Forging signatures on checks, transferring funds online directly to a bank account controlled by an employee, charging personal purchases to company credit cards, and paying off personal credit cards with company funds are some examples of a common form of embezzlement: disbursement fraud. Each of the schemes mentioned above can be prevented or detected quickly with proactive internal control and oversight procedures. Without these, schemes like the ones listed above may go on for years before being detected.
In order to protect your small business or non-profit organization from being impacted by disbursement fraud and in order to protect the staff from undue doubt and suspicion, internal controls should be put in place and periodically monitored.
Internal controls protect both the organization and its people.
A documented system of checks and balances serves two purposes: to identify honest errors and to uncover dishonest acts. Early detection of either helps organizations reduce the financial impact of theft and embezzlement, prevent erroneous financial reports, and ensure proper regulatory compliance.
The presence of strong internal controls does not imply mistrust of executives, accountants and bookkeepers. These controls demonstrate sound management and professionalism, and are evidence of a well-run organization.
The following checklist identifies actions and evaluations that will enable your organization to reduce the risk of disbursement fraud.
Any “no” response may be a red flag and should be closely evaluated.