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TOP 10

BEST PRACTICES

for Preventing and

Detecting Employee

Theft in Dealerships

BY TIM WOOD, PRINCIPAL, CLIFTONLARSONALLEN

hen a dealer be- amounts and never be caught. crooks, but a dealer does make themselves
comes a victim of more vulnerable if they do not recognize
employee fraud, Throughout our professional careers, we that internal theft is an inherent risk in
they will always have had clients and known of non-client every business and they need to take mea-
look back and dealerships that have fallen victim to inter- sures to help prevent it from occurring.
Wwonder “How nal fraud. It occurs much more frequent-
could this have happened and how could I ly than you would ever imagine. Though Below are 10 suggestions, or best practices,
have stopped it?” Often times, a long-time each instance can be different in facts and that we have found to be useful in reducing
trusted employee will have perpetrated the circumstance, the patterns of shortcomings your risk of employee theft, and unearthing
crime. Our natural tendency, as we become in the dealership are often similar: employee fraud:
comfortable and familiar with employees 1. The dealer was caught off guard by the
over time, is to think that we have a real- theft. Segregation of all accounting duties –
ly good person in place and everything is 2. The dealer was either part-time in- 1 but with shared knowledge of them.
humming along nicely. You may even volved or absent from the daily op- It is unwise to give one individual control
gradually increase a trusted employee’s re- erations and trusted the perpetrator of all functions in the accounting and fi-
sponsibilities and tasks, inadvertently giv- completely. nance department. There should be clear
ing them tasks that make you more suscep- 3. The dealer either did not have ade- and distinct separations of assignments for
tible to theft. An employee facing financial quate internal controls in place, or the accounts payable and receivable, cash and
pressures of their own may see the oppor- policies and procedures were not regu- bank reconciliations, receivable charge-
tunity to steal and may rationalize that their larly followed. offs, customer refunds, and titling, among
theft is inconsequential to the overall finan- 4. The perpetrator was caught by chance, others. These lines of separation are hur-
cial health of the dealership. Often, at the and not through systematic fraud con- dles to fraud, encumbering a perpetrator’s
beginning of a cycle of employee theft, the trols. route to theft.
perpetrator may intend to “pay back” what
they take in due time. As time goes on, We are not suggesting that a dealer now Once you have cordoned off these various
and their theft goes undetected, they may goes and places suspicion on all of their em- internal functions, you should make sure
think that they can continue to take small ployees or regard all trustworthy people as that all accounting personnel are cross-

12 | GIADA Independent Auto Dealer FEBRUARY 2017