Thursday, February 14, 2008

YM and OPM

In my early 20s I worked at a bank. I began in the mail room, but ended up working in a variety of positions, including teller, vault teller, and branch operations manager. As a vault teller, I worked in a room enclosed with what was supposed to be bullet-proof glass. I was surrounded by hundreds of thousands of dollars in actual currency.

An acquaintance once asked if I was ever tempted to pocket any of that money. I was shocked at this suggestion. Such a thought had never crossed my mind. Besides, I explained, I had to account for every penny of the money twice daily.

A few days later, I mentioned this conversation to my branch manager. He said, “You have learned a very important lesson early in your life that many people never learn: the difference between YM and OPM.” I queried, “YM and OPM?” “Yes,” he replied, “your money and other people’s money. Some people never understand this and it causes them and others problems throughout their lives.”

I have come to understand that my branch manager’s comment about YM and OPM is a very important principle that can be applied to finances at every level.

One of the sorriest sights I ever saw was when a guy working in the accounting department was caught embezzling. He was a young guy with a wife and little kids. He managed something called the over-and-short fund. Tellers that do lots of cash transactions daily often make minor mistakes. So when they balance out at the end of their shift, they sometimes end up with a little bit more or a little bit less than their registers say they should have. In fact it is rare for tellers to balance out to the penny. The difference goes into or comes out of the over-and-short fund.

When I worked at the bank, differences under a dollar were pretty much expected. Larger differences, particularly amounts in excess of $10 were a concern. The computer tracked patterns. It was generally expected that a teller’s overages and shortages would more or less balance out during a month or two. If a teller was consistently short, surveillance was begun to see if the teller was pocketing money. More than once I saw a teller let go for what amounted to petty embezzlement.

The young guy in the accounting department had come into his job behind a highly trusted career employee. The old guy was known to be as honest as the day was long. He had managed the fund for decades, from the time the bank was a tiny concern. There was never any thought of implementing appropriate modern audit controls on the fund. When the younger guy took it over, he was taught to do the way the older guy had always done it.

A couple of years after the young accountant began managing the over-and-short fund, the bank went through a major modernization from top to bottom. A consultant team was brought in to revamp all processes. They implemented appropriate audit controls at all levels. Of course, this meant that each process required a baseline audit. The audit of the over-and-short fund seemed to go OK. The auditors left. Then the police showed up. We watched as police officers walked the young accountant out of the bank in handcuffs. He was later sentenced to 10 years in prison and his wife divorced him.

It turned out that this guy had slowly siphoned off relatively small amounts of money from the fund over a couple of years, but the total amounted to quite a large sum. The strange thing was that for all of the money the embezzler had stolen over the previous couple of years, he had basically nothing to show for it. His home was a little run-down dump. He drove a run-down old beater car. He dressed in beat-up suits. He had no money in the bank. It wasn’t like the family had experienced major medical expenses. He didn’t even have any fancy electronics. It was difficult to figure out where all the money had gone.

A simple understanding of the difference between his own money and other people’s money would have saved this young accountant a lifetime of problems and misery. Everyone should develop a healthy understanding of the difference between their own money and other people’s money. This is particularly a good trait to look for when choosing political leaders.

Next segment in this series: Repo Man

Previous posts in this series:
Money Attitudes

1 comment:

David said...

I had the same question you asked "What's YM and OPM?" after your post yesterday.

After reading this, I have to agree that knowing what they are and knowing the difference is very important for everyone.