Solid Steps Counties Can Take To Limit Embezzlement Risk

Written exclusively for My Community Workplace for Government

A year after the discovery of a multi-million dollar embezzlement scheme in a county public works department, a grand jury's investigation of the incident uncovers a "long list" of weaknesses in the department's financial operations. The report also found that after uncovering the embezzlement, the department failed to correct the risky financial processes that led to the theft.

The grand jury report lists a number of recommendations for decreasing the significant financial risk that is present with current procedures. Some of these include updating financial software; providing additional management training on financial management and conflict of interest issues; and keeping the internal audit department fully staffed.

The report also recommended that all county departments provide a formal, written accounting of all financial expenditures every year, and tasked the county's board of supervisors with verifying that the department's financial management complies with stated guidelines. Giana Magnoli "Grand Jury Slams Santa Barbara County's Financial Management After $2 Million Embezzlement" (Jun. 24, 2018).

Commentary and Checklist

Establishing financial control measures and making sure they are followed are two distinct elements of financial risk management.

Conducting yearly fraud assessments and training can boost communication and awareness about fraud for all employees.

Once the fraud risk assessment is complete, agency leaders can modify or add effective control procedures aimed at limiting their risk.

When a revision of workplace procedures is necessary, be sure to educate staff members on why specific procedures are necessary and the significant risk involved when they are not followed.

The following additional suggestions can improve employee compliance with financial controls and reduce the risk of employee fraud:

  • Make sure all employees, including upper management, understand the financial control policies and procedures. Communicate the consequences for failing to follow them, including termination and criminal prosecution.
  • Create an employee training approach that is meaningful to participants. The likelihood employees will comply with procedures increases when they understand their role in reducing fraud risk.
  • Establish a committee to be responsible for overseeing that all financial control procedures continue to be effective and are being followed by all employees.
  • Mandate that the organization have a reporting procedure, so employees can report suspected wrongdoing easily and without fear of retaliation. If possible, allow for anonymous reporting.
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