An investigation of the financial performance and condition of Tallahassee Bean Counters (“TBC”) was conducted for the period May through September 2013 for the purpose of sharing with you any observations or areas that require additional consideration. This analysis was based on a limited understanding of the business and the control environment. Furthermore, many of the detailed testing procedures that generally would be performed as part of a complete forensic investigation have not been conducted due to my not having full access to all financial documents and records. Please contact me should you decide a more formal investigation is warranted based on the findings included in this analysis. Our findings include the following:
✓ The overall control environment has not been established to prevent, detect, or deter fraudulent activities including financial reporting;
✓ Ghost (fictitious) employees have been created and payments have been made to these fictitious employees;
✓ Revenues from ticket sales do not agree to supporting documentation;
✓ Bank deposit transactions are not properly verified;
✓ Inventory is subject to misappropriation.
Potential Suspects and Red Flags
Based on my review of personnel files, interviews with co-workers, spouses or former spouses, and prior employers, three individuals – Phil Ackers, Ben Hill, and Terri Hughes – have been identified as potential culprits of fraudulent activity. Below are the key factors that led to this determination.
Phil Ackers: As president of TBC, Mr. Ackers should be responsible for establishing the overall control environment of the organization. The “tone at the top” is one of the most critical factors to ensure that fraudulent activity is either prevented, detected, or deterred. However, there are no formal procedures whereby employees can report known or suspected fraudulent activity. Second, Mr. Ackers supposedly provided Ms. Hughes with bonuses in sufficient quantity to purchase in cash a beach house in the Florida Keys. Although that purchase was made 12 years ago, there is heightened concern of Mr. Acker’s activities in light of the amount of outstanding debt he is maintaining. Last, Mr. Ackers was responsible for overseeing the construction activity of the new training facility. The span of his control includes the ability to retain and approve payments to vendors and initiate change orders without secondary approvals. Mr. Ackers also has the ability to override controls in his capacity as president. Furthermore, Mr. Ackers handles cash associated with program, promotion, and ticket sales.
Terri Hughes: Ms. Hughes has spent at least 20 years working with Mr. Ackers. Furthermore, she has been acquainted with Mr. Ackers for at least 22 years although the extent of their relationship is not known. Prior to her employment with TBC, Ms. Hughes worked for Mr. Ackers as his assistant at Pizzano’s Restaurant in Miami. Pizzano’s Restaurant was owned by Mr. Ackers. Additionally, Ms. Hughes allegedly purchased a home in the Florida Keys with cash provided by Mr. Ackers as “bonuses” for her superb work. A home in the Florida Keys can be rather expensive in addition to the ongoing property taxes and maintenance. When viewed in conjunction with Ms. Hughes’ salary and her maintaining rent payments for a second home in Tallahassee, one must question whether her income can support such a lifestyle.