FD's Diary - Christmas day - at the office

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The FD gets called in on Christmas morning

December 25 ' An FD's Diary on Christmas Day?

Oh yes. I got called 45 minutes ago. I'm the first key holder anyone can contact today and the alarm had gone off in the office. So, here I am resetting things. And, of course it's a false alarm.

Peace on earth and goodwill to all men, I say. Except those who create false intruder alarm calls on Christmas morning.

Back to lunch soon though. Bet I won't be popular'.

* * *

December 22 - Time for an end of year reflection, I guess. With luck I might avoid coming in here tomorrow and one of the big advantages of not having a December year end is that there are no stock counts and other such inconveniences to have to worry about at this time of the year. I have agreed to call in between Christmas and New Year, largely because #3 has done so much recently, but there is an opportunity for a break, and a first Christmas with an even bigger family.

So, what's been good about 2005? If I'm honest, it's a son surviving emergency surgery and a new daughter being born that jump to the forefront of my mind. Dragging myself back to work mode, I can't help but say that my changing role here has been really satisfying. At the start of the year I think I still saw myself as an accountant but on the back of the issues in Belgium at the end of last year, the need to change our product range as a result and the consequent change in the way that Ops and I view our respective tasks I am ending it thinking of myself much more as a manager.

It's been really rewarding to see how #3 has risen to the challenges I given to her, although it has to be said that I still think that there is still some friction between her and AJ which might need to be tackled in the New Year.

Our possible fraud at the end of the year is a timely reminder that I can't be complacent about the quality of our systems, especially as the business grows.

And the budget has not been completed as yet. In fact, there's some way to go, but at least people are accepting that they have to think about the process. This is a good omen.

Ops and I had our stresses a little while back. I think that quite a lot about was my own stress at becoming a father again. But, it's also fair to say that he has reacted almost as well as #3 to some of the challenges that I have presented to him.

What do I see is my main challenge the New Year? Firstly, getting enough sleep. Secondly, having the planning in place for what looks like a significant new way of working. Lastly, I need to help Ops deliver the benefits that these changes are supposed to supply.

Not much to do then! In the meantime, have a good Christmas.

* * *

December 20 ' It's been frantic.

The staff 'do' (much feared by me for reasons of old ' see December 2003 diary if you want to know why) came and went on Saturday without much incident. At least one staff relationship came to light which was previously unknown but both are big, ugly and single enough for the fall out to be of little consequence as they work in quite different areas. And no one made a complete fool of themselves.

The stock controller did not come. Nor has he been to work. He now says he can't return before Christmas. With our lawyer's help we have decided that he can have 4 weeks paid leave. Then we will stop payment. Our contract gives this discretion. That takes us to after Christmas. We will tell him this. He's also being told a disciplinary hearing is to be heard on 9 January (when the four weeks is up). He's been advised to bring a lawyer. We've said we'll make a contribution to costs.

The reason is we now know that a pattern of claimed installations by the chap in the West Midlands which appear not to have given rise to new kit going on site started by September at least. The kit in question was last counted in the stores in July, and again in November when the adjustments were booked. But how did it leave in the meantime? The West Midlands guy has paperwork saying he used it. The stores paper work does not match. The stock controller is off, but do we know he was guilty? Was he just stupid, which is not a crime? Our lawyers think we have problems with prosecuting by the way as some kit we use is re-conditioned ' and we can't always prove when as we've discovered we've been less than rigorous with serial number records, so we might be in trouble as we're not always comparing new with old, but reconditioned with old, and this is subjective without numbers to prove things. The system will be improved!

But stupid or guilty of assisting crime (which has had a real cost), the stock controller's got to have a hearing and unless his arguments are very, very good he's out of here. The relationship of trust has failed.

In the meantime I issued a plea to #4 to work her Christmas vacation and, like an answer to a prayer, she's now working in the stores. No one is complaining. The guys seem to think overalls suit her.

* * *

December 15 ' The stock controller said he was too ill to come to work yesterday. But he did call me. I asked him why he was ill. He said stress.

'What about', I asked.

'Those stock differences', he said.

'What stock differences?' I said.

'You know, the ones on the Belgian stock' he replied.

'What about them?' I asked.

'I can't explain them' he said.

And on it went.

The outcome is he says he's stressed because of stock differences and can't come to work but says he knows nothing about them. When I asked why he had not reported them and just posted them instead he could not explain himself. He said it was this oversight that was causing him stress.

I don't believe him.

But equally, he's lying quite well enough to mean there's no chance of bringing him to book.

I've discussed it with Ops. Because of the very helpful posting on this site I've told the auditors what has happened and said please report it to NCIS. That took them back! But, I said we could not prove anything yet.

But Ops and I have decided on the basis of the long, fully noted call with the stock controller to charge him with misconduct by failing to draw attention to stock problems, a charge he has already admitted.

We've consulted lawyers to protect ourselves and made clear to them we have no intention of prosecuting because we're sure he could deny any charge of theft and we're just glad to be back of the West Midlands chap. The lawyers are drafting the letter to the Stock Controller, who has declared himself off sick for a week so I don't have to suspend him at the moment.

And we'll see how he responds.

Fun being in charge, isn't it?

* * *

December 12 ' Just when you want to work part time (in fact, when you have to work part time ' I need to do the school run for the next week and a bit) you have problems.

The stock controller has not turned up again. #3 is earning a special Christmas bonus by working over the weekend. We have found a pattern ' the losses are all in particular stock areas concerned with older items now likely to be hard to source following the Belgian problems. So it looks like it's deliberate.

In his absence the stock controller got a letter suspending him from normal duties this morning and a request that he arrive for interview on Wednesday. It was sent by courier to his home, where it was signed for.

I bet he doesn't come.

I wish I had more time.

I wish Olivia was sleeping.

But she is gorgeous, which makes up for it.

* * *

December 9 ' Our man in the West Midlands has quit. The stock controller was not at work today.

Looks like we've rumbled something.

We have two of our people from here testing 10 sites where the West Midlands man supposedly fitted replacement kit today. Reports so far are that there's no sign of a replacement on the client premises as yet.

So what do we do? Prosecute a fraud? Or write it off to experience and thank #3 for noticing not all was right and Baby Olivia, under whose cover they hoped to get away with it? That's a conundrum I could do without.

* * *

December 8 - #3 was right. There was something odd about the November management accounts.

I have usually done stock in the past. #3 is therefore relatively unfamiliar with it, but just couldn't make sense of the fact that the value of some lines had fallen quite a lot. So we investigated. In fact we are investigating still.

We do periodic checks of all stock ' over a year everything should be counted once, high value items more often and stock on all vans at least twice (as we think that is vulnerable).

In November a spate of stock adjustments were posted by the stock controller / warehouse chief, mainly on our 'old style components' (the sort we bought in bulk from Belgium a year ago). Some operators out in the field also appeared to be using a lot of these ' for some reason the West Midlands is requiring a very high repair rate on maintenance contracts at the moment.

None of this feels right. The West Midlands is seeing a unit replaced on just about every visit ' which just does not happen. And the stock controller says he has no clue why just these lines seem to be suddenly suffering stock losses within the warehouse, which is under his control.

We smell a rat. We can't prove it yet, but we have a funny feeling that our ex-operator who set up by himself has found a new line of supply in our warehouse. But you have to be so careful before making any such suggestion. So we've all been distracted.

And I just wonder whether the adjustments were delayed until they thought my eye would be off the boil?

And the in-laws go home at the weekend. I'll actually miss them.

But at least I can sleep in the spare room sometimes then. I don't care what Ben Elton has to say on the subject in 'Blessed'. New parents need spare rooms. Well, fathers do.

* * *

December 5 ' I do remember life before Olivia. But it's already a vague memory. Come back sleep ' all is forgiven.

So too, come to that, might Ops be forgiven. Once I'd met Sales last week and talked to them about what they're doing I also had chance for a brief session with him ' and the simple fact that they were rising to the challenge seemed to inspire him. He's now looking at the impact of what they're thinking on what he'll need to do. I could of course curse him for the fact that when I as an accountant asked him to do it he looked blank and when Sales, as practical people showed it was possible he responded, but I think I'll just take my luck from wherever it comes.

Now, to more mundane things. November management accounts need some attention. #3 reckons they don't make sense to her as they're panning out right now. Some real numbers might add some reality to life.

(Having said which ' I often wonder how many of the numbers in the accounts we produce bear any relationship to reality. Most of them, like debt, seem like an act of faith whilst fixed assets are just fiction. But maybe this is what you think about when being kept awake at night).

* * *

December 1 ' First the good news. Our chap who had the accident is out of hospital and doing well. The other driver is out of intensive care and should be OK. These things matter a lot when you're a director. I wonder how much people realise?

Now the bad news. Baby Olivia likes to be fed several times a night. Fatigue is kicking in.

Then the extraordinary news. Our sales people are taking the budgeting process seriously. They asked for a meeting to discuss how they're doing their planning. Can you believe that? It's a new one on me. But they really want a plan. Ops says its because they want it to be easy and to then link their bonuses to it. I don't mind right now. I want the structure first ' then we can argue the detail. Then he can agree the bonuses. But what they're doing is logical. It's not this year plus 3%. It's looking at a detailed work plan for the top 20 customers, a much broader sweep on the rest to see what could be won and then a plan for likely new sales based on realistic achievement from past experience based on different ways of selling / lead generation.

Now I know I suggested something like this, but it's really good that they listened in the first place and are trying to write it down. If they can get this done this month doing the rest of the budget in January / February could be much easier.

It was almost worth coming in just for that.

Now all I need is a quiet corner, a pillow and a pile of petty cash claims to process. It really is a shame I have delegated all such tasks.

In November the FD's new baby, Olivia, was born.

For previous installments of the FD's Diary, see:
October
September
August
July
June
May
April
March
February
January
December
November
October
September
August
July
June
May
April
March
February
January
December
November
October

Comments

More food for thought...

AnonymousUser | | Permalink

You clearly have a lot on your plate.

Since #3 uncovered the anomalies, could she follow through? Why not ask her to compile all of the events, information and documents into the "on a plate" report for your review before it goes to the police.

Looking to the longer term - you have an opportunity for staff development.
#3 might be interested in further developing her involvement in managing overall exposure to risk and fraud.

It can be eye opening and sometimes downright scary to start looking at risks. But I have known businesses that suffered (and some that died) because they didn't look.

Typical examples (not all will apply to you) include things like:

Bank software installed on an old operating system platform (XP security is so much stronger than windows 98).

Passwords to ledgers or even banking systems commonly shared and/or known to ex-members of staff or written down and left laying around.

Sole signatories on bank accounts.

Large volumes of transactions from an employee just below the limit at which he needs to get approval.

For a useful tool visit the COSO framework. OK, OK - US companies now have a completely overblown approach to controls. But the original COSO report contains pure gold. The evaluation tools and reference manual are especially useful, mapping business objectives to risks to controls in a simple, straight-forward, and common sense way to create a logical framework.

You could get #3 to run analyses on data too, perhaps six-monthly in quiet periods - Get her to have a look at this article on fraud detection published by the American Institute

http://www.aicpa.org/pubs/jofa/may1999/nigrini.htm

It provides a quick technique for finding patterns of fraud - e.g. in expenses claims or invoices. It can drive cost savings too (e.g. A peak of invoices at £3.28 from a high volume of small but necessary purchases. All requisitioned separately, with each invoice separately mailed by the suppliers and separately approved and entered into the ledgers? Renegotiate weekly or monthly billing and a unit price decrease for the admin saving your supplier makes. Enjoy your own admin saving).

You might be surprised what you learn about the business when you try the analysis and follow up the anomalies in the data.

Must take all possible legal steps

AnonymousUser | | Permalink

Like the other posts I believe that for a variety of reasons you must take all possible legal steps. From a HR perspective I think you would send all the wrong signals if you did not involve the police if you can identify a prima facie case of theft. I think that the comments regarding giving all the information on a plate is very well made. If the Crown Prosecution service doesn't go ahead you may then have to decide what if any civil proceedings may be helpful.

With luck you may well get evidence that links all three parties [service engineer, stock "controller", end user] and allows you to go after your lost assets as well as ridding yourselves of 2 thieves.

davidwinch's picture

Tackling crime in smaller businesses

davidwinch | | Permalink

Recent events may bend your thoughts towards more general issues of possible crime impacting on your business. May I suggest you take a few minutes to read the Fraud Advisory Panel booklet Fighting fraud - A guide for SMEs available free from their website?

It is worth considering your firm's attitude to crime in the workplace - and whether you project the best impression of that attitude to your employees.

Good deterrent procedures, sensible internal controls and a risk-free whistleblower mechanism are important.

If you do wish to involve the police (and you may or may not wish to do so) then if you want to get a positive response you should present your information in a way which the police will be able to absorb and use readily.

In this case that would mean collating together information about the allegation and relevant documents, identifying key issues and personnel (both suspects and witnesses), and presenting this 'on a plate'. Police resources are very stretched, particularly in relation to skilled investigators of financial and business crime - so you need to help them to help you!

This could also save you some wasted time and frustration at a later stage!

Finally, don't forget that if your auditors / external accountants become aware of the suspected thefts and false accounting (bogus adjustments to stock levels and bogus requisitions of parts required for repairs are examples of 'false accounting') they will be obliged to report their suspicions to NCIS, very possibly without your knowledge or consent.

David
david@mlrosupport.co.uk

Connections??

AnonymousUser | | Permalink

If stock has walked where has it gone to?

You suggest your "ex-operator who set up by himself has found a new line of supply".

If that is correct, then prosecuting the stock controller may also expose the connection to your ex-operator. He may have built up a stock of units you can recover. Also, you may be able to make a claim under your insurance policy to recover the loss - will your policy allow this if you don't prosecute?

And just think of all the extra material you'll gain for this blog!

anton pilar

AnonymousUser | | Permalink

You could ask your legal people about the scope and limitations of an anton pilar order - not sure about the spelling - thats how it sounds.

They are issued by a court and allow entry to premises in order to obtain info/evidence. From what I remember it gives you powers not far removed from c&e's and the subject gets no warning, you can just steam in and remove stuff.

might locate your missing kit.

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