Solution: Segregation of Duties for Receipts Someone other than person collecting money compares items sold to money collected (movie theatre example) Person collecting money is not person preparing deposit Person collecting money receives periodic report of deposits Second person OKs all voids/refunds
Solution: Segregation of Duties for Disbursements Review of bank statement and canceled checks (optical images) completed by someone not involved with check writing Amount altered? Void check cashed? Unauthorized checks written? Checks out of sequence or gaps in check sequence? Compare with claims approved Small entities: Involve board member or other employee
Solution: Internal Controls for Disbursements Require original invoices & original itemized receipts (prevent the slice & dice) Reference claims approved (with amounts) in minutes Retain voided checks See OSAs Statements of Position: Credit Cards Petty Cash The Importance of Internal Controls See OSAs Avoiding Pitfalls: Petty Cash (3 part series) Electronic Funds Transfers Fuel Purchases Phantom Vendors And many more...
Common Myth No fraud here – see our recent audit. Reality: Entities over-rely on external audits to detect fraud Initial detection of fraud, according to ACFE 2012 Report to the Nations: 43.3% tips (of those, 50.9% were from employees) 14.6% management review 14.4% internal audit 7.0% by accident 3.3% external audit