Maintaining Checks and Balances

Last week, I participated in a sad event. I helped a client fire an employee for theft.

The client called me for advice after discovering some accounting issues. Just by fluke, they had found that there was a bad cheque noted in the accounting system. That, by itself, is not unusual. If a cheque jams in the printer, it may be coded a bad cheque.

However, bad cheques should be kept for a paper trail. In this case, the cheque was missing. My client got a copy from the bank. Lo and behold, it was a cheque to the controller, in an amount equal to her pay, dated for payday. The owner's signature appeared to be forged. Uh-oh.

I asked my client to dig deeper to see if there were other instances. You never know: maybe it was a mistake. They immediately found two, seven months earlier. It was the same pattern. Now we were sure. This was no mistake, this was theft.

I met with the employer to review their evidence. It was irrefutable. However, any internal investigation is not complete without asking the employee for their side of the story. I briefed the owner on how to conduct the interview. As it was still the investigative stage, there could not be accusations.

The owner and the employee's supervisor conducted the interview. The three instances of extra cheques were laid out on the desk. The owner asked if she could explain why she received extra pay. Faced with the evidence, the employee admitted that she had issued herself extra cheques and that she had no excuse for her behaviour. The employer, having been given an admission of theft, properly told the employee that she was being dismissed and she would have to leave immediately.

The employer handled the situation extremely well and professionally. They even offered to get her a cab home if she wanted it.

The sad thing is that the employee is a single mother with a very ill child. The employer had actually offered to give her money to assist with her child's care. She never accepted the offer, but turned around and took money, covering her steps very elaborately. The employer is still investigating to determine the extent of the theft.

There are two things that stand out:

1. Don't put any one employee in a position to cut cheques and do the bank reconciliations. If the size of your business permits it, have a different person doing the tasks.
2. When investigating theft, do what my client did: accumulate the proof before making accusations, present the evidence to the employee and ask for an explanation of the problem. Most people, when faced with irrefutable proof, will admit to their wrongdoing and it will be easier to terminate their employment without a fight.

The employer has said that it has no plans to contact the police and it is very unlikely that they will even pursue the employee for return of the money. She should consider herself lucky.