Employee Theft Threat Real; Safeguards Available

By Diane Wells

Auto Dealer Advisor, 2005 Spring

It’s been estimated that during the last five years, 80 percent of all dealership employees stole something. While the majority of theft involves inexpensive items such as office supplies, when major theft is considered and all of the stealing is averaged out industry wide, it comes to $9 per employee per workday. For a dealership employing 100 people, that amounts to more than $234,000 a year.

This is the second part of a two-part series on suggested internal controls upgrades to protect dealerships from employee theft. In our last issue, dealership income, cash disbursements, and account reconciliations were examined. This issue discusses upgrades in five additional areas.

Payroll

• All department managers should be required to sign off on payrolls each pay period to approve the identity of the listed employees and the amount paid.
• Never make cash payroll payments.
• As often as possible, the dealer should hand paychecks directly to the employees.

New Vehicle Department

• Establish strict inspection procedures for new vehicles received and be certain that all personnel are familiar with requirements for damage claims and legally required consumer disclosures.
• Take a frequent unannounced inventory of all new vehicles. Check the condition, signs of unauthorized use, and equipment shortages. Test the results against office records and immediately investigate discrepancies. Allow no equipment to be removed from any new vehicle without an internal repair order signed by the new vehicle department manager.

Used Vehicle Department

• Maintain an approved list of wholesalers, and allow only those approved to buy and sell on your lot. Keep records of the activity of each one on the list. Investigate unusual activity. Check market values and compare to dealership records.
• Verify dealer licenses or sales tax permits for all non-retail purchasers.
• Personally review all wholesale transactions resulting in a loss or involving multiple vehicles.

Parts Department

• All parts tickets and repair orders that are not prepared by the computer must be completed in ink. Changes should be crossed out and initialed by the manager.
• A clear policy should be established for discount purchases by volume customers and employees. Frequent checks should be made to be certain that these policies are being observed.
• Shipments of parts in company vehicles should be checked frequently to be certain that all parts loaded have been properly charged out.

Service Department

• As part of the regular month-end procedures, all work-in-process should be inventoried. All repair orders, which have not cleared through billing, should be listed.
• Work should be spot checked to be certain that parts charged are actually used.
• Credit policies and records should be understood by and be available to all service department managers, advisors, and cashiers. No vehicle should leave the shop until proper arrangements for payment are made.