It always saddens me when I read stories about nonprofit employees arrested for embezzlement. Such incidents diminish the reputation of the agencies and in some cases can delay delivery of services to families in crisis.
With most nonprofits struggling to survive, government grants being scarcer these days, and donors and funders reluctant to donate to administrative costs, it's not surprising that financial departments are shrinking. In some cases, nonprofits can only afford to hire one finance officer for the entire operation.
But that's still no excuse for lack of vigilance.
Executive directors today are in a bind. Too many of them are writing grant proposals, raising money, hiring new employees, firing employees, writing funder reports, overseeing events, managing programs and ordering pens and toner and stamps.
This is why a strong of board of directors is necessary. Too often, board members are pressured into becoming a treasurer as long as no extra work is involved. Yes, there are board members who review financial reports with the finance officer, but in my experience, this practice is rare.
As a result, some unscrupulous employees take advantage of the lack of oversight and write too many checks to themselves. When they are finally arrested, a nonprofit's image is often diminished and donations drop.
While nonprofits carry insurance to recover stolen funds, in the interim, their public image is tarnished — something no agency can afford.
If you are on a nonprofit's board of directors, there are several actions you can take:
At your next board meeting, ask your executive director about the agency's check approval process.
Make certain that the board treasurer meets monthly with the finance officer and reviews all spreadsheets.
Ask your board treasurer to give the finance reports at board meetings.
Institute a policy requiring your nonprofit to show a designated board member a copy of the checkbook or copies of all issued checks on a monthly basis.
Ask all employees to submit a check request detailing the need for the issuance of a check.
Require two signatures on all checks for $500 or more. It would be ideal if one of the signatures could be from a board member. If not, make sure that two senior managers sign the checks and be sure to exclude your finance officer from being one of the signers.
If someone from your organization is caught stealing, reassure your donors.
Call your major donors and explain that the funds will be recovered and a new system of checks and balances is now in place.
Don't hide from the press. Reach out to the media to set straight whatever facts might have been incorrect.
Send a letter or postcard to all of your donors assuring them that you will recover the money stolen and explain what steps you're taking to prevent this type of crime from re-occurring.
If you are a donor, consider supporting the administrative costs for nonprofits. Too many government agencies and foundations place unrealistic limits on funding that can be allocated to paying senior staff members. So give nonprofits what they need, your full support.
Frances Caballo is the owner of ACT Communications in Santa Rosa and serves writers, businesses and nonprofits.
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