Voices

The Intern Chronicles: Eyewitness to fraud

One March morning in 2018, I walked into my office at a nonprofit, expecting the day to be as normal as any other. I was not prepared for what I came upon. I arrived at the scene of a crime and witnessed mixed emotions from my coworkers. I saw tears and felt anger and betrayal radiate off the people that I shared offices with. It was later that day that I discovered my supervisor, the senior accountant, had been committing fraud for over four years.

I have been with the nonprofit since April 2017. My official job title is “junior accountant” but really, I am just the intern. My job responsibilities include reconciliations, journal entries, small-business cash receipts, and reconciling the Bank of America credit card monthly. I reported directly to the senior accountant and she was considered something of a mentor to me. What I am about to tell you is the true story of the fraud case that struck this nonprofit organization, as seen through eyes.

Sarah Sharp (not her real name) was hired by the nonprofit in 2012. She originally started off in a temporary position since she was hired out to people through a temporary agency focused on accounting help. Before she started working for the temp agency, she worked in other positions at other companies. In her previous jobs, she committed larceny twice: She had stolen $14,000 from one client, and stole from another work’s credit card. Why did we hire Sarah, you might ask? Well, this is where the story begins.

When the temp agency hired Sarah Sharp out to us, we never saw anything bad on her record. At my work, it is not required to perform a criminal record check (known in Massachusetts as a CORI check, for “criminal offender record information”) for a temporary employee. A CORI check only applies to offenses in the state of Massachusetts. At the time, we trusted the temp agency’s opinion of Sarah for a few months until we decided it was necessary to CORI check all employees. Once we CORI-checked Sarah, we saw where our mistake was.

Sarah’s past charges showed up on her CORI check and the organization was surprised about this revelation, since they were larceny charges over $250 charged to her in 2010 and 2012. The reason why we never knew about these was because the temp agency never did a CORI check on Sarah, so they were unaware of these charges also. We were now faced with the option to let her go or give her a second chance. The nonprofit is centered on giving people chances, so we decided to permanently keep Sarah Sharp as our senior accountant.

AT-062018-Small Business Fraud Risks

Sarah had lots of responsibilities as our senior accountant. She oversaw the company’s payroll, four credit card statements, balance sheet reconciliations, journal entries, unemployment statuses, reviewing, and she was also the No. 1 person that people went to with questions. Although she reviewed others’ work, no one reviewed her work. She was the sole reviewer of all her entries. This means that she signed off on her own statements and posted them to our accounting database. Her son was responsible for filing away the paperwork, so nothing was questioned.

The nonprofit was cautious of Sarah handling money, so they put some internal controls in place to prevent this. In the accounting offices, there is a safe that contains the petty cash for the administration department and contains cash from deposits that need to be brought to the bank. Sarah was not allowed access to this cash safe and the cash safe was always under supervision. Although she did not have access to this cash safe, she still found more creative ways to steal from the company.

Sarah was given sole responsibility for the credit card statements. This meant that no one else saw what was on those statements or what was getting paid off. When the accounts payable supervisor would ask to look at the statements, Sarah would get very defensive and not allow access. It was later discovered that the senior accountant would put charges on the credit cards for her own personal needs. Some examples of these charges were a Hulu account, a snowblower, an Xbox One, her cable and phone bills, Intuit payroll, and family vacations to places such as the Great Wolf Lodge and Hampton Beach. She even purchased a book that would help her when taking the CPA Exam. Because there were so many charges put on the credit cards, Sarah would try not to put her large charges on the cards because those might be red flags. Instead, she used the cash advances on the credit cards to pay for things such as her monthly car bill. In the end, we discovered $33,000 worth of charges on just one of our credit cards.

When auditors would come for our year-end audits, they would never look at the credit card statements. They would also not match up the charges with receipts that the company had signed and filed away. Because of this, the senior accountant was able to get away with these charges for years. Anything that is on the credit card statements must be entered into our accounting software, so that we can enter a manual check payment when it is time to pay our credit card bill. Receipts are not entered into the system unless we have them physically and are signed. Sarah would bypass this by entering the charges into the system and allocating the charges to different accounts so as to not put up red flags in the accounting system. She also entered the receipts under the wrong vendors, so if anyone was to check up on the accounts, then they would be sent through a tailspin of wrong accounts. When it came to reconcile the credit card accounts, Sarah oversaw it. Her reconciliations were never signed off on since she would do them herself. The person who was responsible for filing away documents had no accounting experience, so nothing was questioned within the documents. Sarah would hide the credit card charges so they would show up wrong on the subledger. She did this by debiting the credit card clearing account and crediting cash. This would cause our accounts to never balance.

Since Sarah Sharp was always so caught up in covering her tracks, she never filed taxes for our payroll. Because of this, we owed over $20,000 just in taxes alone. The only reason why Sarah was caught committing these crimes was because she took medical leave. The AP department, as well as I, were put in charge of all the credit cards. When we looked at the statements, we noticed some alarming charges, such as the Hulu account and the Verizon charges that we did not have backup for. We notified our superiors and they began looking more into the situation. The AP clerk also noticed some weird receipts that she was receiving through her mailbox. Since Sarah was away on medical leave, she could not intercept the fraudulent receipts from getting into the hands of the other accountants. The receipt that set off the whole investigation was a Geico car insurance statement. The nonprofit does not use Geico, so this was suspicious to us.

Sarah Sharp was fired the very next day. The police showed up to her door along with our assistant COO. That was the day that the official investigation began. Sarah was able to file for unemployment because she never informed us of all her duties (one duty included unemployment statuses of previous employees). When the investigation began, the nonprofit noticed all our mistakes and where we went wrong. The biggest mistake that was noticed was the lack of internal controls and supervision. There were lots of red flags but there was minimal attention to them. The accounts payable clerk said, “Talk about red flags? It is more like we are sending up flares.”

The investigation into the case of the senior accountant is ongoing. The case is still being investigated by the police and is waiting to be brought to court. This ongoing investigation gives this story an open ending. There is hope that justice will be served, but sometimes this is not always the case. The purpose of this story is to make people aware that fraud can happen anywhere, and the guilty party could be anyone, even your most trusted employee. Let this story be a lesson to always follow and provide internal controls in the workplace, or you could experience a similar story someday.