What controls stop asset-disposal fraud?

Why disposal attracts it

An asset recorded as scrapped is an asset nobody will ever look for. That is the entire appeal, and it is why non-cash misappropriation — the theft of equipment and inventory rather than money — features in 22% of occupational fraud cases, at a median loss of $66,000 and a median of twelve months before anyone detects it.

Twelve months is the number to sit with. It is not that the scheme is sophisticated. It is that nothing in the process was ever going to catch it.

The three-way split

Authorise, execute, record. Three roles, three people. The person who sells the asset never posts the entry, and the proceeds are handled by someone other than the seller.

Collapse any two of those into one pair of hands and you have built the scheme yourself, in your own policy: sold it, pocketed the proceeds, marked it scrapped. Every other control is decoration if this one is missing.

And the two traps that look like ordinary business

Segregation of duties stops the crude version. These three are how the same theft arrives dressed as routine paperwork:

• Below net book value. Staff buying disposed assets at undervalue is among the oldest schemes there is. Open bidding or an independent valuation defuses it; a discretionary approval does not.
• Related parties. Any purchaser connected to the organisation needs elevated approval and documented justification, whatever the amount.
• Trade-ins — the stealth gap. The old asset leaves inside a procurement transaction, so no disposal record is ever raised and nobody notices, because all the paperwork is about the new asset. Policy has to force a disposal record on every trade-in, or the register quietly keeps the ghost.

Terms

• Segregation of Duties (SoD)