10 Ways To Avoid Employee Fraud

Fraud is everywhere these days including private schools. Recently a Montessori school trustee told me how his IT guy had made off with $10,000 worth of servers and other computer equipment. The high profile million dollar embezzlement case in Roslyn, New York illustrates white collar crime on a much larger scale. So, what's a board of trustees to do? Here are ten ways you can head off fraud.

1. Don't allow one person control over all of your accounting functions.
2. Require two signatures on checks over a pre-determined amount - say, $500.
3. Never pre-sign checks.
4. Consolidate your bank accounts and 'slush funds' so that your book keeping accurately reflects the school's true financial position.
5. Eliminate petty cash.
6. Assign deposit and account reconciliation functions to different people.
7. Implement a purchase order system.
8. Review expenses and supporting vouchers carefully.
9. Have an outside auditor review your books annually.
10. Do background checks and speak to references before you hire.

Implement Sound Business Practices and Stick to Them
Small to medium sized private schools can find it difficult to implement standard business practices. Even when they do, they can find it even more difficult to adhere to those practices. The watchword for your back office functions has to be "Constant vigilance!" Put another way, don't trust anybody! If that sounds dreadful, it is. But your school probably cannot afford to take even a minor financial hit, right? So make sure it doesn't happen on your watch.

Always be observant. Ask questions. That's part of your fiduciary responsibility.