Tallahassee Bean Counters Case; Case Study Analysis

FORMAT: I want you to reconsider this paper for two parts: in the Tallahassee Community College Tallahassee Bean Counters
First Part:
Please go through the Group Project Guidelines file first, then read the case study that is uploaded. After reading the case study, I want an executive summary about the case.

Second Part:
1- Questions to be considered (Important) approximately bring 4 questions to consider in this Tallahassee Bean Counters case
2- Compile a list of additional information you would like.
3- Ask yourself, “if this was a real-life situation, what evidence is needed to convince someone that a fraud is being committed? Who would I need to speak to? Where would I need to go to gather evidence?
4- Make reasonable assumptions about individual behaviors, based upon evidence.

I think now you understand the TBC (Tallahassee Bean Counters) case and who is fraudulent guilty in this case. The Freddy Fix It is Fraud. Could you please only focus the investigation on the Freddy’s Fix Fraud this time? I have found that the fraud amount from Freddy is $46160 (please see the attachment of Freddy) Please use these numbers in your writing from this attachment (Freddy).
Here is the writing format to follow on Freddy Fraud, and include all evidence and documentation needed to convince the jury of any suspect’s guilt including:
» Who committed the fraud?
» How was it committed?
» How can you demonstrate intent?
» What is the economic impact?
» Demonstrate that the suspect benefited financially – follow the money!
Keep in mind that you will focus just in Freddy part.
Let me know if you need more documents to upload.
To understand the family relationship between them :
Parents: Jerry and Sarah Harris Roper. Niece to Phil Ackers as her mother is sister to Phil

Acker’s wife _Madelyn Harris Ackers_. Her uncle is Freddy Harris, brother of Phil’s wife.
Freddy is related to Julie and Phil as Phil’s wife Madelyn is sister to Freddy.

See all attachments to have more evidences.
Thank you for cooperation.

July 10th – Shouse questions

Tallahassee Bean Counters support information

Ticket Sales:

On August 22 and September 27th,  Tallahassee Bean Counters sold tickets over capacity.  The tickets for will-call were entered for the full amount subsequent to game day i.e. they would know how many were not picked up.  Furthermore, Will-Call ticket sales dropped from 2,190 to 200 from August 22nd to the September 11th game.  I believe this shows Julie was overstating revenue and accounts receivable in August.

QUESTION: We believe Accounts Receivable and Revenue are overstated.  Please provide details and/or justification for the entry into A/R for Will Call tickets.  Please provide any subsequent write off for uncollectible amounts.

Julie takes will-call ticket orders and Phil makes the entries to A/R.  Will-call orders are invoiced after the games.

QUESTION: Why is the A/R account Debited for the full amount if not all tickets are picked up?

Game revenues are overstated by the Will-Call tickets in accounts receivable.  This revenue was used to obtain favorable lending.  See above.

QUESTION: What were the terms needed to obtain most favorable lending?  Is there a total revenue requirement?  Net Profit requirement? See TH9 for the bonus schedule.

QUESTION: Why were so many discounted tickets sold on Sept 26 and 27?  Who makes the decision to sell for less? Unknown/

Will call tickets peaked then dropped way down.  There was a comment from the ladies in the

ticket booth that Julie handled will call tickets, and they weren’t always picked up.  Myrna stays after the other 2 leave to count tickets with Ben.

QUESTION: Please provide signed payroll sheets for August 22nd for ticket sales hourly employees (Myers, Lipponi and Child).  We want to confirm they worked 9 hours for this one game as they typically only work three. Payroll information is in the textbook.  See TH 3 attached for ADP confirmations.

Parking:

QUESTION: Are the 2 types of parking tickets different?  How do we know if a person was charged $2 or $3?  Is there a system in place to verify $3 tickets are given to oversized cars?  I want to make sure $3 wasn’t collected, patron given $2 ticket, and the difference skimmed.

QUESTION: Parking tickets dropped on September 22nd despite the second highest attendance of the season.  What checks are in place to ensure tickets are given out to paying customers.  The concern is skimming when money was received.  See TH5 attached for parking counts.

QUESTION: Can we see a copy of Julie’s resume?  What prior experience does she have with general ledger accounts, accounts receivable and financial statement preparation?  I do not have a resume for Julie; however, see information from a background check.

QUESTION: Can we see the terms of the bonus?  We would like to know how much each received upon reaching the revenue goals.  The justification is – there was motive to overstate net income.  If the bonus was substantial, then it’s reasonable the likelihood for fraud increases.

The bonus terms are attached (TH9)

General: Ben Hill

QUESTION: Are there audited financial reports we can view?  No audited financial reports are available.

QUESTION: Have external auditors had prior concerns of Mr. Hill’s business practices?  Are there sufficient internal controls?  Are internal controls tested by external auditors? I have no previous audit reports.

QUESTION: Can you tell us the size of Ben Hills bonus?  Has his lifestyle changed? What kind of car did he buy with his bonus?  The reason for this question is also to establish possible motive.  We are trying to determine if there is a reason for him to commit fraud as currently we don’t see any suspicious activity with him.  Bonus information is in the General Journal.

Borja’s Questions:

Following on my initial findings, Prof. Vogt’s answers and my experience in real life, I would say that there are certain items to be concerned about, regarding the construction of the training facility.

The fact that the actual price of the new facilities is already approximately 15% higher than the initial bid brings out a lot of concerns. Especially since the person that approved the bid and approves all change orders is the same one, with no other interaction from other top management. In order to know if these change orders are legitimate

Questions/Requests:

• Has there been any unexpected issue regarding the construction that would bring the price up? None I am aware of.
• Were the blueprints given to the contractor correct? Uncertain, but I assume so.
• Why was not the owner informed of a 15% over cost (~$100k)? It is a significant amount. Are there procedures in place in the company to have extra costs approved by more than one person? No. Phil approves all change orders.
• Could we bring a third party for an independent appraisal of the extra costs incurred? See TH13 for an independent construction appraisal.
• I am concerned with Larkin’s bid being deliberately low, and therefore unachievable from day one. If this is the case, is Phil just an incompetent manager or he had a cut in it? I have seen a case like this one in the company I used to work for, and I am concerned about it. This is the reason that, in view of the extra costs, I would like to compare all the offers, and see what prices other competitors brought to the table.

See TH12a for construction bid information

In order to try to find some motive to a possible fraud in the construction of the training facility I would also like to know if either Phil or Larkin Construction are facing any financial difficulties.  This would be good information – how might you find it?

This also may be very tangential, but are there any family relationships between Phil and the Construction company? Not that I am aware of.  How might you find out for sure?  Is this question broad enough?  This also happened in the Company I used to work for, where relatives of Top Management were constantly awarded contracts, thanks to inside information and some pressure exerted from those managers.

Regarding the payroll issue, I really can’t find how any significant fraud could happen. Everyone in payroll actually exists, so nothing there. Could they be lying on any PTO taken, but not actually discounted from whatever PTO time they could have? If that’s the case, I assume it is a very small amount of dollars impacting the P&L.  No known discrepancies exist in payroll.

Equipment Purchases:

The only transaction listed under the equipment account in the GL is a $25,500 in which a piece of equipment was purchased for cash on 6/24 from Farmer’s Supply. Although it is understandable that a baseball team might need a piece of equipment for field/parking lot maintenance etc. however we do not have an invoice, purchase order, or documentation of any kind on this purchase, which is suspicious. Furthermore the company Farmer’s supply seems like it would sell items that were only tangentially related to the operations of a baseball team. For these reasons we would like to take a closer look at the transaction.

Question: What was the piece of machinery purchased on 6/24 from Farmer’s Supply? Please provide purchase order, invoice, proof of purchase, and any other documentation on hand from the TBC (Tallahassee Bean Counters)or Farmer’s supply on the purchase.  Unknown, but nothing suspicious identified.

Question: We would like to confirm that Farmer’s Supply is a legitimate business given the lack of information on the transaction. Please search public records and discover the names of the owners, the primary place of business, and where Farmer’s is incorporated.   This is a legitimate business.

Concessions:

There are several causes for concern in the concessions operating at TBC (Tallahassee Bean Counters). One concern is that Holly (who used to do inventory) noted that she thought that inventory levels looked lower than before Julie took over inventory. Furthermore, our team did an analysis of inventory levels based on purchases and sales, and there were discrepancies between reported inventory levels based on count by Julie and what they should have been based on sales and purchases. Of particular concern is the $19,186.50 worth of concessions inventory spoilage that  was booked throughout the 5 months being investigated – including over $10K booked to September alone. Based on these concerns we would like to take a more detailed look at concessions operations at TBC (Tallahassee Bean Counters). Our concern is that sloppy inventory counts, bookkeeping, or intentional manipulation through spoilage numbers, false sales, or false purchases could be used to 1) steal cash outright 2) post fake revenues 3) hide expenses to increase profit 4) allow and hide inventory theft. We are also concerned that Julie is invovled in counting inventory, ordering/paying for inventory, and bookkeeping.

Question: What are the internal controls and policies surrounding spoilage at TBC (Tallahassee Bean Counters)? Is there anything in the employee handbook or job guidelines for concessions for inventory that dictate procedures for spoilage?  No written procedures that I am aware of – Julie is responsible for concession inventory.

Question: [interview request] – We would like you to interview Julie about concessions inventory. Particularly ask about the significant spoilage in September – did a freezer cease working causing increased spoilage, was there a pest problem that necessitated throwing away inventory?  Julie had nothing to offer in response to questions.

Question: We would like an independent inventory count for all concessions inventory items done ASAP. With the risk of theft and the highly unusual amount of spoilage in September it is our desire to confirm inventory levels independently. Where might you find an independent inventory count for the period for which you are concerned?  Current inventory counts are accurate.

Question: Holly reported doing inventory counts accidently during the transition period while Julie was taking over. In the interest of verifying Julie’s counts we would like our investigator to ask Holly if she kept written records of her inventory counts during the May-September time frame.

Good.  See TH15 for Holly’s concession counts.