Larry’s Laws of Larceny- Law 15: You can Drive a Mack Truck Through an Internal Control Hole

Larry Beebe, CPA

An organization must have excellent internal control systems to insure that its accounting records and financial statements are complete and accurate. An employee benefit plan has many internal control systems including cash receipts, cash disbursements, benefit payments, payroll and participant data. A person working at the plan who wants to steal only has to find a small flaw in the internal control system to steal. In no time, that small flaw in the internal control system becomes a hole large enough to drive a Mack truck through it.

A claims supervisor in a health plan had a common last name. He looked up all plan participants in his home state with the same common last name. He filed phony claims in the participant’s names and had all the approved claims forwarded to him. The flaw in internal control was that the approved claim came to his desk with the check drawn payable to the participant. He simply deposited all the checks in his bank account. He should have never had access to the checks.

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