Internal Controls Claim Scenario

We are going through an unprecedented period of time. Tens of thousands of businesses, large and small are either temporarily closed, or are operating on a remote basis. As a result, there are fewer people “on location” in oversight roles leading to a lessening of internal controls and a decrease in checks and balances. Segregation of duties may be going by the wayside. Now more than ever, Insureds must remain vigilant in maintaining their internal controls. Otherwise, a lack of oversight could result in the following loss example.

The Executive Director of an Insured took advantage of a lack of oversight concerning her position because the Insured’s Board members were scattered throughout the country. Some of the Executive Director’s job duties included approving expenses, maintaining fiscal records, developing and monitoring the annual budget, and assisting the Treasurer with the submission of monthly financial statements to the Board. The Executive Director exploited the lack of internal controls to use the Board’s operating account as her personal bank account. The Board’s failure to maintain its segregation of duties allowed the Executive Director to make payments for personal travel, golf memberships, groceries, utilities, and more.

In addition to promptly adjusting the claim, Great American’s claims adjuster was able to assist the Insured by recommending corrective actions to minimize the risk and increase the probability of early fraud detection. The Insured now has an independent bookkeeper in place, as well as multiple levels of banking approval.

For more information, please contact your local Fidelity / Crime Division representative or email [email protected].