Day Care Center Closes Due To Financial Improprity
Day Care Center Closes Due To Financial Improprity
Day Care Center Closes Due To Embezzlement
On June 14, 2010 the Times-Dispatch reported that state police are investigating embezzlement as a possible reason that a popular Charlottesville day care was forced to close. Wesley Community Child Care Center closed this year because of a tax lien of more than $25,000, according to court documents.
According to an affidavit, police found about 39 unauthorized ATM cash withdrawals from the day care's operating account totaling more than $4,000. Bank deposits also came up short when compared with the center's income, according to the affidavit from the state police. The investigation is ongoing and no charges have been filed so far.
The pastor at Wesley Memorial United Methodist Church, the day care's parent organization wrote "we are reviewing the Child Care Center's financial records to determine the reasons for the tax lien and debts that arose out of the Child Care Center operations."
According to court documents, police are investigating a possible connection to financial losses at the ABC Preschool in Palmyra, where the same person was earlier employed.
Small business, including non-profit organizations are particularly exposed to financial impropriety because they have fewer employees to which they can assign duties that otherwise should be assigned to different people. Still, there are many steps small businesses can take to reduce their exposure to the possibility of losses through embezzlement.
1. Always check the background of prospective employees. Sometimes you can satisfy yourself by making a few telephone calls or writing a few letters. In other cases, you may want to turn the matter over to a credit bureau or similar agency to run a background check. (Keep in mind that the rights of individuals must be preserved in furnishing, receiving, and using background information).
2. Know your employees to the extent that you may be able to detect signs of financial or personal problems. Build up rapport so that they feel free to discuss such things with you in confidence.
3. Be sure no one is placed on payroll without authorization from you or a responsible official of the company. If you have a personnel department, require that it approve additions to the payroll as a double check.
4. Have company mail addressed to a post office box rather than to your place of business. A person who does not have any other financial duties should open the mail and make a record at that time of cash and checks received.
5. Always have one person prepare the daily cash deposits and another compare the deposits made by employees with the record of cash and checks received. Make sure you get a copy of the duplicate deposit slip or other documentation from the bank and compare that bank receipt to the organization's books.
6. Arrange for bank statements and other correspondence from banks to be sent to a post office box, and assign responsibility for reconciling bank statements with your company's books and records to someone who does not deposit money or have check-signing authority.
7. Personally examine all canceled checks and endorsements to see if there is anything unusual. This also applies to payroll checks.
8. Consider making sure that an employee in a position to mishandle funds is adequately bonded. Let employees know that fidelity coverage is a matter of company policy rather that any feeling of mistrust on your part.
9. Spot check your accounting records and assets to satisfy yourself that all is well and that your plan of internal control is being carried out.
10. Personally approve unusual discounts and bad-debt write-offs. Approve or spot check credit memos and other documentation for sales returns and allowances.
11. Don't delegate the signing of checks and approval of cash disbursements unless absolutely necessary and never approve any payment without sufficient documentation or prior knowledge of the transaction.
12. Examine all invoices and supporting data before signing checks. Make sure that all merchandise was actually received and the price seems reasonable. In many false purchase schemes, the embezzler neglects to make up receiving forms or other records purporting to show receipt of merchandise.
13. Personally cancel all invoices at the time you sign the check to prevent double payment through error or otherwise.
14. Don't sign blank checks. Don't leave a supply of signed blank checks when you go on vacation.
15. Inspect all prenumbered checkbooks and other prenumbered forms from time to time to insure that checks or forms from the backs of the books have not been removed and possibly used in a fraudulent scheme.
Unfortunately, small organizations simply do not have enough people to assign these various duties. That's where we can help. At Non-Profit Connection, we can perform many of these suggestions for you. Providing independent oversight won't guarantee that financial impropriety will be prevented, but it can often go a long way toward discovering such matters before they result in irreversible damage.
http://www.articlesbase.com/accounting-articles/day-care-center-closes-due-to-financial-improprity-2817904.html
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