Fraud prevention

Recently, I’ve been giving some thought to a new presentation dealing with fraud prevention. The working title is Safeguarding your Business Office Against Fraud.

It will draw upon my experiences with the handful of fraud cases I either worked with investigators on, or learned about over the course of my forty-plus year career. In each and every case, better internal controls could have prevented the fraud from happening.

Today, let’s take a look at one of those scenarios.

Separation of duties

The concept of separation of duties means that no one person should be responsible for the entire life cycle of a transaction. For example, the same person shouldn’t be producing bills, taking payments, and making adjustments. Likewise, the same person shouldn’t be receiving, reconciling, and depositing cash.

Ideally, in any office, there is sufficient staff to separate these duties. However, in reality, especially for smaller offices, this just isn’t feasible. This is where instituting proper internal controls is imperative.

Real-life scenario

In this case, one employee was responsible for taking payments and making adjustments. Over the course of three years, this employee pocketed over $93,000 in cash payments from customers and made adjustments in the system to offset the customer’s balance.

Due to poor internal controls, no one in the office was reviewing the adjustments report each month, so this went undetected. It was only when the employee failed to adjust one account, and the customer questioned why their payment wasn’t credited, that the fraud was detected.

Proper internal controls

Many utilities, due to limited staff, find themselves in a situation where the same person that takes payments also makes adjustments. If your office is in a similar situation, proper internal controls dictate that someone other than the employee making the adjustments review them to ensure they are legitimate.

Complete the 2024 Utility Staffing Survey

If you haven’t already completed the 2024 Utility Staffing Survey, and would like to, please click here to complete the survey. It should take less than five minutes to complete.

If you have any questions, please feel free to e-mail me at or call me at 919-673-4050.

Thank you in advance for your participation in the 2024 Utility Staffing Survey.

Are your internal controls adequate?

Are your office’s internal controls adequate? If they aren’t, or you aren’t sure, please give me a call at 919-673-4050, or email me at to learn more about how a business review could help you find out.

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© 2024 Gary Sanders


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