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Don’t Let Technology Keep You from Catching Your Next Embezzler

By Phil Villegas

I like to compare embezzlements to plane crashes.  When a plane crashes it is usually not the result of one system breakdown, but rather a series of simultaneous breakdowns; a convergence of elements that end in disaster.  Perhaps the only difference when compared to dealership embezzlement is the convergence of elements is extended over a period of time, not a single day.

There is one vital internal control in protecting dealerships from embezzlement that has been tail spinning into decline because of advancements in technologies and that’s the review of Cancelled Check.  15 years ago it was commonplace to receive a huge envelope every month with all the cancelled checks, nowadays this is considered archaic, with cancelled checks only being available to be viewed online.  This problem has led to Owners, GMs and Auditors not routinely reviewing cancelled checks.  Keep in mind, a proper review of a cancelled check is not only what’s on the front of the check, but just as important are the endorsements on the back (for those of you taking solace with banks that provide snapshot images with their bank statements).

Five years ago, our group uncovered a $5 million dollar embezzlement scheme by a CFO who was redirecting dealership funds into his personal account.  This scheme went on for years, yet no one discovered it internally.  The one vital control that was missing that could have detected the fraud years earlier and saved millions of dollars was the simple review of cancelled checks.

Technology is here to help, not to enable a disaster.  Don’t allow online access, CD’s or Bank Tokens to stand in the way of a monthly review of the front and back sides of cancelled checks.  You just might find something interesting…

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