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COMPLIANCE TIPS

trained in each of them, including (and or her world. This can serve to keep them Review your compensation structure
especially) those that fall in the controller’s honest or root out any fraud, should it be 9 It is natural to want to tie compensation
realm. Hoarding knowledge can cloak a there. into performance measures, but realize
fraudster’s misdeeds. that by doing so, you may be encouraging
Mail control fraudulent behavior. Are you compensat-
Spot Checks 5 As the dealer-owner, it is smart to per- ing your underwriters with a bonus for
2Unfortunately, given the size of an op- sonally open all invoices and payments that deals booked? Are you compensating your
eration, a complete segregation of duties are sent to your business. These should controller based on bottom-line results? It
as discussed above is not cost feasible. In never be delivered unopened directly to the is important to be cognizant that however
this case, the owner may want to consider individual who processes receipts or pay- you may be compensating your employ-
surprise spot checks over bank reconcilia- ments. If this duty is parceled out to anoth- ees, there will be opportunities for games-
tions, reviewing charge-offs, and reviewing er employee you consider trustworthy, you manship on the part of the employee, and
check, wire and ACH disbursements. An- can test your instincts by mailing yourself counter-measures should be considered
other option is to involve your CPA with $100 cash (with a disguised return address). and implemented to help prevent malfea-
spot checks. You can engage your CPA to If the cash does not end up on your desk, it sance.
drop in with a day’s notice (or no notice at is a safe bet a sticky-fingered employee is in
all) to inspect the books and records onsite. your midst. Welcome and encourage whis-
The inspection itself will have value, but 10 tleblowers
you can also monitor the reactions of your Annual vendor audit Employees who suspect or witness fraud
employees to the announcement and their 6 Savvy internal thieves often create sham often keep their suspicions or knowledge to
behavior during the inspection. Panic is a vendors who bill for small amounts, effec- themselves because they are timid, or fear
tell-tale sign of wrongdoing, while compo- tively paying themselves significant figures retribution. You can assure their confiden-
sure and confidence can be reassuring. over several years’ time. Every single year, tiality — and show you are serious about
pull a list of all your dealership’s vendors preventing and prosecuting fraud — by
Monthly cash reconciliation to the and corroborate each one’s corporate name, establishing and posting anonymous fraud-
3 penny, and limits to on-line banking dba, physical address (post office box is in- tip hotlines, encouraging an open-door
Train multiple people in your accounting sufficient), owner’s name, and phone num- policy directly to the owner, or setting up a
department to perform regular cash rec- ber. Check for any duplicate vendors. You confidential 800 number and post it in in-
onciliations. It is a good idea to change up can also compare vendor addresses with ternal-only areas of your dealership.
the individual who performs this task from your employee addresses. For any suspi-
time to time, if possible. Additionally, on- cious vendors, personally call the phone These 10 practices can help you think like
line banking can make life easier for the number and speak with a live person to a perpetrator and put yourself into a more
dealership, but necessary controls should verify the vendor’s authenticity. defensive frame of mind. When these con-
be in-place and reviewed regularly. For trols are established, communicated, and
instance, no single employee should have Journal entry and general ledger re- adhered to, the opportunities for fraud can
the ability to initiate and authorize on-line 7classification reviews decline considerably. As a trusting business
transactions such as wire payments or ACH Fraudsters are wily, agile people. An ea- owner, it can be difficult to enforce what
transactions. Within your banking appli- gle-eyed review of the journal and general may seem to be such extreme measures, but
cation, you should be able to limit various ledger can detect some of their financial the value of these controls cannot be over-
user’s access and abilities. And, while you acrobatics, like a controller cutting them- stated. When you understand and practice
may think you have taken the necessary selves a check but reclassifying it to another the power of prevention, you may not have
precautions, you would be surprised how account. Or they could charge up a big em- to suffer losses, prosecute employees, and
often a simple review of these limits uncov- ployee receivable and then move it to cus- incur other reactive costs of fraud. n
ers incompatible duties that increase your tomer receivables and write it off as aged. __________________________________
exposure to employee theft. Scour the books for these kinds of tricky Tim Wood is a Principal with CliftonLar-
maneuvers. sonAllen and has focused his practice with
Mandatory controller vacation audit, tax, and consulting on buy-here pay-
4When accounting personnel are cross- Review of Account Edits here and lease-here pay-here dealerships,
trained and can cover for the controller 8 Obtain a monthly Installment Contracts related finance companies and reinsurance
when he or she is away, you should require Edit Listing from your DMS. Review who companies all across the United States. He
the controller’s absence on an annual basis. is making edits, and what type of edits they can be contacted at 314-925-4325 or Tim.
Mandatory vacation means several con- are making. Spot check some of the edits Wood@CLAconnect.com
secutive days out of the office so that oth- of principal balance, payment amounts, or
er staff have to get their hands and eyes on due dates to ensure that appropriate sup-
the controller’s business — feel and see his port exists.

GIADA Independent Auto Dealer FEBRUARY 2017 | 13