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WITHHOLDING OF COLLECTION
The best way to keep people honest is to have them watch each
other.
modus operandi
detection and prevention
modus operandi
The unusual way for a
cashier to temporarily cover up cash shortages is to
withhold his collections by not depositing them in
the bank nor reporting them to his head office.
A branch cashier of a
subsidiary was able to pocket undetected most of his
collections during the month by willfully not
sending his daily collection report to his head
office.
In another case, a
certain municipal treasurer was found with a cash
shortage amounting to P20 million. To avoid
prosecution, the treasurer flew to the United States
the day he was suspended by his head office for his
failure to remit P9 million as the head office's
share in the town's revenue accumulated collections
for two and a half years. A cash shortage of P3
million was due to uncollected cash advances to
twenty eight officials including the municipal
treasurer and other employees of the municipality. A
substantial portion of the fund shortage (P8
million) was used in the payment of questionable
vouchers purporting purchases of school supplies
apparently undelivered. Some vouchers were in the
names of fictitious suppliers.
The municipal
treasurer obviously took advantage of the poor
supervision and weak control resulting from the lack
of rotation of duties in the disbursement
operations. The large unauthorized cash advances to
other officials and the influence on the resident
auditor had covered up and perpetuated the
irregularity.
detection and prevention
The fund shortage was
discovered by the head office when the municipal
treasurer could not remit to them their share of the
town's revenues. In most instances, misappropriation
of government or private company funds can be
discouraged by strictly requiring the cash custodian
or cashier to deposit daily all collections of the
previous working day. All collections should be
receipted by prenumbered official receipted by
prenumbered official receipts and listed on a daily
collection report to be supported by deposit slips
authenticated and dated by the depository bank. The
cashier should transmit daily to his head office the
original copy of his collection report with copies
of the official receipts and deposit slips. The
daily collection report should be numbered
consecutively to easily detect any missing report.
On the other hand, the head office should check
daily the consecutive numbers of the official
receipts issued by the cash custodian so that any
unauthorized usage or missing number can be easily
detected and investigated.
The depository bank
should be required to mail directly to the head
office's auditing department their monthly statement
for independent checking and reconciliation of the
records of the cashier. To rotate duties and
disclose possible defalcation, the cashier or
treasurer should be strictly required to take full
yearly vacation leave. People tend to remain honest
so long as somebody is checking them. So, the home
office auditors should conduct at irregular
intervals, surprise audits of the cashier's cash
accountabilities. To prevent absconding individuals
from taking refuge abroad, the country should have
an extradition treaty with the major countries of
the world especially the United States. An effective
means of discouraging conspiracy to do wrong among
all levels of management is an anonymous letter to
the top executive.
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