This column originally appeared in Entrepreneur
A newspaper in Eugene, Oregon was recently forced to stop printing. Was it because of a downturn in the publishing industry? A new competitor? A natural disaster? Nope. It was because of embezzlement.
According to this report in The New York Times, management at The Eugene Weekly — a 40-year-old publication with a circulation of over 30,000 readers — discovered a mountain of unpaid bills and unfunded retirement accounts thanks to a former financial staffer who had taken tens of thousands of dollars sometime during their five year period with the paper. The newspaper’s editor Camilla Mortensen said inaccuracies were found in the newspaper’s bookkeeping, and the “trusted” financial staffer who was heavily involved in the paper’s finances had used its bank account to pay themselves $90,000 since 2022. The fraud was so significant that management had no choice but to lay off its ten workers and stop publication altogether around Christmas. “The damage is more than most small businesses can bear,” the leaders of the paper said in a publicly released letter. “The scale of this moment is unlike anything we have ever faced.”
Related: 4 Kinds of Fraud That Could Destroy Your Business
Stories like this occur all the time. Just in the past year, a hospital employee in Doylestown, Pennsylvania, was charged with taking more than $600,000. A tech company executive was accused of walking away with almost $3 million in stolen funds. An IT director at a Rhode Island fabricator pocketed more than $1 million. A manager at a Pennsylvania Wendy’s was arrested for allegedly taking more than $20,000 after creating a fake employee. A car dealership employee in Atlanta walked away with $27,000. A payroll accountant at an Ohio company stole a whopping $26 million. There are many more incidents like this.
Press reports about these unfortunate events often lack enough details to figure out what exactly happened. Usually, all that’s said is that the situation is still “under investigation.” Understandably, no private business likes to speak publicly about the embarrassing details. But the New York Times report did include two very interesting tidbits.
The first was that the employee “was involved in the newspaper’s finances” and the second was that the employee “was out of the office earlier this month when questions arose about closing the financial records.”
As a certified public accountant, we’re trained to help clients create and enforce internal controls so that the risk of employee theft — particularly those in the finance area — can be minimized. We tell our clients to keep valuable inventory locked up, require multiple approvals for disbursements, and make sure that there’s a proper segregation of duties over cash so that there are different individuals who receive, deposit and record the money. We also like to have an independent person outside of the organization reconcile bank accounts because, hey, you never know what turns up.
All of the above is easier said than done, especially if you’re a small business with few resources. The Eugene Weekly only had 10 employees, who, I’m sure, were busy with their own jobs. This is why many small businesses don’t implement these internal controls.
But regardless of your resources and the number of employees you have, here’s something you can easily do that will decrease your risk of financial fraud: Require — yes require — vacation. Especially for people who handle your finances. Being a workaholic isn’t cool. It’s bad for one’s mental health to work too much. It negatively impacts performance. And — just as importantly — it can potentially mask financial fraud. It seems like this was the case at the Eugene Weekly.
I’m betting, and I don’t have the complete facts, that the financial person accused of taking the paper’s funds didn’t take much vacation. I’m betting they were always at their desk and territorial about their area. And I’m betting that management at the paper — who were busy trying to run a profitable organization during Covid and at a time when their entire industry is in decline — had better things to worry about.
Related: Why Embezzlement Most Often Occurs at Small Businesses — and How to Prevent It From Happening to You
I’m also betting that all the companies that I’ve mentioned above could have easily and much earlier uncovered fraud if they required that their financial employees take vacation. Doing so not only helps cross-train others to do their work (which can come in handy if an employee is unexpectedly absent) but also helps to put a pair of fresh eyes on transactions. Even if there’s not enough bandwidth to cross-train, then it’s worth the money to bring in a financial temp for the time the person is on vacation. It’s very hard to hide a fraudulent scheme when someone else isn’t part of it.
The leaders of The Eugene Weekly are gutted, but they’re not throwing in the towel. “We believe in this newspaper’s mission, and we remain determined to keep EW alive,” they promised in their letter. I hope they succeed. Perhaps they already do require a vacation, and the loss just wasn’t detected. I’m not so sure, but I doubt it. But at the very least, I hope we can all take at least one thing away from their terrible situation: Vacations are good both for the employee and their employer.
