From the Ohio Society of CPAs comes this warning:
Small nonprofits ripe for embezzlement
They’re often diligent, caring workers, and yet tempted by seemingly easy cash.
Working on the inside, thieves can hit school groups, athletic leagues and churches, especially when they’re surrounded by trusting colleagues and loose security.
And according to one expert, because of the disgrace and embarrassment that the crime brings an organization, their transgressions often are not reported.
The median loss to fraud for religious, charitable and social-service organizations was $106,000 last year, according to an annual survey by the Association of Certified Fraud Examiners. “We estimate that organizations lose about 7% of their net worth to fraud each year,” said Scott Patterson, the association’s spokesman.
“There are so many people doing the good work that nobody steps back to say, ‘Should we begin looking at ourselves. We’ve grown. We better put some checks and balances in,'” said Gary Zeune, a fraud expert whose speakers bureau, “The Pros and Cons,” travels the country. “The only people who can steal you blind are those you trust and who don’t have controls.”
Smaller organizations, such as school parent-teacher organizations, are often vulnerable because neighbors and friends are reluctant to offend by suggesting that dishonesty is possible.
“This is typically mothers stealing from their own kids,” Shaw said. “The kids are the shills out there selling cookie dough or doing the walk-a-thon, and the mothers are stealing it.
“If the board is too embarrassed to have checks or balances, they need to have a new board,” she added. “But if you’re an honest person, you shouldn’t be insulted by having a second set of eyes.”
I’m sad to hear about embezzlement taking place in a homeschool groups, but I know from homeschool leaders that it can and does happen!
How can you prevent embezzlement?
1. Sign up for my newsletter (upper right corner of the website) and receive my report “Best Financial Practices for Homeschool Groups.” If you already belong to my mailing list and still want the report contact me and I’ll send you a copy.
2. Buy Money Management in a Homeschool Organization and read Chapter 9: Fraud: It Couldn’t Happen to Us. I outline some guidelines for groups to avoid embezzlement such as:
- Have a separate checking account in the organization’s name
- Appoint a treasurer
- Have bank statements mailed to the board chair, not the treasurer
- Have the board chair, not the treasurer to sign checks
- Require regular financial reports
- Prepare a budget
Keeping you safe,
Carol Topp, CPA