How to Avoid Sticky Fingers From Stealing Your Organization’s Money

by Marie Palacios

*today's article is in direct response to an email from a nonprofit leader.

EMBEZZLEMENT.

It’s not a popular topic. In fact, many organizations even avoid mentioning the big "E" word when creating policies and procedures because they do not want to insult their close-knit team by even questioning their loyalty and integrity.

No one wants to believe that someone in their circle could possibly steal from the mission. Unfortunately, it happens…and much more often than you can imagine!

According to the Association of Certified Fraud Examiners (ACFE), nonprofits sustain more than $77 billion dollars in fraud-related losses annually.

That’s A LOT of money, and most of those dollars were stolen from small organizations.

In fact, THE 2016 HISCOX Embezzlement Study A report on white collar crime in America reported that "Four of every five victim organizations had fewer than 100 employees; just under half had fewer than 25 employees."

That is a BIG wake up call for small organizations!

It is so important to acknowledge that smaller organizations are often at the greatest risk because funds are managed by a few trusted individuals who have little to no over site from the board of directors.

Once that has been acknowledged, it is time to take action because embezzlement can have catastrophic ramifications for an organization, beyond the initial funds stolen. Victim organizations also struggle to rebuild a trusted team and assure donors that theyare indeed good stewards of all charitable contributions.

Embezzlement directly impacts your organization’s leadership, bank account, credibility in the community, and capacity to fulfill your mission.

To reduce your risks, consider working closely with your board of directors and a local CPA to implement policies and procedures that protect your assets and create accountability for the entire team.

Top 5 Ways to Reduce the RISK of Embezzlement

1.     Know your employees. - Many companies conduct credit reports because they understand that embezzlement is most likely when an employee HAS both the NEED AND OPPORTUNITY to wrongfully access funds. While temptation can't be removed completely, it helps to know what financial challenges your employees face and actively work to reduce the opportunity to give into temptation. Be sure to complete your due diligence when hiring staff and engaging volunteers! (Background checks, credit checks, personal/professional references, etc.)

2.     Establish Key Fiscal Policies that outline how funds are to be received, distributed, acknowledged, and reported. - For example, when possible divide financial roles among staff such as who checks mail, makes deposits, completes bookkeeping, and reports to the board. Monitor cash transactions closely to prevent "skimming." It’s always a great practice to require that 2 or more team members are present to count/record cash collected from events.

3.     Implement Regular Informal Audits. - Make sure employees know that there is a zero-tolerance policy for embezzlement and that systems are in place to safeguard the organization's mission.

4.     Strive for Transparency in the Workplace.- While being sure to balance client privacy, cameras could be installed in key areas. Require that mail is opened, and deposits prepared in view of the camera. Also, provide employees with specific ways to report potential ethical issues anonymously

5.     Consult with a Certified Public Accountant (CPA). - Most CPA's provide clients with a list of recommendations post audit, but many are happy to share resources with you as you work to achieve greater financial transparency and security.

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