The Thunderstorm Of Fraud Is On The Horizon | By David M. Bleser, ISHC

The current climate suggests the main factors needed for these types of frauds to occur are already present. The hotels are now in cost containment mode. Furthermore, unlike in 2002, inflation has reared its ugly head. It costs us more to not only fill up our gas tank but also our shopping cart. Our associates need gas money. They need to pay their electricity bill. They need to put food on the table. So where are they going to be stealing from us? The answer is simple…wherever they can get the money quickly and easy such as petty cash.

Think about this scenario:

The bellman gets a petty cash slip for $50 for gas for the hotel van. The bellman pre-pays the gas but the van only takes $30. The bellman gets the change but does not get the revised receipt. He turns in the receipt for the $50 pre-paid gas. He has just stolen $20 from you. That’s probably enough gas to get him to and from work for the next couple of days.

Better yet let’s look at gift card or gas cards that are supposedly being bought for our associates? How do you know that the associates are actually receiving them? Do you make them sign for the cards? Maybe it’s time that we did.

Those of you who are offering a rooms promotion in conjunction with a gas card, do you have procedures in place to reconcile the gas cards purchased to those redeemed?

Hopefully we have learned from our mistakes as a result of September 11. One mistake we made was that we over reacted. We reduced the amount of personnel in our hotels too much. We eliminated the separation of duties. We eliminated our mystery shoppers. The proof is reflected not only in the types of thefts but in our guest satisfaction scores. The average dollar of the thefts sky rocketed while our guest satisfaction scores plummeted. When associates are over worked and feel under- appreciated it easier for them to rationalize the theft.

Once they can rationalize the theft they then look for the easiest areas opportunity. These areas are wherever we are not closely monitoring their actions. The areas may seem small but in the long run they can cost you thousands of dollars. Think about the bartender who steals only $20 from you each night. That’s $100 a week or $5000 a year. Yet if your bartenders know they are being shopped periodically, it reduces the possibility that they will try to steal. If they are stealing the likely-hood of them being caught increases significantly and therefore reduces your possible loss. Isn’t it worth spending a couple of hundred dollars to save possibly thousands of dollars?

Contrary to the thinking of some individuals within our industry, you can’t prevent or catch all thefts. But what you can do is reduce your exposure and / or minimize your loss. Here are some suggestions:

• Conduct fraud awareness training for your associates, managers and corporate staff. Studies have shown most frauds are uncovered through tips. According to the recent Report To The Nation 2008 by the Association of Certified Fraud Examiners 57% of all tips are from employees. If your employees don’t know how to recognize the red flags, how effective can your hot lines be?
• When considering a cost cutting measure evaluate what the overall effect will be on your internal control program. Does the saving of having deposits go to the bank twice a week instead of daily outweigh the possible loss if 2 or 3 days of deposits come up missing?
• Re-evaluate your cash control policy. This includes the policies and procedures for petty cash. Do you have a dollar limit for petty cash purchases? Do you have a procedure in place to obtain personal banks back from the associates for when they go on vacation? Do you even need personal banks? Do you have strict policies for purchases made with manager checks?
• Constantly review the guest comment cards and the front desk log books. Is there an increase in the number of guests complaining about items being stolen from their room?
• Ensure proper documentation exists for all voids, adjustments and paid outs. Based on the documents you are currently reviewing does it show if the guest paid cash and when the adjustment/paid out occurred?
• Are there sufficient controls in place for the high ticket items like flat screen televisions? Can you and how often do you account for the extras?
• Keep your staff motivated as best you can. Sympathize with them. Let them know you understand this is a difficult time for them.

Unfortunately only when the barometer of unemployment starts to increase do we want to openly admit that fraud exists. The good news is there are steps that the corporate staff and individual hotels can take to minimize and in many cases prevent fraud from occurring.

David Bleser, Prior to creating Bleser & Associates, LLC, David spent 10 years as the Vice President for Hospitality Safeguards, Inc. In his role he created and implemented numerous internal audit programs that were specifically