My client’s former treasurer, a 40 year old woman with a husband and young children at home, was recently sentenced for embezzling funds from the local little league organization. The case resonated with us at Acuity Forensics for many reasons.
First, the victim(s). A small non-profit with volunteers working hard to provide a great experience to the youth of a small rural town in Southwest Washington. The money missing was to be used to fund better equipment, uniforms, and the registrations for kids whose economic backgrounds could not afford for them to play.
Second, the navigation of the client through the turmoil they were experiencing. Embarrassed, frustrated, and feeling as if they were the only ones dealing with these emotions, clients typically feel all of this and more. A better part of our job here is to provide clients with the reassurance that, in fact, they aren’t alone and their emotions are quite normal in situations such as these. And the situation was a difficult one. A small group of board members wanted to have the issue of missing money looked into. Another group of board members were incensed that anyone would accuse the treasurer of wrong doing. How “dare they” even think it?! Once the evidence became irrefutable and there was no other explanation for the missing funds, the group had to wrestle with whether or not they should have it investigated.
These politics are quite normal. Emotions in embezzlement cases run high. Why? White collar crimes involve a major breach of trust. In fact, it is the very people organizations like and trust the most who are stealing the money. Instead of accepting this, clients will turn inward, thinking, “What’s wrong with me that I trusted him/her” and/or “What will people think of me if I accuse him/her of stealing?” It is often this mentality that will allow frauds to go on longer or not to be investigated at all.
Lastly, this case was important because the crime was primarily the skimming of concession stand cash. How do you prove how much money came into the concession stand in the first place? There was concern among all parties, this fraud examiner included, that the theft would be hard to prove.
Undaunted, we set out to understand the role of the treasurer. It was her job to attend all registration sign-up events, receipt the funds collected and deposit those funds to the bank. Incredibly, there were receipt books for those events. We calculated the carbon copy receipts and traced the deposit of funds to the bank. Bingo! Only the checks were deposited; none of the cash. We now had irrefutable evidence that a cash skimming scheme was happening with registration fees.
Now to the concession stand. In the months of May and June not one single solitary dollar bill or coin was deposited to the bank. As most of us in America know, May and June are prime little league months and the concession stand is a popular place to be on game day.
This little league had heard us speak on good internal controls over concession stand money and had even implemented a process whereby two people in the concession stand counted the money at the end of each shift and prepared the funds for deposit.
Just one problem. It was the treasurer’s job to pick up the count sheets and the money and take it to the bank. All the count sheets and all the money were missing.
Back to square one.
That’s where the accountant in me kicked in. I had the league’s bank statements spanning many years, even years prior to when the treasurer took her role. I was able to figure out how much money they deposited for concession sales and I was able to compare that figure to the cost of the food they purchased from big-box stores like Costco and Cash N Carry. What did that analysis tell me? For the four years prior to the treasurer’s role, the cost of goods sold for the league was approximately 50% of sales. In other words, for every one dollar of candy or popcorn sold, the cost of the food was $.50 and the league was making money.
The first year that the treasurer took over, the cost of goods sold jumped to 78 percent. One cannot blame an increased cost of food on an increase in cost of goods sold by more than 25 percent in a single year.
The second year the funds were in the treasurer’s hands, the cost of goods sold jumped to 101%. This was the year that the board continued to ask for bank statements and financial reports that never came. Once the board obtained the bank statements, it became immediately apparent that not one regular deposit had been made in the months of May and June (unless those deposits were credit-card related).
Our analysis, along with the evidence on the registration thefts, were provided to the league who then reported the crime to the police.
The rest, as they say, is history, the treasurer plead guilty to the crime just a few months after being charged. She was sentenced yesterday to 45 days in prison for a loss of approximately $20,000.