Harrisburg Accounting Firm Investigates Employee Embezzlement

What is embezzlement?

Embezzlement is a nonviolent crime in which a person entrusted with someone else’s property converts that property to their own use. People who commit embezzlement are fiduciaries who have a duty to manage assets for the benefit of the owner. Embezzlement is a classic form of white-collar crime. It can take many forms and occur in any area of an organization. Some examples include:

• An accounts payable clerk who submits bogus invoices from a fictitious supplier that they control
• A procurement manager who arranges for a vendor to perform services at the manager’s home and then bills his organization for the work
• A vice president who misdirects employee retirement funds to his own account

Thorough, discreet investigations of embezzlements

At Breon & Associates, we help companies investigate possible employee embezzlement. We understand the importance of speed and discretion. We’ve had extensive experience leading investigations while collaborating with a client’s legal and HR teams. We take measured, prudent steps to gather the necessary data to assess the nature, scope, and extent of the matter.

What factors make a company ripe for embezzlement?

While good leaders strive to establish an ethical culture and internal controls to prevent or detect fraud, there are certain conditions which, time-after-time, are exploited by employees who choose to do the wrong thing. Such conditions include, among others:

• Lax controls over company processes —Employees who handle cash or other liquid assets face the temptation to skim a little for themselves. While some people would never steal from their employer, most people may succumb to temptation if they think they can get away with it. If your controls are too loose to catch discrepancies, someone intent on stealing will exploit those weaknesses.
• Misplaced trust — Only about four percent of employees who commit embezzlement have a prior criminal record. That means 96 percent are perceived to be fine, upstanding citizens…until they’re not. Data shows that employees who commit embezzlement usually have around eight years of service with their company. They’ve earned the organization’s trust and are often given significant latitude to perform their jobs. This creates a circumstance that can be exploited by someone who chooses to commit fraud.
• Hard feelings — An employee who contemplates committing fraud seeks justification for their actions. This often comes from perceived mistreatment from the organization. Perhaps they were passed over for a promotion or learned that a coworker is paid more and feels that they are under-recognized for their work.
• Financial stress — There are many personal circumstances that can put a worker under financial stress: a relative’s long-term illness, poor investments, drug and gambling addictions, or simply reckless spending. Financial stressors can drive an otherwise honest employee to embezzle or “borrow” funds to get through this difficult time. They kid themselves that the money will be returned once they make it through this rough patch.

Embezzlements harm organizations in multiple ways

Data shows that about one-third of companies that file for bankruptcy have been severely undermined by fraud. While most embezzlements are not large enough to derail an organization’s finances, they will have an impact on the ethical culture that leaders strive to create. Embezzlement, no matter how small, should never be tolerated. Leaders should not look the other way or accept a certain level of “skimming” as a cost of doing business. That lax attitude only paves the way for greater violations. When good employees learn that fraud may be occurring at work and perceive that nothing is being done about it, their morale can drop precipitously which can impact the quality of their work. If you suspect embezzlement in your organization, action needs to be taken.