The Tallahassee BeanCounters (TBC) is a minor league baseball team, which is based in Tallahassee, Florida. Incidentally; it had never been audited before the writing of a letter by an anonymous whistleblower; reporting fraudulent activities within the company, to Franklin Kennedy, the organization’s owner. An additional impetus for the audit of the company’s accounts was the granting of a mortgage to the company for the construction of a new training facility. This investigative report seeks to confirm whether allegations made by the whistleblower are true or false, by scrutinizing the company accounts, employees, materials, and the organizational chart.
It is worth noting that the organization is run by an ex-base ballplayer, who is an associate and long-time friend. Seemingly, he does not have an academic background in business administration, which sets the stage for flaws in management. From the interviews with employees, it is observed that there is no whistle-blowing structure in the organization, coupled with the absence of an internal auditor, thereby providing conduits for the siphoning of funds illegally from the company.
One of the indicators of fraud within the organization is the lack of proper specialization and division of labor. For example, Tucker Johnson who is the head coach, delegates some of his duties to Sam McCarty the equipment manager, because of his phobia of paperwork, and does not counter check orders made on new equipment by Sam, who can easily inflate the quantities required. Additionally, there is overlapping of roles within the organization, that is seen where Julie Roper who is the assistant to the president, also assumes the role of a concessions manager. Julie’s ineptitude at work is shown where she fails to do her job at times as required. Her job description warrants the counting of condiments at the end of every game, but she views this as a laborious task and so does so sporadically. On May 13th for instance, she counts the condiments but fails to do so on the 14th and 15th, creating loopholes for fraud by altering the concessions figure. Phil has a charming personality, which enables him to create a rapport with everyone in the organization. From the evidence gathered, he is seen to be very unpredictable, when he decides to cut down on employee expenses, by instituting job cuts. In a move that raises eyebrows, he fires his assistant Terry Hughes for going away to see her mother and replaces her with his niece, a clear indication of nepotism. He also takes deposits to the bank, a duty that should be undertaken by junior staff.
Furthermore, in the build-up to the construction of the new training facility, he was the one who handled the bidding process and kept the bids in sealed envelopes in a safe in his office. Ordinarily, the bidding process should have been handled by a hired independent body, or by the company’s owner, Franklin. The process is handled solely by Phil, raises a red flag as to whether the bidding process was free and fair, and if the contractor, Larkin Construction, was indeed the lowest bidder as purported.
There is some likelihood of fraud taking place in the parking lot because we can read malice from the issuance of tickets to the various categories of cars. Strangely enough, there is no way of telling the difference between tickets sold to big vehicles and small vehicles, because after paying the tickets are just placed under the wipers of vehicles’ windshields, while the spectators are watching the game.
The organization in question seems to be outsourcing payroll services, from the ADC payroll company, which does nothing more than just distribute money to the accounts of the employees. The process of filling out a consolidated timesheet is done by Candie, and the calculation of salaries owed is done by Michelle, who writes out a check to the ADC payroll company, to disburse the funds. This begs the question of the need for outsourcing of a payroll company, that just pays out money which could have easily been handled by Michelle, after compilation of the necessary bi-weekly data by the various departments. Michele who is also a part-time student can easily be tempted to canvass to get tuition money.
Myrna and the other workers at the ticketing booth, have worked together for 20 years. Additionally, their husbands attend every game and the six have a personal relationship. This in itself can lead to loopholes for committing fraud; for example, we do not know whether their husbands pay for the tickets. The period is also long enough, for the ladies to come up with a way to swindle the ticket payments. It is of importance to note that the other ladies, leave when Ben Hill and the armed security guard arrive, without confirming the amount of money they have, and leave the duty to Ben Hill and Myrna Myers alone.
As evidenced from the attendance to one of the games, and interviews with the employees, Ben Hill is the one who calls all the shots and almost has the final word on a collection of any fund. He is the last person who confirms the collections and reconciliations, keeps the money, and even does the bank deposits. He has an open check to do anything as he wishes. It is also noted that he has a larger-than-life personality, is always at night clubs and hits out on every woman who comes close to him. These can be possible forces, towards unprofessional allocation of funds, given that he has the opportunity to do so.
The accounts receivables have been increasing exponentially, from May to September, due to either a very weak collection system or unaccounted figures. For example, the increase from $14338, $71602, $89912, $132134, to $112932 respectively, which can lead liquidity issues.
The figures for concessions in September are given as $3671, which is an understatement, since we see that the condiments were not counted on 27th September, the last day inventory was taken in the storeroom. This gives an implication that there are some inventories, whose figures might not be given correctly; therefore the balance sheet does not give a true and fair view of the financial status of the organization.
Although the organization qualified to give impressive profit margins for the period when the construction was going on, we doubt whether that was the true position; given the ambiguity, we have in the final financial accounts. We would like to ask for the cash flow statement for the current period, a balance sheet, and financial statements of the same period for the previous year. There is also a need for a bank statement, to help in the preparation of a bank reconciliation statement.
Ultimately, the TBC organization is a business enterprise like any other, which should be run by professionals, starting from the senior manager to junior staff. A human resources office should be instituted, to recruit qualified personnel for the various duties that are required to run the organization efficiently. This is a measure to ensure that, there is perfect division and specialization of labor. A whistle-blowing channel should be enacted, where a phone line is opened for employees to tip off the organization, in incase there is an impending crime. The office of an internal auditor should be put in place to ensure that all the monthly activities are vetted to detect any unscrupulous activities that might present themselves.