That Break’s For You


vacation“We are again honored to have a seventh guest post from our friend and Richmond Chapter 2015 Vice-President, Rumbi Bwerinofa, CPA/CFF. Rumbi is a Director of the Queens/Brooklyn Chapter of the New York State Society of CPAs and a member of the NYSSCPA Litigation Services Committee. She is the editor of TheFStudent.com, where she discusses financial forensic issues.” – Charles Lawver-2015 RVACFES Chapter President…”

I live in New York City, the city that, in its own mind at least, never sleeps. Those of us who live here wear that like a badge of pride.  Rest? Only when we’re dead! If you ride the subway, death apparently includes the daily rush-hour commute. Here, we’re a city of zombies who have even figured out to sleep, standing up, crammed like sardines into whatever tin box is taking us to work. Out bosses love our never rest attitude. What could be better than workers who express shame when requesting time off? Who wouldn’t like an office full of people competing to see who can pull the longest hours?

Well, it turns out that, perhaps, a worker who never leaves his or her desk may not be such a good thing for company health, when it comes to fraud prevention and detection. That person who’s so diligent that, not only does she never need help, but she’s even willing to take on additional tasks like, say, picking up and distributing the mail or making bank deposits, may be taking on all these extra tasks for a reason, say to make sure that no one discovers she’s actively stealing from the company. That why it’s important for forensic accountants and fraud examiners to help our clients understand the criticality of enforced staff vacations for the overall integrity of their fraud prevention programs.

It’s so important to stress to the employer that, when employees do take vacations, desks mustn’t be allowed to sit idle, with work and mail just piling up, untouched for two or three weeks.  Vacation times represent the perfect point to perform targeted, concurrent fraud prevention and detection related tests. One, or more, of the vacationing employee’s cross-trained peers should take over the daily, detailed tasks of the employee. Such tests are especially important if the employee has access to assets or cash, but it’s a good prevention practice for every employee’s desk. Mail should be opened, bank statements reconciled and checks to vendors written. In this way, fraud and error stand a good chance of being caught.  Just knowing that this type of testing is mandatory during enforced annual vacations is a potent fraud deterrent in itself.

Too often fraud is caught by accident, when one employee happens to be out of the office and a question needs to be answered. Someone will dig into that employee’s work and stumbles onto something amiss. Rita Crundwell  stole almost $54 million from the city of Dixon during the nearly three decades she was that city’s comptroller. Her crime was discovered while she was out of her office, on vacation, and the acting comptroller, asked for bank statements, found a statement for an account that was not recorded in the ledger. The account held millions, had an official-sounding name wasn’t identified in any city record. Had, someone else in the city’s finance department routinely performed banking and mail duties while Crundwell was out of the office (of even at random times when she wasn’t), this embezzlement may have been caught years earlier.  Prior to the fraud’s discovery, no manager in authority seemed to see a conflict of duties issue with Crundwell, the comptroller, picking up all the city’s mail. While she was on vacation, she would have a relative or city employee pick up the mail, separate out hers’, and distribute the rest. Yes, a relative, not even a city employee, picked up and distributed the city’s mail!  Had Crundwell known that her work would be independently randomly checked and reviewed on a regular basis, she may have decided that stealing from the city was just too risky and have never perpetrated her crime.

The FDIC and SEC recommend mandatory vacations of two consecutive weeks for traders and others in the financial industry. This guarantees there’s adequate time for the employer to have another staff member perform the work of the vacationing employee and check for fraud and error. Any business would benefit from adding this process to their control systems.

An earlier post on The Inner Auditor discussed the risks and control weaknesses associated with only one person in a business holding the bulk of the information about how things work. Should that person take an extended vacation, retire or quit, the company could very well come to a confused standstill because no one else knows how to perform certain processes or where certain information is kept. A benefit of and enforced mandatory vacation and random testing policy is that other staff members will be forced to learn, through cross-training,  what their colleagues do and know; knowledge about the functioning of every desk will be shared among various employees.

Employers should be thoroughly briefed on benefits for fighting fraud, reducing error and sharing knowledge that a well-planned and executed vacation and concurrent testing policy can bring to the fraud prevention effort. They may or may not worry too much about how tired their workers are, but I’m pretty sure that they care a lot about keeping their assets safe.

Comments are closed.