Fire EMS Autumn 2011 by Moore Creative

Carolina Fire Rescue EMS Journal

Thieves among us (Cont’d from page 49)

to identify pilferage. For maximum effectiveness, auditing should take place annually. In between external audits, trustees or directors not involved in receiving, depositing or spending organizational funds should review checking account reconciliations and bank account balances. Functioning as an audit committee, this group examines and evaluates financial records throughout the year.The committee focuses on identifying overt attempts at theft. Indications include inexplicably low bank balances, payments to unknown vendors or vendors that sell products that appear unrelated to the organization’s primary mission, inability to link purchase orders to payments for goods or services, unauthorized withdrawals or transfers and signs of missing inventory. To minimize conflicts of interest or fear of reprisal, include one or more individuals from outside the organization on the audit committee. Consider enlisting a representative from local government or the business community. Use of an outside examiner offers convincing evidence of the importance placed on self-examination and commitment to preventing any abuse of charitably donated funds or taxpayer support. Preventing embezzlement requires faithful application of an entire set of financial policies and procedures.The examples presented represent tactics employed to deter embezzlers. Depending on the nature of the organization and its complexity, more extensive guidelines might be needed to define all relevant rules and regulations. 2. Preventing embezzlement Use a lockbox for payments or donations: A lockbox is a post office box used exclusively to receive payments. An employee of the organization’s depository bank opens all mail, directly deposits any payments and sends a full accounting of all deposits to the organization’s designee. Lockboxes virtually eliminate any opportunity to filch payments or donations before bank deposit.The lockbox also offers an accounting of receipts independent of any volunteer emergency service organization officer. Variances between the bank’s deposit records and the organization’s accounting records offer an additional warning of an attempted theft. Never sign blank checks: Sign checks only when the payee, amount and date are filled in on appropriate lines. Refer to copies of original invoices and purchase orders that validate the payment at the time of check signing.The purchase order must confirm that the product or service stated on the invoice was ordered and

received. In addition, checks for more than a normal amount (e.g., more than $100) should require two signatures. Under no circumstance should any officer pre-sign a blank check, regardless of the reasons the requesting individual gives. Never permit a payee to sign checks: While seemingly obvious, this rule is routinely broken.To guarantee independent verification, check signers must never be the recipients of a payment.This rule is particularly important for expense reimbursements, wages or other stipends. Limit consecutive terms in office: Successful embezzlement schemes require the criminal to monitor financial transactions constantly to hide their theft. Forcing officers to step down from office periodically offers the organization the opportunity to disrupt any criminal conspiracy. Pay attention to signs of unusual behavior: Otherwise unexplainable wealth or spending by an officer with access to organizational assets may signal theft. Purchases of homes, automobiles, boats, vacations or other items inconsistent with the person’s known financial capabilities form grounds for suspicion. Consider indications of drug addiction, gambling or similar behaviors alarming. These can motivate a historically honest person to embrace embezzlement. Promptly update bank account signature records: Banks compare endorsement signatures with file copies of authorized signatures. Failure to notify the organization’s bank of changes in authorized signers eliminates a valuable control measure. Immediately notify bank officials when an officer resigns or is removed from office. Control use of petty-cash accounts: Petty cash is a convenient way of paying low, nonrecurring expenses.These accounts also provide easy targets for embezzlers. A check signer must never serve as the petty cashier, as this position permits the removal of petty cash and replacement by writing a check. Organizations can minimize the need for petty cash by using postage meters, which eliminates the need to purchase stamps. A general-purpose credit card with a low credit limit can be used to cover meal, travel or related official entertainment expenses. Each mechanism presents an electronic trail of expenses that can be tracked at a later date. Use purchase orders: Purchase orders can deter submission of false or padded invoices. A purchase order lists the vendor’s name and the estimated invoice amount and describes the good or service purchased. The purchasing agent verifies the legitimacy of the vendor and confirms receipt of ordered

FALL • 2011 53

www.carolinafirejournal.com merchandise. No bill should ever be paid unless a valid purchase order accompanies the invoice.

3. Insuring against loss In spite of all efforts to prevent embezzlement, some criminals will succeed in stealing money or other assets. When the firewall is breached, the last hope is idemnification: the use of insurance to recover the value of stolen assets. A fidelity bond is a special type of insurance used to reimburse businesses suffering losses from embezzlement, forgery or fraud. Bonds come in several varieties. Some cover named individuals or specific position titles such as president, treasurer or director. Alternatively, in-

surance may cover all individuals who handle money without respect to position title. Insurance is inexpensive relative to the potential loss.The annual premium for coverage on losses up to $500,000 can cost less than $1,000.

Protect Your Agency Emergency service organizations are just as susceptible to embezzlement as any other business.Your agency should not suffer a financial loss from embezzlement. A combination of sound internal controls, annual professional auditing and adequate insurance is the best guarantee of the organization’s integrity and good name. Remember that a bankrupt or publicly discredited emer-

gency service organization cannot fulfill its mission and is of no service to anyone.The community entrusts these volunteer agencies with the tasks of saving lives and property. We must do everything possible to prevent tarnishing our reputation or losing the community’s trust. Dean currently works as one of the Assistant Regional Emergency Response and Recovery Coordinator for the Triad Region of North Carolina through Wake Forest University Baptist Medical Center Trauma Department. He is a faculty member for the EMS Programs at Alamance Community College, a paramedic with Davidson County Emergency Services and a volunteer with Thomasville Rescue, and Holly Grove Fire Department.

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