Chain of command

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joelly
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Chain of command

Post by joelly » Wed Nov 15, 2017 8:49 pm

Hi Everyone,

I'd like to ask if any of you ever experience the following: The cfo/trustee gave your subordinate (bookkeeper) a car without letting you know. You are the controller. What would you do? The one that bothers me the most is the fact that the bookkeeper booked an entry to conceal the transaction. Normally, any proof of wire was approved by the cfo and given to me before booking it into the general ledgers.

No wonder the bookkeeper has shown a bit of an attitude toward me.

I plan to talk to them both tomorrow to find out why they are keeping me out of the loop. I now suspicious if anything else is happening without me knowing.

Love to hear your thoughts. TIA.

-joelly
Last edited by joelly on Wed Nov 15, 2017 9:05 pm, edited 1 time in total.

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whodidntante
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Re: Chain of command

Post by whodidntante » Wed Nov 15, 2017 8:58 pm

It's not necessarily anything sinister. Some people don't respect chain of command. There are countries where this is part of the culture, and it's finding it's way to American culture too. I'm assuming you are American.

I would talk to the CFO and explain that this bothered you, and why. Have a conversation about it. Talk and listen, that kind of thing.

Your subordinate's attitude is a separate issue, and will need to be dealt with if it's serious enough. But he/she didn't will this car into being, it was given by the CFO.

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joelly
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Re: Chain of command

Post by joelly » Wed Nov 15, 2017 9:07 pm

I'm not as bothered by the car being given to her but why the attempt to hide the transactions. :oops:

What else she and he hides? Can't help being suspicious.

livesoft
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Re: Chain of command

Post by livesoft » Wed Nov 15, 2017 9:13 pm

I'll throw this out there to make this thread actionable and interesting: Office affair.
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joelly
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Re: Chain of command

Post by joelly » Wed Nov 15, 2017 9:29 pm

whodidntante wrote:
Wed Nov 15, 2017 8:58 pm
It's not necessarily anything sinister. Some people don't respect chain of command. There are countries where this is part of the culture, and it's finding it's way to American culture too. I'm assuming you are American.

I would talk to the CFO and explain that this bothered you, and why. Have a conversation about it. Talk and listen, that kind of thing.

Your subordinate's attitude is a separate issue, and will need to be dealt with if it's serious enough. But he/she didn't will this car into being, it was given by the CFO.
I was not born here but I'm a newly minted US citizen. :beer

Found the car transaction hidden in some prepaid accounts in the ledger. Occurred in Feb'17 and I just found it last week. This is mostly what bothers me and not the car. He could give her a moose I won't care when it's properly approved and booked. In this matter, no paper trail whatsoever.

She receives $82K/yr (not include overtime) and $48K/yr in allowances (paid medical, paid gas, paid auto and paid 2 kids private school). She is our bookkeeper. I haven't decide her salary increase yet.

I usually don't mind much an attitude or two (bad/good days happened), but once something like this happen, I have to adjust her workload going forward. How can I trust her again?

15 yrs ago I worked for a terrible controller and I swear that I won't be like that if I were a controller. He was so mean that his dept reduce to only a one-staff dept (which is me).

I just don't want to be mean but I probably should. But I will surely talk to the cfo.

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joelly
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Re: Chain of command

Post by joelly » Wed Nov 15, 2017 9:34 pm

livesoft wrote:
Wed Nov 15, 2017 9:13 pm
I'll throw this out there to make this thread actionable and interesting: Office affair.
Actually, the cfo gives his admin asst a free rent. The 2bd 2ba apt was remodeled to the nines (spare no expenses). The fmv of the apt is $3,500 in the brentwood area in los angeles, ca. This is in addition to her payroll ($59K/yr, not including overtime).

How do I change the title? I like your title better. :mrgreen:

123
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Re: Chain of command

Post by 123 » Wed Nov 15, 2017 10:33 pm

Is your company a profit or non-profit? Is it publicly traded or privately held? Does it have a compliance and/or audit group? Does it have an external auditor? What is the cfo's relationship to the board of directors/owners? Lots of things can impact chain of command and what is tolerable/unethical.

Does it have a budget? What kinds of accounts did the potentially inappropriate expenditures get charged to?
The closest helping hand is at the end of your own arm.

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joelly
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Re: Chain of command

Post by joelly » Wed Nov 15, 2017 11:07 pm

123 wrote:
Wed Nov 15, 2017 10:33 pm
Is your company a profit or non-profit? Is it publicly traded or privately held? Does it have a compliance and/or audit group? Does it have an external auditor? What is the cfo's relationship to the board of directors/owners? Lots of things can impact chain of command and what is tolerable/unethical.

Does it have a budget? What kinds of accounts did the potentially inappropriate expenditures get charged to?
Non profit. Privately held. No compliance and/or audit group. It doesn't have an external auditor yet. The cfo is a trustee plus an officer. Owner is still alive but has alzheimer so appointed 2 trustees (sharing 50-50 responsibility) to run his business. The other trustee is bothered by this also because the cfo didn't inform him either.

We do have a budget. Bookkeeper is treating the transaction as a prepaid auto expenses in which she is reclassing $1,000/mo from auto expenditures to the prepaid exp every month to reduce the prepaid amount ($40K). The prepaid auto expenses is a new account she created especially to record this transaction.

The cfo is a casual leader. One day I predicted that his casualness will lead to casualties. I just want to establish enough control in my dept to minimize this kind of issue.

Iridium
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Re: Chain of command

Post by Iridium » Thu Nov 16, 2017 2:26 am

joelly wrote:
Wed Nov 15, 2017 9:29 pm
I was not born here but I'm a newly minted US citizen. :beer

Found the car transaction hidden in some prepaid accounts in the ledger. Occurred in Feb'17 and I just found it last week. This is mostly what bothers me and not the car. He could give her a moose I won't care when it's properly approved and booked. In this matter, no paper trail whatsoever.

She receives $82K/yr (not include overtime) and $48K/yr in allowances (paid medical, paid gas, paid auto and paid 2 kids private school). She is our bookkeeper. I haven't decide her salary increase yet.

I usually don't mind much an attitude or two (bad/good days happened), but once something like this happen, I have to adjust her workload going forward. How can I trust her again?

15 yrs ago I worked for a terrible controller and I swear that I won't be like that if I were a controller. He was so mean that his dept reduce to only a one-staff dept (which is me).

I just don't want to be mean but I probably should. But I will surely talk to the cfo.
I do not think that much good would come of being mean. If your bookkeeper has a good enough relationship with the the CFO that he gave her a car, she isn't going to be afraid of you. Ultimately, it is always going to be much better if both the CFO and the bookkeeper want to work with you, rather than take the lesson that they need to do a better job hiding money (but if they get caught the worst punishment is getting yelled at for an hour or two).

The fact that the CFO's admin has a generous housing allowance tells me that the organization seems to have a certain amount of tolerance for the CFO handing out extraordinarily generous fringe benefits. I'm assuming the housing allowance was done on the up-and-up as you made the car allowance sound like a first time issue. Correcting the car allowance is going to be quite awkward for all involved (especially when the approvers are asked sign off on the expense retroactively and when Payroll informs the bookkeeper how much tax needs to be withheld on what was determined to be a fringe benefit). Barring the CFO losing his job (on which, by providing the facts to the CEO and other trustee, you have already done everything you can do), the best possible outcome is that the CFO realizes that handing out the housing allowance by working with you was so much easier than correcting the "mistakes" that are made when going behind your back, so he'll want to work with you in the future.

I know that you are probably pissed and feeling betrayed right now, but maintaining and improving a good personal relationship with the CFO is one of your important long-term projects. Assuming he doesn't get fired. Once this blows over, I would even consider asking him to lunch on an occasional basis. Given his casualness, he is unlikely to see the value in proper reporting and controls, but if he values you, he's more likely to put up with it anyway.

Sounds like quite a mess and I feel for you. On the positive side, you now have the perfect use case for when you want to purchase that fancy software that automatically matches up approvals with expenses (or whatever thing would have helped catch this issue earlier).

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joelly
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Re: Chain of command

Post by joelly » Thu Nov 16, 2017 8:48 am

I’m not mean by nature, only by thoughts.

The housing for his assistant was also not on the up and up. The other trustee is also bothered and upset about it. When he confronted him, he said that that because he didnt give her an increase. So the other trustee checks with hr and sure enough the assistant received 10% increase in addition to the housing. So the other trustee now learns of his duplicity.

I just don’t know how he can be so casual and has all the power to release fund, etc without anyone to answer to.

I’m going to meet with the other trustee today and see what he wants to do. I have some bullets point on what he can donto protect himself against any casualties caused by the cfo/trustee.

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Re: Chain of command

Post by BolderBoy » Thu Nov 16, 2017 9:35 am

You need to look for another job. No good is going to come of this.
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BL
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Re: Chain of command

Post by BL » Thu Nov 16, 2017 9:46 am

BolderBoy wrote:
Thu Nov 16, 2017 9:35 am
You need to look for another job. No good is going to come of this.
+1
Best advice yet.

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joelly
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Re: Chain of command

Post by joelly » Thu Nov 16, 2017 3:10 pm

BolderBoy wrote:
Thu Nov 16, 2017 9:35 am
You need to look for another job. No good is going to come of this.
That is an idea that I keep tossing around in my head. The reason of my reluctant to move is because I created the accounting system in this company and I hate to pass it on to others after all that hard work. Also, just hired a senior accountant and plan to hire another to get some work off of the unethical bookkeeper. I have a LOT more work in my hand to increase internal control and reduce our risks of falsifying data and/or unauthorized transactions.

Had a 5-min convo to the other trustee this morning. He listened to me and agreed that the cfo/trustee and the bookkeeper has shown disrespect to us (this trustee and me) and the owner. But he is working to change that (I don't see how and didn't further ask). Before leaving, he said we need to have a discussion further later today, around 3pm. He said that the other trustee should be out of the office by then due to granddaughter's activity.

However, he did say that I shouldn't go to the cfo/trustee to confront him and tell him how I feel about the transaction. He said there are wars and there are battles.

:confused

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Re: Chain of command

Post by flamesabers » Thu Nov 16, 2017 3:27 pm

OP,

Does the CFO have a personal relationship with the bookkeeper? (Family or otherwise.)

In any case, I agree with the others about looking for another job. When a senior leader is being lackadaisical with his responsibilities, I think that's a huge red flag. It may only be a matter of time before a huge incident occurs and he tries to place the blame on his subordinates.

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Re: Chain of command

Post by 123 » Thu Nov 16, 2017 4:07 pm

Have some fun before you move on. Make sure these personal expenses for the employee involved are recognized and recorded as payroll/compensation for personal services and added to the employee's payroll record and W-2 reporting. You could probably also file an amended W-2 for prior years.

Edited to add:
A non-profit usually has to file a form 990 tax return each year. If the non-profit is not reporting total compensation expenses properly that could be an issue as well. If the employee should be listed as one of the "highly compensated" employees and he/she is not that is an IRS violation for whoever signs the tax return (we hope it's not you). The rules for "highly compensated" employees have changed over the years. Some non-profits have to list the 10 top compensated salaries in addition to those of executives. Issues with the 990 filing can get very juicy because the IRS has basically unlimited resources to go after "bad guys" and make a public example of them. Sometimes the IRS will go after smaller fish because it's so easy to snare them.
The closest helping hand is at the end of your own arm.

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Re: Chain of command

Post by joe3411 » Thu Nov 16, 2017 4:42 pm

$82k for a bookkeeper? Plus 48k in benefits?? That must be over double the average even for a HCOL area.

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Re: Chain of command

Post by fishmonger » Thu Nov 16, 2017 5:00 pm

joe3411 wrote:
Thu Nov 16, 2017 4:42 pm
$82k for a bookkeeper? Plus 48k in benefits?? That must be over double the average even for a HCOL area.
This is baffling to me - where are you located and what type of NPO is this? I live in the HCOL Northeast and see Exec Director/CFO positions that pay $100k +/- for organizations with $10-20M in annual revenue.

My gut tells me something seriously wrong here (maybe a few things). I'm sure you're aware that non-profits are notorious for fraud. In my opinion you are being way too relaxed about this. You might want to go directly to the BOD with your concern, but before I talked to anybody I would read the organization's by-laws, particularly the section on whistleblower's policy. Going to assume that you have one

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Re: Chain of command

Post by Good Listener » Thu Nov 16, 2017 5:10 pm

Livesoft nailed it . Is there anyway if your job is being done responsibly that you could miss this? If so I'd miss it until you could find another job. If you mention it and Livesoft is right, you're going to eventually lose your job anyway.

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Re: Chain of command

Post by Kywildcat » Thu Nov 16, 2017 5:17 pm

I work in accounting as well and I would be tempted to have a talk with the CEO or board about this behavior. Does the CFO even have the right to give a car to the book keeper as a business expense (he can spend his personal money on whatever he wants). The fact that it was booked to a prepaid account makes it appear that they were trying to hide it (why isn't it in PP&E and being depreciated?).

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Re: Chain of command

Post by Raymond » Thu Nov 16, 2017 5:27 pm

Start looking for another job.

When you leave, drop a dime to the board, donors, IRS, FBI, the NSA and (most importantly) the CFO's spouse/significant other :twisted:

Hmm... the CFO, the admin assistant and the bookkeeper?

To expand on livesoft's comment, maybe it's not just a two-some :shock:
Last edited by Raymond on Thu Nov 16, 2017 5:47 pm, edited 1 time in total.
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TerryDMillerMBA
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Re: Chain of command

Post by TerryDMillerMBA » Thu Nov 16, 2017 5:43 pm

These kind of things make the news lately when they go badly.

We see how it goes when things are still rosy. :moneybag :beer :twisted:

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Re: Chain of command

Post by quantAndHold » Thu Nov 16, 2017 7:09 pm

I’ve been around the block enough have seen a few things..

* even if the things you’re posting here are not illegal in themselves (which I’m not sure about either way), where there’s smoke, there’s fire. There’s something going on with this CFO and he people around him, and eventually, someone’s going to jail.
* once the grand jury convenes, you never know where the next shoe will drop. Even if you haven’t done anything wrong, staying until things fall apart could be a career limiting move.

It’s time to quietly find another job.

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Re: Chain of command

Post by CaliJim » Thu Nov 16, 2017 9:02 pm

Keep good notes. Document everything and keep a duplicate copy somewhere safe.
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TimeRunner
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Re: Chain of command

Post by TimeRunner » Thu Nov 16, 2017 9:19 pm

Who inherits the company when the owner eventually passes away? That might be the person to follow up with.
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munemaker
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Re: Chain of command

Post by munemaker » Fri Nov 17, 2017 5:24 pm

BL wrote:
Thu Nov 16, 2017 9:46 am
BolderBoy wrote:
Thu Nov 16, 2017 9:35 am
You need to look for another job. No good is going to come of this.
+1
Best advice yet.
I agree. Since you know about this and are in the chain, you may be accused of being complicit if it hits the fan.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 3:13 pm

Good Listener wrote:
Thu Nov 16, 2017 5:10 pm
Livesoft nailed it . Is there anyway if your job is being done responsibly that you could miss this? If so I'd miss it until you could find another job. If you mention it and Livesoft is right, you're going to eventually lose your job anyway.
Yes, even if I'm doing my job responsibly, I could miss it. However, I am making changes to the internal control to avoid something like this to happen again in the future. I have informed both trustees (we don't have BOD) that I will start making changes to the internal control but I didn't cited this particular transaction.

I don't know if they are having an affair or not.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 3:15 pm

CaliJim wrote:
Thu Nov 16, 2017 9:02 pm
Keep good notes. Document everything and keep a duplicate copy somewhere safe.
I have a diary that I kept.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 4:26 pm

fishmonger wrote:
Thu Nov 16, 2017 5:00 pm
joe3411 wrote:
Thu Nov 16, 2017 4:42 pm
$82k for a bookkeeper? Plus 48k in benefits?? That must be over double the average even for a HCOL area.
This is baffling to me - where are you located and what type of NPO is this? I live in the HCOL Northeast and see Exec Director/CFO positions that pay $100k +/- for organizations with $10-20M in annual revenue.

My gut tells me something seriously wrong here (maybe a few things). I'm sure you're aware that non-profits are notorious for fraud. In my opinion you are being way too relaxed about this. You might want to go directly to the BOD with your concern, but before I talked to anybody I would read the organization's by-laws, particularly the section on whistleblower's policy. Going to assume that you have one
It may seem like I'm too relaxed but I am not. I brought up my concerns to the 2nd trustee and he told me to hold off and not to confront anyone involve. If you were me, what would you do? You would do what a normal controller would. Determine that the internal control risk is high and start putting fences around so that this will not happen again. This is what I can do because I can't change the lackadaisical nature/tendency of a trustee. Only the other trustee and/or the law can put a stop to that.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 4:31 pm

So most of you agree that I should change job. I'm working on it but at the same time, I'm working on fixing what I can. We have a 2nd trustee now and he seems to be on the up and up and definitely not a lackadaisical kind-of-guy.

The way I see it, the lackadaisical 1st trustee is the responsibility of the 2nd trustee. My responsibility is to put an additional safety measure around the existing system to make sure this or anything similar doesn't happen again.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 4:56 pm

Kywildcat wrote:
Thu Nov 16, 2017 5:17 pm
I work in accounting as well and I would be tempted to have a talk with the CEO or board about this behavior. Does the CFO even have the right to give a car to the book keeper as a business expense (he can spend his personal money on whatever he wants). The fact that it was booked to a prepaid account makes it appear that they were trying to hide it (why isn't it in PP&E and being depreciated?).
I wish I have a CEO and/or BOD to go and bring this up but I don't. Starting July 2017, there is a 2nd trustee who actually listens to me and my cases. So we'll see how it goes.

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joelly
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Re: Chain of command

Post by joelly » Mon Nov 27, 2017 6:28 pm

123 wrote:
Thu Nov 16, 2017 4:07 pm
Make sure these personal expenses for the employee involved are recognized and recorded as payroll/compensation for personal services and added to the employee's payroll record and W-2 reporting. You could probably also file an amended W-2 for prior years.
The CFO won't agree to that. He is the signor in all of our tax returns so....

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Re: Chain of command

Post by TropikThunder » Tue Nov 28, 2017 7:39 pm

joelly wrote:
Wed Nov 15, 2017 9:29 pm
She receives $82K/yr (not include overtime) and $48K/yr in allowances (paid medical, paid gas, paid auto and paid 2 kids private school). She is our bookkeeper. I haven't decide her salary increase yet.
Either I missed something, or I’m in the wrong line of work, or both. But how in the world is a bookkeeper making $130,000?!? Why does she need a car allowance? Does she have to drive to multiple worksites and do the bookkeeping there? And how in the world is the CFO justifying private school tuition paid for her 2 kids as a benefit? This whole thing stinks.

margered
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Re: Chain of command

Post by margered » Wed Nov 29, 2017 1:38 pm

If your non-profit is large enough to have a CFO, you, senior accountant and a bookkeeper, isn't it large enough to be required to have an outside financial review or an outside audit?

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Ethelred
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Re: Chain of command

Post by Ethelred » Wed Nov 29, 2017 1:51 pm

So, the CFO has given fringe benefits to two members of staff, and in both cases, they've tried and failed to hide them from you.

It seems very likely that the CFO has also given extra fringe benefits to himself, maybe an order of magnitude bigger in size, just you have yet to discover them. My guess would be that the other trustee wants to get the CFO in trouble, not just go after the bookkeeper and admin assistant,

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joelly
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Re: Chain of command

Post by joelly » Tue Dec 05, 2017 5:45 pm

Ethelred wrote:
Wed Nov 29, 2017 1:51 pm
So, the CFO has given fringe benefits to two members of staff, and in both cases, they've tried and failed to hide them from you.

It seems very likely that the CFO has also given extra fringe benefits to himself, maybe an order of magnitude bigger in size, just you have yet to discover them. My guess would be that the other trustee wants to get the CFO in trouble, not just go after the bookkeeper and admin assistant,
You are correct. Do they really think I won't find out?

CFO has given himself plenty. I know those too. They happened before 2016 though, the new trustee only just join us mid 2017. Should I tell him? If I don't, then I would be found consenting in hiding it after the fact IF the new trustee ever find out.

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joelly
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Re: Chain of command

Post by joelly » Tue Dec 05, 2017 5:48 pm

margered wrote:
Wed Nov 29, 2017 1:38 pm
If your non-profit is large enough to have a CFO, you, senior accountant and a bookkeeper, isn't it large enough to be required to have an outside financial review or an outside audit?
Apparently it is not. Why? Because we are still on our way to be a non profit. So this would be the time to clean up the books. I am helping the new trustee with this. He is very appreciative and he wants things done right. I like to do things right.

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joelly
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Re: Chain of command

Post by joelly » Tue Dec 05, 2017 5:52 pm

TropikThunder wrote:
Tue Nov 28, 2017 7:39 pm
joelly wrote:
Wed Nov 15, 2017 9:29 pm
She receives $82K/yr (not include overtime) and $48K/yr in allowances (paid medical, paid gas, paid auto and paid 2 kids private school). She is our bookkeeper. I haven't decide her salary increase yet.
Either I missed something, or I’m in the wrong line of work, or both. But how in the world is a bookkeeper making $130,000?!? Why does she need a car allowance? Does she have to drive to multiple worksites and do the bookkeeping there? And how in the world is the CFO justifying private school tuition paid for her 2 kids as a benefit? This whole thing stinks.
Oh no, she gets a corner office too. CFO bought her a brand new car too this year, spent $40K. CFO wired the money. She booked the entry. None is the wiser. OR so they think.

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joelly
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Re: Chain of command

Post by joelly » Tue Dec 05, 2017 6:18 pm

Everyone,

I am asking for a prayer. I am building a case (not to hurt anyone) but to clean up the books. The new trustee has express willingness to be my ally which I totally appreciate.

So much is wrong, not only financially but also in management. i.e. bookkeeper went rogue on hiding transactions, she also shows lack of qualifications in booking journal entries without providing back ups, etc. CFO said once upon a time the bookkeeper was the chief of acctg, chief of finance, etc. I don't know what he meant by that.

I am working on implementing a new system which will be applying GAAP and the bookkeeper position will be no more independent of the controller as the CFO likes it now.

So much work for me when I inherited a team instead building one myself. The senior accountant (I hired him mid 2017) seem to agree with me about the bookkeeper lacking qualifications.

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Ethelred
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Re: Chain of command

Post by Ethelred » Tue Dec 05, 2017 6:54 pm

joelly wrote:
Tue Dec 05, 2017 5:45 pm
You are correct. Do they really think I won't find out?

CFO has given himself plenty. I know those too. They happened before 2016 though, the new trustee only just join us mid 2017. Should I tell him? If I don't, then I would be found consenting in hiding it after the fact IF the new trustee ever find out.
I would assume you should, unless you think that will make you liable for not reporting earlier, or similar. But I know nothing about the legal issues.

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Re: Chain of command

Post by LadyGeek » Tue Dec 05, 2017 7:40 pm

This thread has run its course and is locked (work relationship issue, fraud / tax evasion - a legal issue). See: Acceptable Topics and Subforum Guidelines
This is an investing and personal finance forum. We also maintain a subforum that allow our members to discuss consumer goods and services and recreational activities. Anything else is considered "Off Topic" and is not acceptable on this forum.
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