So, what control weakness allowed this receipt fraud?
No one was controlling the issuance of the city receipt books. Also, the city clerk should have noticed the lack of cash payments being received for fines.
How can we remedy this receipt fraud problem?
When governments use physical receipt books, assign the duty of purchasing and issuing receipt books to a particular person. He or she should maintain a log of the receipt books and who has each one.
Surprise audits of those receiving funds is another way to combat theft. These reviews can be performed by the government’s internal audit staff or by an outside CPA or Certified Fraud Examiner.
White-collar crime is real, so stay vigilant. (Even so, I still can’t believe the real Andy Griffith would steal.)
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Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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