Exception to the Rule

Look for the lie that covers the theft!

When the house is winning do all department managers look at their exception reports to see the trouble areas/team members?

For most, my guess is no! Some managers don’t take the time to read the reports, and the ones who do, don’t research and investigate to determine why the information is on the reports. Other managers simply don’t know the reports exist; therefore, making it even more critical to review their area.

The losses that occur in areas outside of gaming are tremendous and mounting. Gaming is regulated; other areas are not. It is easy for theft and fraud to occur in these areas and go undetected for years, resulting in losses of tens and even hundreds of thousands of dollars. A good rule of thumb to use is that five percent of every dollar is lost in retail! I don’t doubt it whatsoever.

Exception reports are just that, reports of exceptions for normal operations, controls, policies or procedures. The reports are normally generated automatically by a computer application or system or can be manually generated by the audit team.

An example of an exception report is a “void report.”

This report lists voids that are performed at a point of sale (POS) in a specific location (bar, restaurant), for a specific department (food and beverage), or for the property as a whole. Such information is invaluable when attempting to detect internal theft. Because voiding a transaction is one method of committing theft at the POS, reviewing such activity can identify team members who are stealing through the use of the void function.

Other examples of exception reports are:

  • No sale report
  • Personal identification number (PIN) change
  • Name change
  • Invalid signatures or insufficient signatures
  • Cash variance reports

An exception should be researched to determine why it occurred.

For example, a retail associate who sells a pack of cigarettes, receives the cash, enters the transaction into the POS, and then voids the transaction may then pocket the cost of the cigarettes. The void(s) will be evident on the exception report and must be investigated and the appropriate response taken.

An astute and engaged manager will normally check the exception reports for his or her department to ensure that the department is operating efficiently and that team members are following the proper policies and procedures, and to look for indicators of theft or fraud. As mentioned previously, a voided transaction is an exception and should be investigated to determine the reason it occurred.

Remember, exceptions occur for a reason.

allowed at all. A void transaction is permissible when, for example, a guest returns a steak because it wasn’t cooked properly, and we want to remove the charge from their bill. The charge for the steak may be removed by voiding that transaction. Or for another example, a player with a players club card can’t remember their PIN and we must change it for them. These are both normal and frequent occurrences at any restaurant or casino.

However, because the ability to void a transaction or change account information must exist for these routine issues, then the ability for a team member to manipulate it for their own use or gain must also exist.

It is a wise manager or supervisor who monitors and reviews their department exceptions and key performance indicators. It is there that we will normally find the precursors or other indicators that will expose a developing or existing theft or fraud. In my experience, there is almost always some type of exception or other violation of a policy or procedure involved in every scam, theft or fraud. In fact, due to the propensity for thieves and fraudsters to steal as much as they can in as many ways as they can get away with, you can often find other exceptions and violations that indicate a fraud that you weren’t even looking for or aware of!

Remember, look for the lie that covers the theft! The lie is usually in the exceptions or violations!

Key Takeaways

  • Department supervisors and managers should review exception reports daily, as well as investigate why a violation of a control or procedure occurred.
  • Develop a daily checklist of key exceptions or performance indicators that should be checked for each department or venue.
  • Hold supervisors and managers accountable for reviewing key information.
  • Train supervisors, managers, audit personnel, and security and surveillance personnel to recognize red flags and tells for theft and fraud. Use outside instructors if necessary, it is that important!
Jennifer Boss 13 Articles