Embezzlement In Mame Research Paper
Jordan Emery
Professor Vollmers
BUA 302
19 March 2015
Exposure to Embezzlement in Maine: A Comprehensive Look
There are two popular theories regarding the motives the embezzler, according to Nettler (1974, 73). The first is that the act of larceny committed by the embezzler “represents the greater allure of the sweet life over the limitations of conventional routine.” Simply put, the said embezzler is dissatisfied with the monotony of daily life and feels that he or she has a sense of entitlement to the money. The second theory is that the embezzler is combating two forces: “desire and opportunity.” Whether the motive of the embezzler is one of yearning, opportunity, or perhaps desperation, one universal truth emerges: the individual committing …show more content…
the act is trusted by the entity that he or she serves. Unfortunately, such acts victimize unsuspecting superiors and deplete entities of valuable financial resources. Embezzlement is becoming increasingly common in Maine entities, and employers’ interest is piqued on how to prevent becoming victims themselves. In order for establishments to prevent embezzlement cases, initiatives need to be taken to expose Mainers to the types of embezzlement that occur, why they occur, and measures that can be taken to prevent and detect such cases.
Why is Embezzlement on the Rise?
In order to stop instances of embezzlement in the future, it is critical to explore the crux of the issue: why are people in Maine embezzling in the first place? Nationwide, embezzlement has become one of the most common financial risks in business. According to a 2009 Marquet International study, the typical embezzlers are longtime employees with no prior criminal history who worked alone, and about two-thirds were committed by women, although men usually stole larger amounts (Knapscaefer, 2011). In Maine the description of an unsuspicious, isolated employee describes many individuals employed at small businesses and nonprofit entities, such as town municipalities. Couple that with the “we are all friends here” attitude that most Mainers exhibit and ignorance on how embezzlement can occur, and the recipe for disaster is formed. As Nettler suggests, the motives of the embezzler vary, however the methodology the embezzler uses is quite consistent: make off with small amounts of money over long periods of time before coming to a “fairly significant crescendo” (Skelton, 2012). For some embezzlers, this “crescendo” is the number of acts committed, while for others, it is the increase in value of the financial resources stolen. The act may take months or perhaps years to detect, and for most businesses, the realization comes far too late.
While it is important for Mainers to understand what types of entities are at risk for such callous acts, it is also important to question why embezzlement is on the rise. “For a 16-year run from 1987 to 2002, the state didn’t see more than 20 embezzling arrests per year. Some of those years, there were as few as five. In 2011 there were 56, according to numbers … released by Maine State Police” (Skelton, 2012). Some theories suggest that the rise in embezzlement cases is due to the recent upheaval in the economy. As Lang (1991, 27) points out, “a lower profit is not necessarily the red flag indicating possible problems in an association,” however, when financial resources are scant to begin with and are being depleted more rapidly than usual, the employer may rightly begin to question the individual in charge of finances. Other theories suggest that the shift in society’s reliance on technology better equips fraud examiners, accountants, and law enforcement officials with fancier tools for detecting embezzlement (Skelton, 2012). Bill Brown optimistically concludes, “part of the reason for the statistical trend [in the increase of embezzlement cases] can be credited to better trained accountants, more awareness by business owners, and more effective use of technology to spotlight thieves” (Brown, 2012). Perhaps the reason for the rise in convictions is a combination of these theories. More arrests, in turn, highlight the issue and yield a greater awareness of the issue with employers. Thus, it is a positive reinforcement mechanism.
Victims of Embezzlement in Maine
In Maine, the frequency of reported embezzlement cases is highest in governmental and not for profit sectors.
However, actual occurrence of such cases is perhaps more frequent in small and family-owned businesses. Heightened awareness of governmental and nonprofit embezzlement stems from newspaper headlines that are littered with stories about town managers, executive directors of organizations, and town secretaries abusing their access to monetary resources. These embezzlers often whittle amounts ranging from $48,000 to $500,000 slowly from accounts via self-issued checks, failure to record cash transactions, padding travel expenses, and doctoring financial statements (Skelton, 2012). Such reports are much more infrequent and uncommon among local businesses, though they do exist. Brown proposes that the lack of reporting of embezzlement from small businesses is due to the lack of financial resources. That is companies fail to report “the ‘small’ losses—typically a few thousand dollars. These are the ones where the initial investigation will cost more in lost staff time and professional fees than the total theft” (Brown, 2012). In such cases, organizations opt to instead dismiss the employee and reevaluate their current internal control system. It is important for them to recognize, however, that just because instances of pilfering and substantial theft from small business employees are not more prevalent in the news, it does not mean that such acts are not …show more content…
occurring.
Signs of Embezzlement
Whether the potential loss due to embezzlement is a few thousands dollars from a small business or a million dollars from a state or federal entity, employers need to educate themselves on the telltale signs of employee theft.
Common red flags for organizations of all types include: an unbalanced bank statement, the bank flagging unusual transactions, reporting of expenses larger than anticipated, issuance of paychecks to ambiguous recipients, late payment to a vendor or supplier, and inconsistencies in financial statement closing rituals (Knapschaefer, 2011). Other incidents may be more transparent to an employer, such as an unexplained charge for a personal item on a credit card, a depletion of products or business supplies from the organization’s shelves, a drastic change in lifestyle habits, or surveillance video recording acts of theft taking place. If an employer encounters any of these signs, actions to further scrutinize the financial records should be
taken.
Embezzlement Prevention
Detection is critical to preserve any Maine organization subject to embezzlement; however, such problems could easily be avoided if the correct prevention measures are taken to begin with. Too many organizations are under the impression that they are protecting themselves from embezzlement by conducting an external audit. Unfortunately, external audits are primarily conducted to ensure compliance with accounting standards, not to detect chicanery within the financial records (Skelton, 2012). Yet, an external audit is still recommended for all entities that seek deeper investigation regarding how financial statement numbers were computed. Conversely, an internal audit takes a more detailed look at the expenses of an organization and questions randomly how particular numbers were computed, making them extremely valuable. Other than external audit, the most practical and financially feasible preventive measure to avoid embezzlement is to study the organization 's functions, finances, and staff to create a system of internal controls that adequately meet the organizations’ needs. Expansion of staff is unnecessary, however, since it is recommend the workload should be diversified which may lead to changes in employee responsibilities (Dwortz, 2012,11). By reassigning tasks so that records are being double checked, the temptation to embezzle is much smaller. No one person should take an accounting transaction through all its steps. By implementing such processes, it will be much less tempting and much more difficult for embezzlement to slip through the cracks of an organization. Revising internal control methods, in conjunction with a yearly internal audit, can drastically reduce embezzlement.
Though a revised system of internal controls and an external audit are the most popular approaches to prevent embezzlement, other preventative measures can be taken. One seemingly trivial, but highly recommended prevention technique is to lock up valuable inventory or checks in a cabinet or keep such items in an area with limited access. This inventory should be counted to ensure accuracy on a routine basis. Another, more drastic, measure that can be taken is the use of a third party accountant to conduct bank statement reconciliations. This is especially beneficial for those organizations who manage large flows of cash in an operating period. Additional measures for embezzlement prevention include limiting permissions to open lines of credit for the business, purchasing “honesty insurance,” and setting up expense account guidelines to ensure that travel and entertainment expenditures are being managed appropriately (Dwortz, 2012,11; Lang,1991,27). An organization need not enact all preventative measures discussed, however, it should entertain and commit to as many as possible.
In picking up a newspaper or watching the news, it is clear that embezzlement has become a prevalent issue among businesses and communities in Maine. Speculations about the reasons behind the upward trend include better training and detection by accountants and law enforcement, the recent financial strife, or overall complacence among employers in Maine. The types of organizations that fall victim to such acts are widespread, however, reports of embezzlement occurring in governmental and not for profit entities dominate public exposure. Fraud investigators claim that those cases reported are “just the tip of the statistical iceberg” (Brown, 2012) and that embezzlement cases are just as, if not more, frequent in small businesses.
The number of larcenous acts committed by employees is on the rise, it is important for employers to recognize key signs of embezzlement and take preventive measures to avoid such issues from occurring in their organization. The most popular and seemingly most effective method is improving internal controls by delegating different steps of the accounting cycle to a variety of individuals to create an internal checks and balances system. Other recommendations encourage organizations not to simply rely on external audits and to lock up any business property or inventory that may tempt employees from acts of embezzlement. If Mainers take the necessary precautions and act on the first signs of employee theft, embezzlement will slowly fade away and cease to be a predominant issue in Maine.
Works Cited
Brown, Bill. "Embezzlement Rising in Maine: Our Fraud Investigator Considers the Causes - Firm Footing." Firm Footing Embezzlement Rising in Maine Our Fraud Investigator Considers the Causes Comments. BerryDunn Blog, 29 Oct. 2012. Web. <http://www.berrydunn.com/firmfooting/2012/10/embezzlement-on-the-rise-in-maine-our- fraud-investigator-considers-the-causes/>.
Dwortz, Rob. “Preventing Embezzlement Can Keep You in Business.” Grand Rapids Business Journal (2012):11. EBSCOHost. Web. <http://web.a.ebscho.com.prxy4. ursus.maine.edu/ehost/pdfviewer/pdfviewer?sid=d0fe8246-23a2-40a3-b3e9-60cc4873 c21f@sessionmgr4004&vid=1&hid=4212>.
Knapschaefer, Johanna. "They 'd Never Steal From Me: Arming Against Embezzlement." Business NH Magazine 1 Feb. 2011. Web.< http://millyardcommun ications.com/index.php?src=news&refno=2157&category=News>.
Lang, Andrew S. "Beating embezzlement." Association Management Dec. 1991: 27+. Business Insights: Essentials. Web. <http://bi.galegroup.com.prxy4.ursus .maine.edu/essentials/article/GALE|A11671851/ec171013b202d4fa153eadd78 6bf11ce?u=maine_orono>
Nettler, Gwynn. "Embezzlement Without Problems." The British Journal of Criminology 14.1 (1974): 70-77. JSTOR. Web.<http://www.jstor.org.prxy4.ursus.maine. edu/stable/23636093>.
Skelton, Kathyrn. "Embezzlement Rising in Maine." Bangor Daily News 28 Oct. 2012. Web. <http://bangordailynews.com/2012/10/28/news/state/embezzlement-rising-in-maine/>.
Professor Vollmers
BUA 302
19 March 2015
Exposure to Embezzlement in Maine: A Comprehensive Look
There are two popular theories regarding the motives the embezzler, according to Nettler (1974, 73). The first is that the act of larceny committed by the embezzler “represents the greater allure of the sweet life over the limitations of conventional routine.” Simply put, the said embezzler is dissatisfied with the monotony of daily life and feels that he or she has a sense of entitlement to the money. The second theory is that the embezzler is combating two forces: “desire and opportunity.” Whether the motive of the embezzler is one of yearning, opportunity, or perhaps desperation, one universal truth emerges: the individual committing …show more content…
the act is trusted by the entity that he or she serves. Unfortunately, such acts victimize unsuspecting superiors and deplete entities of valuable financial resources. Embezzlement is becoming increasingly common in Maine entities, and employers’ interest is piqued on how to prevent becoming victims themselves. In order for establishments to prevent embezzlement cases, initiatives need to be taken to expose Mainers to the types of embezzlement that occur, why they occur, and measures that can be taken to prevent and detect such cases.
Why is Embezzlement on the Rise?
In order to stop instances of embezzlement in the future, it is critical to explore the crux of the issue: why are people in Maine embezzling in the first place? Nationwide, embezzlement has become one of the most common financial risks in business. According to a 2009 Marquet International study, the typical embezzlers are longtime employees with no prior criminal history who worked alone, and about two-thirds were committed by women, although men usually stole larger amounts (Knapscaefer, 2011). In Maine the description of an unsuspicious, isolated employee describes many individuals employed at small businesses and nonprofit entities, such as town municipalities. Couple that with the “we are all friends here” attitude that most Mainers exhibit and ignorance on how embezzlement can occur, and the recipe for disaster is formed. As Nettler suggests, the motives of the embezzler vary, however the methodology the embezzler uses is quite consistent: make off with small amounts of money over long periods of time before coming to a “fairly significant crescendo” (Skelton, 2012). For some embezzlers, this “crescendo” is the number of acts committed, while for others, it is the increase in value of the financial resources stolen. The act may take months or perhaps years to detect, and for most businesses, the realization comes far too late.
While it is important for Mainers to understand what types of entities are at risk for such callous acts, it is also important to question why embezzlement is on the rise. “For a 16-year run from 1987 to 2002, the state didn’t see more than 20 embezzling arrests per year. Some of those years, there were as few as five. In 2011 there were 56, according to numbers … released by Maine State Police” (Skelton, 2012). Some theories suggest that the rise in embezzlement cases is due to the recent upheaval in the economy. As Lang (1991, 27) points out, “a lower profit is not necessarily the red flag indicating possible problems in an association,” however, when financial resources are scant to begin with and are being depleted more rapidly than usual, the employer may rightly begin to question the individual in charge of finances. Other theories suggest that the shift in society’s reliance on technology better equips fraud examiners, accountants, and law enforcement officials with fancier tools for detecting embezzlement (Skelton, 2012). Bill Brown optimistically concludes, “part of the reason for the statistical trend [in the increase of embezzlement cases] can be credited to better trained accountants, more awareness by business owners, and more effective use of technology to spotlight thieves” (Brown, 2012). Perhaps the reason for the rise in convictions is a combination of these theories. More arrests, in turn, highlight the issue and yield a greater awareness of the issue with employers. Thus, it is a positive reinforcement mechanism.
Victims of Embezzlement in Maine
In Maine, the frequency of reported embezzlement cases is highest in governmental and not for profit sectors.
However, actual occurrence of such cases is perhaps more frequent in small and family-owned businesses. Heightened awareness of governmental and nonprofit embezzlement stems from newspaper headlines that are littered with stories about town managers, executive directors of organizations, and town secretaries abusing their access to monetary resources. These embezzlers often whittle amounts ranging from $48,000 to $500,000 slowly from accounts via self-issued checks, failure to record cash transactions, padding travel expenses, and doctoring financial statements (Skelton, 2012). Such reports are much more infrequent and uncommon among local businesses, though they do exist. Brown proposes that the lack of reporting of embezzlement from small businesses is due to the lack of financial resources. That is companies fail to report “the ‘small’ losses—typically a few thousand dollars. These are the ones where the initial investigation will cost more in lost staff time and professional fees than the total theft” (Brown, 2012). In such cases, organizations opt to instead dismiss the employee and reevaluate their current internal control system. It is important for them to recognize, however, that just because instances of pilfering and substantial theft from small business employees are not more prevalent in the news, it does not mean that such acts are not …show more content…
occurring.
Signs of Embezzlement
Whether the potential loss due to embezzlement is a few thousands dollars from a small business or a million dollars from a state or federal entity, employers need to educate themselves on the telltale signs of employee theft.
Common red flags for organizations of all types include: an unbalanced bank statement, the bank flagging unusual transactions, reporting of expenses larger than anticipated, issuance of paychecks to ambiguous recipients, late payment to a vendor or supplier, and inconsistencies in financial statement closing rituals (Knapschaefer, 2011). Other incidents may be more transparent to an employer, such as an unexplained charge for a personal item on a credit card, a depletion of products or business supplies from the organization’s shelves, a drastic change in lifestyle habits, or surveillance video recording acts of theft taking place. If an employer encounters any of these signs, actions to further scrutinize the financial records should be
taken.
Embezzlement Prevention
Detection is critical to preserve any Maine organization subject to embezzlement; however, such problems could easily be avoided if the correct prevention measures are taken to begin with. Too many organizations are under the impression that they are protecting themselves from embezzlement by conducting an external audit. Unfortunately, external audits are primarily conducted to ensure compliance with accounting standards, not to detect chicanery within the financial records (Skelton, 2012). Yet, an external audit is still recommended for all entities that seek deeper investigation regarding how financial statement numbers were computed. Conversely, an internal audit takes a more detailed look at the expenses of an organization and questions randomly how particular numbers were computed, making them extremely valuable. Other than external audit, the most practical and financially feasible preventive measure to avoid embezzlement is to study the organization 's functions, finances, and staff to create a system of internal controls that adequately meet the organizations’ needs. Expansion of staff is unnecessary, however, since it is recommend the workload should be diversified which may lead to changes in employee responsibilities (Dwortz, 2012,11). By reassigning tasks so that records are being double checked, the temptation to embezzle is much smaller. No one person should take an accounting transaction through all its steps. By implementing such processes, it will be much less tempting and much more difficult for embezzlement to slip through the cracks of an organization. Revising internal control methods, in conjunction with a yearly internal audit, can drastically reduce embezzlement.
Though a revised system of internal controls and an external audit are the most popular approaches to prevent embezzlement, other preventative measures can be taken. One seemingly trivial, but highly recommended prevention technique is to lock up valuable inventory or checks in a cabinet or keep such items in an area with limited access. This inventory should be counted to ensure accuracy on a routine basis. Another, more drastic, measure that can be taken is the use of a third party accountant to conduct bank statement reconciliations. This is especially beneficial for those organizations who manage large flows of cash in an operating period. Additional measures for embezzlement prevention include limiting permissions to open lines of credit for the business, purchasing “honesty insurance,” and setting up expense account guidelines to ensure that travel and entertainment expenditures are being managed appropriately (Dwortz, 2012,11; Lang,1991,27). An organization need not enact all preventative measures discussed, however, it should entertain and commit to as many as possible.
In picking up a newspaper or watching the news, it is clear that embezzlement has become a prevalent issue among businesses and communities in Maine. Speculations about the reasons behind the upward trend include better training and detection by accountants and law enforcement, the recent financial strife, or overall complacence among employers in Maine. The types of organizations that fall victim to such acts are widespread, however, reports of embezzlement occurring in governmental and not for profit entities dominate public exposure. Fraud investigators claim that those cases reported are “just the tip of the statistical iceberg” (Brown, 2012) and that embezzlement cases are just as, if not more, frequent in small businesses.
The number of larcenous acts committed by employees is on the rise, it is important for employers to recognize key signs of embezzlement and take preventive measures to avoid such issues from occurring in their organization. The most popular and seemingly most effective method is improving internal controls by delegating different steps of the accounting cycle to a variety of individuals to create an internal checks and balances system. Other recommendations encourage organizations not to simply rely on external audits and to lock up any business property or inventory that may tempt employees from acts of embezzlement. If Mainers take the necessary precautions and act on the first signs of employee theft, embezzlement will slowly fade away and cease to be a predominant issue in Maine.
Works Cited
Brown, Bill. "Embezzlement Rising in Maine: Our Fraud Investigator Considers the Causes - Firm Footing." Firm Footing Embezzlement Rising in Maine Our Fraud Investigator Considers the Causes Comments. BerryDunn Blog, 29 Oct. 2012. Web. <http://www.berrydunn.com/firmfooting/2012/10/embezzlement-on-the-rise-in-maine-our- fraud-investigator-considers-the-causes/>.
Dwortz, Rob. “Preventing Embezzlement Can Keep You in Business.” Grand Rapids Business Journal (2012):11. EBSCOHost. Web. <http://web.a.ebscho.com.prxy4. ursus.maine.edu/ehost/pdfviewer/pdfviewer?sid=d0fe8246-23a2-40a3-b3e9-60cc4873 c21f@sessionmgr4004&vid=1&hid=4212>.
Knapschaefer, Johanna. "They 'd Never Steal From Me: Arming Against Embezzlement." Business NH Magazine 1 Feb. 2011. Web.< http://millyardcommun ications.com/index.php?src=news&refno=2157&category=News>.
Lang, Andrew S. "Beating embezzlement." Association Management Dec. 1991: 27+. Business Insights: Essentials. Web. <http://bi.galegroup.com.prxy4.ursus .maine.edu/essentials/article/GALE|A11671851/ec171013b202d4fa153eadd78 6bf11ce?u=maine_orono>
Nettler, Gwynn. "Embezzlement Without Problems." The British Journal of Criminology 14.1 (1974): 70-77. JSTOR. Web.<http://www.jstor.org.prxy4.ursus.maine. edu/stable/23636093>.
Skelton, Kathyrn. "Embezzlement Rising in Maine." Bangor Daily News 28 Oct. 2012. Web. <http://bangordailynews.com/2012/10/28/news/state/embezzlement-rising-in-maine/>.