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Embezzlement Case Study: House Corporation Treasurer

Scenario

The new House Corporation Officer discovered discrepancies in their accounts which led the House Corporation to complete an audit of their financial records. It was discovered that the former House Corporation Treasurer embezzled approximately $30,000. The former Treasure wrote numerous checks to herself with no receipts or explanations supporting to the payments.

Issues to discuss

  1. What procedures to you have in place to avoid this type of incident?
  2. Do you require two signatures on your checks?
  3. Do you conduct regular audits?
  4. Do you segregate duties between volunteers who write checks and those who reconcile the accounts?

Some Important Information Regarding Embezzlement Claims

Embezzlement claims are on the rise. We often see more frequent and more severe embezzlement claims during economic downturns. Because of the increase in claims, we wanted to remind you of the importance of reporting embezzlement claims as soon as you suspect that an embezzlement claim may have occurred. According to the policy language, it is a condition of coverage that the organization must

  1. Give written notice to the insurance company at the earliest practicable moment, and in no event later than 90 days after the initial discovery
  2. Furnish affirmative proof of loss with full details to the insurance company at the earliest practicable moment, and in no event later than six months after initial discovery

We have had a recent claim that was not reported within 90 days of it being discovered, which jeopardizes the coverage available to the client in this situation. Unlike homeowner’s insurance, there is no penalty under your organization’s insurance program for submitting an incident, even if you’re unsure whether or not it will arise to the level of a full-blown claim. It is in your organization’s best interest to call us at any time that you suspect any type of embezzlement activity because of the strict reporting guidelines under the embezzlement coverage.

Embezzlement claims are often very difficult and costly to investigate, which is why we have negotiated with the insurance company on your behalf to add expense coverage to the policy. The expense coverage affords the client with $25,000 to spend to document the embezzlement for the purposes of the claim (e.g. moneys spent on forensic accountants, time to procure documents, etc.).

Refer to your Insurance Overview for your location’s specific limits and deductibles for all of the coverages afforded under the insurance program, including embezzlement.

In the event that you suspect an embezzlement claim has occurred, do the following as soon as possible:

  • Notify Heather Cox at MJ Insurance as soon as possible.
  • Remove all financial responsibilities from the individual immediately.
  • Begin the process of developing the details to the loss.