Bobbie Jean Donnelly was the office manager of the design division of a Los Angeles-based company that lacked effective controls on internal expenditure. She also had the total trust of her boss so that she was allowed to sign expense reports on his behalf without due recourse to him. Consequently, falsifying records was easy for her and was only revealed after the institution of an audit program that had adequate internal controls for the processing and payment of expense reports within the company.
Implementation began with a review of past records of transactions, this was her waterloo. Using data analysis software as appropriate, the audit team was able to sift through the load of transaction for review within the past one year. The findings were startling especially for a set of individuals. They were members of the design unit and she was responsible for the highest fraud! Indeed, she more than doubled her boss’s travel expenditure within that year.
Some of the methods she and her colleagues used included; submitting American Express bills instead of detailed receipts, duplicating taxi receipts and even falsifying records of travel outright. For instance, she was discovered to have received $6000 for a recruitment trip to Italy where she would have dined in the best hotels with the recruits. This she was found never to have done since it coincided with a family trip to the same Italy! It soon became obvious, what the lapses in the system were.
Employees were only required to state the business benefit of any traveling, estimates were also very broad and approximate and the ‘others’ section of the budget also gave room for fraudulent maneuverings. Also, the fact that she could sign on her boss’s behalf was a factor. These loop holes were sealed accordingly while Jean and her cohorts were dismissed and charged to court. The problem of duplicating expenses was solved by accepting originals only. A corporate credit card system is also now in place so that tracking can now be done easily.
And then there is now the consistent use of audit software within the company so as to proactively check irregularities. QUESTIONS 1 Don’t you think the new system in place would slow the company’s processes down considerably? 2 How about the cost of implementation/ 3 For a set of employee who has been used to some degree of ‘freedom’ in presenting the balance sheets, don’t you think the constraints in this new system would affect their perception of the management’s trust in them? 4 Do you not think this can affect creativity and productivity considerably?