Larry’s Laws of Larceny- Law 4: Lapping has Nothing to do With the Daytona 500

Larry Beebe, CPA

Lapping is a fraudulent scheme which allows an individual to steal cash from an organization. It can occur in at least two ways in a multi-employer benefit plan.

One way involves a theft of employer contributions. An employee of the benefit plan steals an incoming employer contribution, converts it to cash, and steals the cash. The thief covers up by crediting the employer’s account with the next employer’s payment. The thief then steals again and covers up in the same manner.

Another way of lapping would be to steal a participant’s balance in a defined contribution plan or vacation plan. When the person claims the amount in their plan, the balance in another participant’s account is substituted.

Our firm was called in to investigate a lapping scheme in a vacation fund where a trusted employee stole hundreds of thousands of dollars.

A way of preventing lapping is to separate duties so that no one individual is responsible for cash handling and cash recording. Requiring employees to take of a week or more at a time is one way of catching a lapping scheme.

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