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The four women all left the courtroom with mixed emotions that day in March 2018. It was a relief the sentencing was over, and the judge gave the maximum sentence, but it was heartbreaking to hear a crying child as her mother was being taken to jail. They all struggled to believe that someone could be so deceitful, but she had been that deceitful, and she never showed any remorse in the courtroom. As they sat down at the restaurant to eat lunch, Julie began the conversation with, We will never see a cent of that $150,000 she took from us, and they all agreed. At least the judge sentenced her to the maximum allowed, Kim said with a sigh.

The case began nine months earlier when Jackie made a phone call to a professional Certified Management Accountant (CMA) she had known for years. Tina, would you be able to just take a look? I dont think the companys financial statements are correct. I think the CPA firm has made a mistake. Jackie felt that the net income on the financial statements was too high because the company was always short on cash to pay the bills. How can they say we have net income, when we dont have any money? In fact, she had recently pulled money out of her personal 401k plan to loan to J. Murray & Co, LLC, to keep the company going for her daughters sake. Jackie would do anything for her daughters, and they would do anything for her.

J. Murray & Company, LLC, is a privately held LLC that has been in business for over 77 years. The two partners, Julie Bontrager and Kim Price, are sisters. They inherited the business from their father several years ago and have been managing the business full-time. The company is a wholesale tobacco, candy, and novelties distributor in Mt. Pleasant, Mich., that services over 300 local small businesses.

Since it is a family-owned and operated business, Julie and Kim wear many different hats and manage everything from purchasing to customer service. Their mother, Jackie, along with Julies daughter, both work in the office in accounts receivable.

An accountant at the company, Jenifer Jerman, performed many tasks consistent with a business finance professional. Her role involved recording transactions and partnering with management to make financial decisions. This included payroll, accounts payable, processing credit card payments, making bank deposits, helping walk-in customers, and recording all cash transactions, both payments and receipts in the companys accounting software called Peachtree.

She also prepared the bank reconciliations and kept track of the cash budget in an Excel spreadsheet. Julie and Kim relied heavily on Jenifers work with the Excel spreadsheet to make decisions on how much product they could order and what bills they could pay. Since cash flow had been low, and they did not want to bounce any checks, they made sure this spreadsheet balanced to their bank balance on a regular basis.

The accountant also gave all the financial transactions and payroll records from Peachtree to a local CPA firm that then prepared reviewed financial statements from these records, quarterly payroll tax returns, and the annual federal income tax return.

Jenifer was not family, but they had treated her as if she was. Jenifer worked at J. Murray & Co, LLC, for six years, and although occasionally there was some turmoil and stress in the office, everyone trusted her. She became a best friend to Kim, and Jackie treated her like a third daughter. Jenifer also had a family of her own, including three children of her own and two step children.

The main office at J. Murray & Company, LLC, consists of a small room where all five employees worked: Julie, Kim, Jackie, Jenifer, and Julies daughter. For the most part, there were no walls or cubicles to separate them, so there was very little privacy. They worked very closely together both physical and professionally.

Tina, a practicing CMA, agreed to review J Murrays financials. She requested a balance sheet, income statement, the prior years tax return, and a current bank reconciliation. One look at the most recent bank reconciliation from Peachtree, and Tina knew something was wrong. The reconciliation, which should show $0 unreconciled differences, showed over $200,000 as an unreconciled difference. Tinas initial thought was that it was just human error, so she told Jenifer they would need to figure it out and correct it. Tina offered to come back in a few weeks to work on it, but then Jenifer quit.

When Tina returned and began to investigate the unreconciled difference, she compared the latest bank statement and bank reconciliation with the transactions in Peachtree. It was immediately clear that checks cleared the bank but not recorded in Peachtree. She requested to see copies of the cleared checks for that month and found that they were made out to Jenifer.

Tina immediately talked to Julie and said, I think you have an embezzlement. They both agreed to look at the next prior month to make sure, and again checks cleared the bank made out to Jenifer Jerman that were not recorded in Peachtree. When they told Kim, she was so shocked that she did not believe it for a couple of days. Are you sure? Can you double check again? How could her best friend steal from her?

The local police were contacted, and statements were made by Julie, Kim, Jackie, and Tina. Tina began to perform the forensic accounting work that first involved preparing new bank reconciliations for each month for the last five years and tracking transactions throughout the financial statements. The Peachtree system was backed up and a copy was saved as evidence. The audit function of the Peachtree software was reviewed, and it was found that hundreds of transactions had been deleted. Upon further investigation, the deleted items from Peachtree were the extra payroll checks that were cashed by Jenifer. The forensic work also involved comparing Kims signature to the signature on those checks. It appeared Jenifer forged the Kim Prices signature.

Tina concluded that Jenifer had entered additional fictitious payroll hours to herself in Peachtree, printed payroll checks in her name, and then deleted the payroll records and the checks from Peachtree so that no record of them remained. She then forged Kim Prices signature on those checks and cashed them.

Jenifer covered up her embezzlement by making it appear as though she had performed a bank reconciliation, but she left unreconciled differences. She also covered up her embezzled checks on the Excel spreadsheet by entering different employees names for the checks that she had printed and cashed herself. This is the same Excel spreadsheet that Julie and Kim relied on for cash management, the one that did tie to the bank balance.

As a result of the investigation, Tinas written statement to police included the following: It appears that Jenifer Jerman prepared extra payroll checks to herself, printed them, signed them as Kim Price, cashed them, and deleted those transactions out of Peachtree so that no one would know they were ever printed. These checks ranged in dollar amount from $220.48 to $420.85. She prepared up to 12 extra checks per month to herself. In a span of four years, Jenifer printed and cashed approximately 480 embezzled checks totaling $148,338.87. Jenifer was paying herself more than the salary amount of each owner.

When called in and questioned by police, Jenifer admitted on video to the embezzlement. She was arrested in July 2017 but posted bail and only spent a couple of hours in the county jail. Tina worked with the prosecuting attorney to help determine all the crimes that were committed and the resulting damages. Jenifer was charged in September 2017 with one felony count of embezzlement of $100,000 or more and with one felony count of forgery. She pled no contest in January 2018 and was sentenced on March 22, 2018.

Kim said, Now I understand how she could afford all the stuff she always bought for her kids and herself. We actually paid for all those cell phones, braces, and pedicures!

Jenifer manipulated both the financial records and her coworkers. She built up their trust and lied to their faces every day. While employed at J Murray?, Jenifer became Kims best friend and participated in their parties, took food to their homes, and shared stories about their kids. They completely trusted her.

In 2014, well before the discovery of the embezzlement, Julie became extremely ill and was not expected to live. She lapsed into a coma and was placed on life support. During this time, Kim depended immensely on the staff at J Murray, especially Jenifer, to keep the business running.

Unfortunately, everyone now realizes that this dependence and trust gave Jenifer more opportunity. Kim and Julie thought Jenifer had stepped up to the plate and was helping run the business in their absence, when in reality she had decided to accelerate her embezzlement by writing more checks to herself. After many months in the hospital, Julie recovered and was released to come home under the care of numerous therapists.

Shockingly, Jenifer printed all those extra checks on a printer they shared in the one-room office. How could this have happened? Why did Kim and Julie not realize so many checks were missing? Why didnt the outside CPA firm realize the cash balance was not correct on the balance sheet?

In court, her attorney indicated that Jenifer had been undergoing psychiatric treatment for a long time due to the anxiety of committing the embezzlement, and yet she continued to embezzle. It came to light that she was manipulating her husband as well who was the 911 dispatch director in the county that serves under the local police department. When interviewed by a fellow police officer, he said he did not know anything about her taking the money. Why did he not realize she was spending three times as much money as she was supposed to be earning?

Julie, Kim, and Jackie were given the opportunity to give their victims statements to the judge at the sentencing proceedings. They each told how the embezzlement hurt their business and their families, as well as the families of their employees. They told the judge that she was like family. I would have done anything for her, her family, and her kids. Kim expressed, My hope is that her sentence sets an example and is a deterrent to her in the future and for many others who may try this type of behavior.

Before giving his sentence, the judge said, What the defendant did in this matter was calculated. It was deceitmanipulative. This is someone that purposefully, intentionally, and deceitfully created a system to take money for her own. He also said, Jenifers sentence memorandum indicates that some of this could have been brought on by the financial toll of her husbands bankruptcy filing, but he explained that bankruptcy filing was not an excuse to steal. He continued to communicate his disgust by saying, The fact that the owner was sick, and she stepped up her activity. The fact that she knowingly allowed the owners mother to loan the company $140,000 to keep it afloat while she took money and continued to take money. Its just beyond imagination.

In Jermans sentence memorandum, it also stated that, Ms. Jermans priority became helping her family to live the life that she believed they deserved. The judge responded to that by saying, That struck me as unbelievable...to live the life that her family deserved, above and beyond their means after filing bankruptcy and at the expense of the victims. She decided that she and her family deserved to live a better lifestyle. Thats just appalling to me.

The judge sentenced her to the maximum amount he could, which was 30 months to 20 years for one count of embezzlement of $100,000 or more and 30 months to 14 years on a forgery charge. Her earliest parole release would be September 20, 2020. She was also ordered to pay restitution of more than $175,103.71, which will go directly to the victims in the case as well as an insurance company.

His final words directed to Jenifer were, The collateral effects of the defendants actions in the matter are huge. I feel sorry for her children. I feel sorry for her husband. I empathize with the victims in this matter. Its? not just the owners of the business, its the other employees, its the vendors, and its the customers of a 77-year-old business that questioned whether they should go back there. The collateral effects of your actions are massive. So, I find that the sentence is definitely proportionate to the seriousness of the matter.

The lunch the four women shared after the sentencing marked a new beginning for J. Murray & Company, LLC. Although everyone has now learned first-hand how important accounting internal controls are, it is still difficult to implement and maintain them in a small business. Kim and Julie are always on high alert for embezzlement. They realize that they must keep business and personal relationships separate, and trust is not something they can depend on when it comes to running their business.

Kim and Julie recognize they need to hire an accountant to help them with their finance and accounting needs. They have retained your consulting team to advise them on hiring a new management accountant. Before you begin the hiring process, you should look at the six domains of the IMA Management Accounting Competency Framework. What specific competencies in this framework would benefit J. Murray & Company, LLC, the most?

After reading the case answer the following questions. Make sure that you discuss your answers thoroughly

Kim and Julie recognize they need to hire an accountant to help them with their finance and accounting needs. They have retained your consulting team to advise them on hiring a new management accountant. Before you begin the hiring process, you should look at the six domains of the IMA Management Accounting Competency Framework. What specific competencies in this framework would benefit J. Murray & Company, LLC, the most? Use the following table to provide your answer.