The former CFO of a prominent Harvard, Mass museum is being sued for allegedly stealing more than $1 million from the organization.
According to an article published in The Daily News Transcript, former Fruitlands Museum Chief Financial Officer Peggy Kempton is accused of working with her three children to embezzle $1 million from the museum over a seven year period.
Kempton was hired in 1997 and promoted to a position of trust in the organization in 2001. The lawsuit alleges that from 2001-2007, Kempton opened numerous credit accounts, made personal charges, and used Fruitland funds to pay the balances.
In addition, Kempton’s three children – one of which received compensation for alleged volunteer work from 2001-2007 – are also accused of paying personal credit card charges with Fruitlands money and had funds transferred directly into their personal accounts by their mother.
As CFO, Kempton was the sole employee responsible for writing checks and communicating with the museum’s bank and accountant. The lawsuit alleges that she hid her fraud by falsely adjusting the museum’s financial records. As a result, the museum is also naming its private accounting firm in the lawsuit.
The fraud was discovered soon after Kempton abruptly quit her job in February. Since then, new procedures have been put in place to spread financial responsibilities among several individuals as opposed to one.
For the full story visit The Daily News Transcript.
Comments
Segregation of Duties
This is a classic case of poor segregration of duties.
In many cases - especially where money is involved - a conflict of interest may tempt someone to break the law. Nowhere is this truer than in Accounts Payable.
In AP, there are a lot of conflicting duties which should always be segregated. Segregating AP duties is one of the most important internal controls in finance. For example, the person entering the invoice should not approve the invoice for obvious reasons. Similarly, the person who sets up a vendor should not enter the invoice into the ERP system. There are many examples in AP where duties should be segregated. The problem is that most finance departments constantly have pressure to do more with less. But to follow segregation of duties to the letter, you need enough staff which isn't always a luxury - especially in these economic conditions.
More here:
http://blog.170systems.com/bid/8359/Segregation-of-AP-Duties-What-s-the-...
http://blog.170systems.com/bid/8397/A-True-Story-of-AP-Fraud-a-Woeful-Fa...