Comments Off on Dealership Embezzlement in the Headlines – Is your store next?
By Marilou Vroman, CPA, CFE
You may be aware there are ways to monitor the web for content such as “Google Alerts.” This service is an easy way to have relevant news delivered to your in-box. As a forensic accountant and a passion for dealership internal controls, one of my alerts is set up to provide articles about dealership fraud or embezzlement. It seems almost every other day I receive an article about another dealership that has been taken advantage of by an employee. After reading many of these articles, I find myself thinking, this could have completely been prevented with the simplest of internal controls.
Just yesterday I read an article about a Toyota dealership in which a General Manager perpetrated a fraud scheme where checks were diverted for personal use. According to the article, the General Manager told his dealership employees to make checks in the thousands of dollars payable to a fictitious [...]
Comments Off on Does your Dealership have a One-Way Policy with Deferring Losses?
By Phil Villegas
When was the last time your General Manager wanted to spread a large gain over a few months or to pick it up during the 13th month entries? Chances are you have never heard these words spoken and likely never will. However, most of us have encountered the situation of a General Manager or Departmental Manager wanting to spread or defer a loss over several months.
Whether the loss is a large shortage in a parts inventory, a legal settlement, an uncollectible wholesale receivable, a warranty audit chargeback, there are multiple reasons which are often presented with an attempt to justify spreading or deferring a loss. Reasons like wanting to avoid showing a large dip in profitability or to “smooth” the financials, and in some cases wanting to label the item as truly extraordinary and run it through as a 13th month item to essentially completely avoid the financial statement. In the [...]
Comments Off on Occupational Fraud Insight from the ACFE Report to Nations
By Marilou C. Vroman, CPA, CFE
The quantity of dealers who have annual financial statement audits has been decreasing over the years, and yet we still find dealers who believe their year-end review or audit of the financial statement is sufficient and designed to detect fraud in the dealership. While fraud may be detected in the review or audit process, it is not likely. Thresholds for materiality tend to limit visibility to the details, and the scope of work is focused on whether the financials are fairly presented and free of material misstatement, not whether occupational fraud exists.
As a Certified Fraud Examiner, I review the Association of Certified Fraud Examiners semi-annual “Report to the Nations” (“Report”) which shows statistics on global occupational fraud stemming from thousands of fraud cases. Some key findings disclosed in the 2018 report from 2690 occupational fraud cases are quite eye-opening:
Internal control weaknesses were responsible for over 50% [...]
I am a collector of vintage watches. For anyone who doesn’t know too much about vintage watch collecting, this might seem like a nice, innocent and stress-free pastime. For anyone who does know about vintage watch collecting, they will know that it is anything but stress-free and innocent. Vintage watch collecting is ripe with fraud, deceit, and embellishment to name just a few factors. Original, unpolished, unaltered and as true to the condition of how that watch was first produced means everything in the watch collector’s world. For vintage watch buyers who don’t have the level of expertise or resources to evaluate a watch, there is one golden rule when considering the purchase of a vintage watch: “You buy the dealer, not the watch.” In other words, you invest in an individual with the knowledge, experience and reputation necessary to qualify them to properly represent and sell that watch.
Comments Off on The good ones are always taken…or are they?
By Marilou C. Vroman, CPA, CFE
A recurring challenge we find in the automotive retail dealerships is what appears to be a general lack of available talent. Many dealers I speak with have asked me if I know of a good service manager or controller looking for a new opportunity. Turnover is a reality for most dealerships, whether it is driven by poor leadership, high pressure to perform, compensation or other reasons, there seems to be a revolving door in many stores.
When there is turnover, a silver lining presents itself with an opportunity to seek out a better candidate than the one who we had before. However, what we often find is “the good ones are already taken.” At times, a candidate may appear good on paper, with glowing referrals and relevant work history but less than stellar results when immersed into the dealership operations. Similar to a recently detailed pre-owned vehicle with polished [...]
Comments Off on WardsAuto – Car Dealers Should Join Automakers in Quarterly Reporting
By Phil Villegas
Read the WardsAuto Article here
For auto retailers, monthly sales reports (as required by automakers) paint a somewhat inefficient and non-representative financial picture.
Last year, General Motors was the first major manufacturer to cease reporting sales on a monthly basis and shift to quarterly reporting.
Ford followed suit this year and Fiat Chrysler recently announced it would too.
Prior to that, Tesla was the only mainstream automaker to report quarterly, not monthly.
The move essentially gives the OEMs some latitude in having to explain monthly spikes and/or drops that can be seasonal or tied to fleet sales, allowing them to gain better control of the message when reporting quarterly.
While I agree with the shift, I can only wish this would trickle down to dealers.
For dealers, monthly sales reporting paints a somewhat inefficient and non-representative financial picture. It can misrepresent the broader operating environment.
Comments Off on We love our dealership vendors, but do they really love us back?
By Marilou C. Vroman, CPA, CFE
You know them well; the dent guy, your advertising agency, the landscaping crew. We need them so we can stay focused on doing what we do best – selling and servicing vehicles. As much as we appreciate our vendors, we also know they can pose a risk to the unsuspecting dealer by slowly diminishing the dealership’s financial health by quietly eroding profitability for personal gain.
How may a vendor take advantage of a dealership? In a high-volume store, sales managers are often so busy closing deals and getting cars “over the curb,” they may delegate the task of inspecting vehicles and authorizing dent or wheel repairs to a porter or a salesperson. If an unethical vendor becomes aware of this delegation of authority, they could solicit a porter with a $100 cash spiff grant the vendor permission to generate an additional $500 in repairs to the inventory than are [...]
We’ve discussed in the past that one of the greatest benefits of working at a dealership is having the ability to buy a car that would be considered below market price. However, should selling a car through the dealership also be a perk? We are not talking about traditional traded-in vehicles as part of a normal sale but rather the consignment or pre-trading (a car that is traded in and sold before the new vehicle is acquired) of employee vehicles.
While nowhere as common as employee purchases, we occasionally come across transactions where dealership employees will sell their personal vehicle through the store. When we have come across these transactions, it’s very rare that these transactions have been carried out with the transparency and level of documentation we would expect with an employee or third-party transaction.
For starters, we typically see personnel from the sales department consigning their vehicles. We have yet [...]