Fight Cashier Fraud at Colleges and Universities with Strong Controls
Here’s an alarming fact: Employee cash skimming occurs commonly at higher education institutions, composing 25% of all such theft across industries, and it is estimated that the median loss per fraud case at colleges and universities is $62,000. The locus of cash skimming in most institutions is the cashier’s office, which typically collects student payments and maintains on-site cash reserves for business functions.
People generally steal from their employers when three factors come together: pressure, opportunity, and rationalization. Your employees’ personal pressures and consciences are out of your hands, but you can indeed reduce opportunity by putting strong internal controls on your cashiering processes. Not only will these help thwart cash skimming but also cash larceny, dishonest register disbursements, and other forms of asset misappropriation. Such controls include:
- Random vault counts
- Daily cash reconciliations
- Vault and cash office access restrictions
- Segregation of duties
Start with the vault
Your institution’s vault probably stores cash, blank check stock, cashier drawers, transit passes, and other miscellaneous items of value. So the vault, of course, is the hotbed of fraud risk and activity and calls for strict controls. When controls are absent, opportunity abounds. We know of a college that was a victim of cash larceny when an employee slipped bills from bundled cash stacks within the vault. This went on for some time until a cashier happened to notice that one of the bundles was unusually light. Further inspection revealed pervasive theft within the vault. Poor camera placement and a high number of employees with vault access left the institution unable to identify and prosecute the thief.
The school made itself vulnerable by failing to perform vault counts. A vault count is simply counting down the contents of the vault, typically at the end of the business day; verifying that the contents match the records; and securely closing the vault. Ideally, a vault count should be random and periodic to be both preventative and detective, but a daily vault count is good, too. Depending on the size of your institution, it may be possible to perform as frequently as every few days or as infrequently as every couple of weeks. It may also be prudent to allow your institution’s internal audit or finance department to conduct quarterly or annual vault audits to strengthen the detective fraud risk control.
You can help secure the vault in several additional ways:
- Limit access to only a few key employees
- Limit vault reserves
- Change vault locks or codes upon cashiering office turnover
- Require separate employees to perform the morning vault opening and the evening closure
It is important for your cashiering office to consider what the daily cash needs are in both peak times and off-seasons. Less cash in the vault presents less of an opportunity to commit fraud and makes vault counts easier and faster.
Focus on point-of-sale activities
Cash skimming schemes often occur at the point of sale, before a transaction is formally recorded in the accounting system. In the case of colleges and universities, this happens not only in the cashiering office but also the bookstores, concessions, cafeterias, and sporting events. This particular fraud scheme is difficult to detect, as no cash will appear to be missing during bank reconciliations. Consider a student who purchases a transit pass, and the cashier office employee pockets the cash without ringing up a sale. Both the student and cashier appear to have conducted a legitimate business transaction, and the accounting system is none the wiser. But those regular vault counts would catch the shrinkage in contents and detect that a fraud may have occurred.
To prevent cash skimming at point-of-sale transactions, install cameras or other monitoring systems that capture suspicious behavior on the spot and identify who may have perpetrated a fraud. Uniform controls on all cash handling procedures and communication between cash handling sites can help facilitate the secure transfer of cash at your institution.
Keep a sharp eye on register disbursements
Cashier office employees may steal cash directly from register drawers. This usually happens when controls are lacking, e.g., drawers aren’t assigned to specific cashiers, there are universal keys for all cashier drawers, and cashiers have unchecked access to the drawers. For example, a cashier withdraws $50 from his or her drawer at the end of the day. If no controls are in place, he or she could mask the theft by making fraudulent withdrawals from other drawers while keeping anonymity.
Besides controlling drawer access, you can prevent and detect dishonest register disbursements by having another employee conduct daily cash drawer counts and performing daily reconciliations between the cashier drawer and the cashiering system (Banner, PeopleSoft, or the AIS used by your institution). Storing cashier drawers in secure locations, such as a vault, will lessen the opportunity a fraudster would have to conduct illicit register disbursements. This control could be further enhanced by positioning cameras within your vault to record not only who enters or exits the vault area, but who is accessing the contents of the vault.
Above all, segregate duties
All previous controls considered, perhaps the most important fraud risk control your institution should implement is proper segregation of duties. Even with the strongest vault controls or surveillance within the cashiering office, you may still not catch a discrepancy within the accounting system that was masked by someone who had performed bank reconciliations for cash they had received and deposited.
Separate people perform the following duties:
- Receive cash
- Record cash payments to student fees or tuition
- Reconcile cash receipts and deposits to the general ledger
- Reconcile bank statements
For instance, if a cashier were to collect a student’s $50 payment on a class fee, record the fee as paid while pocketing the cash, and reconcile his or her own cash receipts to deposits without review, then he or she could effectively hide their theft of student fee payments with minimal chances of being discovered.
Ultimately, implementing strong fraud risk controls within your institution’s cashiering office not only protects your financial assets but also your reputation. Students, employees, and external stakeholders expect you to take the utmost care to protect the funds with which your school is entrusted.
How we can help
Your institution is responsible for implementing and maintaining fraud risk controls, and CLA’s higher education specialists can help you meet your obligations. We can evaluate your cashiering office’s controls and cash-handling procedures and offer practical, actionable ways to help prevent and detect fraud.
- Dominic Fabrizio