The Seven Deadly Sins: Controls Over Cash Handling – Part 3

In my experience as a CPA serving local governments for 30 years, there are seven “deadly sins” related to cash collections. If the local government commits one of these sins, it is risking the ultimate penalty. This series of blog posts will describe each of the seven deadly sins of cash collections. If your government is currently sinning, repent and you can be saved.

I have deadly sin #4 and #5 for you below...

Read Part 1 & Part 2 of this series if you missed them.

Deadly Sin #4 -
​Failure to Make Deposits Intact.

Cash collections should not be commingled before they are deposited. In other words, no cash should be removed to pay for purchases and cash collected each day should not be commingled with cash collected on another day. Leaving the collections intact allows easy reconciliation of accounting records to cash deposited. 
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At a county that collects a large amount of cash, the finance department has historically come down hard on departments and individuals who had shortages or overages.  As a result, the culture evolved to the point that employees would rather make up shortages out of their own pocket than be chastised. Our audit tests found no shortages or overages reported (a highly unlikely scenario). We also found coins in cups and drawers of employees’ desks to be used to make up shortages.  We found an example of a supervisor that held a $10 overage for over a year in a locked drawer. We found anecdotal evidence that employees reimbursed themselves for prior shortages paid whenever there was an overage.   For obvious reasons, the exact amount of cash collected should be deposited into the bank.

Deadly Sin #5 -
​Lack of Responsible Environment.

Most embezzlers who are discovered are reported by other employees or customers who suspect unusual activity. Therefore it is important to encourage employees and customers to report unusual or fraudulent activity. Make sure that there is a well-publicized and monitored mechanism for employees and customers to report suspicions of fraud.

Here are some examples of how organizations have made their environment for responsible:

1. With the growing amount of violence on school campuses, students are being asked to help identify dangerous situations through “see it, say it” programs.
2. Many fast food restaurants and golf courses have signs that inform customers that if they aren’t provided a receipt, inform the manager and their purchase is free.  This improves the chances of identifying an employee who is not ringing up sales and steals the overage.
3. The person who asks to see your receipt as you leave a Walmart store is not looking for shoplifters.  They are assuring that the clerk has rung up the items in the shopping cart.  If they aren’t rung up, chances are the clerk is pocketing the cash.
4. The security director of large drug store chain once told me that he believes one-half of the employees will steal if they don’t feel watched.  Therefore his goal was to make them feel they would be caught if they did anything wrong.  He installed visible cameras above cash registers even though he didn’t turn them on.​

The next and final post, part 4 of this series, will cover the last two of the seven "deadly sins": ​No Immediate Restrictive Endorsement of Checks & No Segregation of Billing Duties​. Read how to avoid them.

For more detailed guidance on how to avoid any  of these "deadly sins," please contact me directly: [email protected]


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