Many businesses look the other way if an employee uses a corporate vehicle to run a personal errand or uses the company's postage meter for their personal letters. But taking from one's employer without permission is always embezzlement, according to Patrick Brady at Clifton Gunderson LLP, and organizations need to decide what to do about it.

Brady, a former federal fraud prosecutor, is director of Clifton Gunderson's forensic accounting practice. He oversees complex financial, employee integrity and misconduct investigations.

Embezzlement isn't any more frequent today than it was five years ago, Brady said, but the lean economic times have led more companies to discover embezzlement in the course of examining their finances.

"If someone is of a mind to steal, they're going to do it," Brady said.

"Someone dominant in the organization is going to override the controls, or they're going to gain the complicity of someone else to get around the controls. It's hard to prevent."

Few embezzlement cases come to the public's attention, Brady says. That's because most organizations don't want to invest the resources to prosecute the individuals involved, and prefer to avoid negative publicity.

Embezzlement often goes on for a long time before it is caught because the perpetrators usually start small, siphoning off a small amount. As time passes and they are not caught, they grow more brave, according to Peter Jacobs, managing partner at Clifton Gunderson's Eastern Iowa Client Service Center in Cedar Rapids.

Some signs crop up repeatedly: Often too much responsibility is concentrated in one individual. That individual is often poorly organized and can't provide answers they should know about accounts. When pressed for answers, they often procrastinate.

"Often, they never take any time off (from work)," Jacobs said, explaining that embezzlers risk being caught if they turn their duties over to someone else.

CPA firms are spending more time this year in activities that could deter embezzlement under provisions of the Sarbanes-Oxley Act. Under the law, Jacobs said CPAs must evaluate management's programs and controls relating to fraud, conduct more in-depth inquiries of management, and assess risks of fraud, among other things.

Guidelines
Peter Jacobs, managing partner at Clifton Gunderson's Eastern Iowa Client Service Center in Cedar Rapids, offers some guidelines for lowering embezzlement risk:

• Perform rigorous new employee background checks.
• Create and follow strong internal controls.
• Conduct regular fraud audits.
• Establish corporate conduct policies.
• Show willingness to punish offenders.

-- Dave DeWitte