Five Steps that Would Have Saved Delaware $1.2 Million

Recent reports regarding the theft of unclaimed property by a Delaware state employee demonstrates just what can go wrong in any organization when basic fundamental controls are ignored. Although the case in question involved the theft of unclaimed property, lack of the basic controls could result in fraud in any organization. Let's take a look at what went wrong and how you can make sure the same thing doesn't happen in your accounts payable department.

The Story

Anthony J. Lofink, son of Delaware State Rep. Vincent A. Lofink, was sentenced to five years in federal prison for embezzling $1.2 million from the state state's abandoned property fund. He was in charge of processing claims from people seeking the return of unclaimed property and then handing out the checks once the claims were approved.

Even the judge in handing down the sentence commented on the complete lack of oversight in the case. State auditors have said this is one of the largest thefts of state money in Delaware history.

An Ounce of Prevention

There are some frauds that are so ingenious it's hard to see how they could have been prevented. Alas, this was not such a case. If the following steps had been taken, this fraud would not have been possible. In fact, if any one of just the first three steps and been incorporated into the states processes, the fraud would probably have failed.

Step 1. Insist on the appropriate segregation of duties. Lack of oversight cited as a big factor in this case. By letting the same person process the claim and hand out the check the state violated this very basic control. It's the same principle as not letting those who process invoices also sign checks.

The rest of this article appears in the September issue of Accounts Payable Now & Tomorrow.

Last week you may remember, we discussed two types of letters related to unclaimed property. Apparently a number of readers are receiving-and sending-them. "I call, send an e-mail, or send a letter to vendors who have not cashed our checks after three months. I ask them if they received our check, and if not, I void it in our positive pay and reissue the check," writes one of our readers.

This response is representative of the practices used by a number of our "regulars" and is a recommended best practice by most unclaimed property experts. One respondent gave me a good laugh when explaining why she takes what some might see as an extra step. "I also have received refund checks from vendors saying we paid an invoice twice (oops, I hate to admit but it does happen)," she wrote. "So it looks like companies are being more pro-active. I do it because I do not want to remit unclaimed money to a bunch of states." What may look like extra work could actually save work and money in the future!

What's more, some of the states are becoming fed up with the work generated for their staffs when they take property from organizations like yours and then turn around and return it to the rightful owners shortly thereafter. So, some, but not all, are requiring a certain amount of due diligence-such as discussed above- before the property is turned over. This is one 'gotcha' that is easy to avoid.

Due diligence requirements are just one of the many unclaimed property issues that will be addressed at our Unclaimed Property Seminars in Cincinnati and Los Angeles. Tracey Reid, the expert who will teach the sessions, is extremely knowledgeable-and a lot of fun. So, why not join us: find out what you should be doing and earn 6 NASBA CPEs in the most entertaining manner possible.

During Accounts Payable Appreciation week, the week of October 20, we want to celebrate the hard work our readers do day in and day out throughout the year. As we mentioned last week, we'll hold a drawing for books. We've identified five of our titles and will give one a day for the first four days of the week. On the fifth day, the winner will have a choice of a $40 gift certificate to Barnes & Noble or a library of accounts payable books written by yours truly. (In the "interests of full disclosure," I have to be totally honest. If I won the big prize, even though the library of accounts payable books will have a value of well over $300, I just might take the B&N gift certificate-and if you win, you should feel free to do the same if that's your preference.)

Here's what will happen. On Monday we'll pick that day's winner and notify them by e-mail. They'll be given a list of books available and asked to choose the one they want. The same will happen on Tuesday, Wednesday, and Thursday. We'll run it like the beauty contests-if you win one of the prizes earlier in the week, you won't be the grand prize winner.

And, of course, since we like to make sure that everyone gets something, we'll have three other celebrations. Everyone who enters the contest will get a handout with excerpts from several books. This will go out on Monday. Receiving this does not mean you won't win one of the big prizes.

We're also putting together a $99 special. This will include a variety of our publications that normally sell for much more. We'll have full details next week-and, also in the interest of full disclosure, there is a special bonus for paid subscribers to our Accounts Payable Now & Tomorrow newsletter. (What was that company slogan? Membership has its privileges?) Finally, we will schedule a low-cost webinar but it will be in November. We'll have the details in the next week or two. To enter the contest, simply send an e-mail to publisher@ap-now.com with the words "AP Appreciation" in the subject line. Please include your mailing address so we know where to send your prize should you win.

Although we didn't plan it this way, it looks like our early Fall webinars are all designed to help you avoid the "gotchas"-by the IRS, the states, and/or your vendors who "getcha" by taking your money twice!

On September 22nd, Cyrus Daftary and one of his associates will provide you with the information you need to handle those awful B-Notices. He'll be followed two weeks later, on October 7th by Tracey Reid with information for unclaimed property filers who want to avoid those common "gotchas" that tend to trip companies up.

And along similar lines, Greta Hicks, an award- winning speaker and former IRS employee, will take the stand on October 16th to provide you with the information you need to determine whether someone is an employee or independent contractor. The IRS takes this issue very seriously and is making it the focus point of many of its audits so it's something no organization can afford to get wrong.

Finally, as you may remember, we are running our Obliterate Duplicate Payment series in October to help readers deal with this profitability-sapping nightmare.

You cannot work in accounts payable today and expect to advance without a good working knowledge of Excel. As promised last week, we've got some links to online tutorials to help you brush up on your Excel skills. Those who are proficient and want some high- level tricks will probably not find them here. (Those gems are rarely available at low or no cost! If you do find an advanced tutorial for no cost, I'd love to hear about it.) Don't be surprised when you finish the tutorial if the provider has a more advanced module for you to purchase.

• Excel 101- How to Use Excel Spreadsheets
• Microsoft Excel 2007 Tutorial and Training Course
• Microsoft Excel XP Tutorial

Have I babbled on far too long this week? Perhaps, so we'll return our most popular clicks and job listings in next week's edition. I do want to tell you about a surprise, though. My publisher sent along my author's copy of my new book, Fraud in Accounts Payable. Seems they managed to beat their publication deadline. What I like best about this book is the 50+ real life fraud stories, shared by readers like you. I couldn't have made some of this stuff up if I tried. You can order the $49 book directly from the publisher and get at 15% discount by going to http://www.ap- now.com/links.html and clicking on the Wiley link on the bottom of the page.

Until next week,
Thanks for listening - and have a great holiday weekend.

Mary Schaeffer
Accounts Payable Now & Tomorrow, a CRYSTALLUS, Inc. publication

CRYSTALLUS, Inc, publisher of Accounts Payable Now & Tomorrow, is a woman-owned business and is registered as a Federal Government CCR vendor.