Tuesday, June 4, 2013

Nonprofits can take steps to prevent fraud, theft and embezzlement

FROM http://www.lehighvalleylive.com/ -

When nonprofit groups discover a thief in their midst, it can be tempting to try to keep it secret, handling it in-house to avoid publicity and negative blow back.

But the reality is that word usually gets out, with the truth often getting twisted into something even uglier.

The Bethlehem Steelers Athletic Association -- which serves about 250 children who play football and cheer -- deserves credit for going public with its internal theft problem and pursuing criminal charges against the alleged perpetrator.

Bradley H. Scheetz, its former president, stands accused of stealing more than $34,000 from the youth sports organization between October 2011 and April 2012.

Recently, the group shared with The Express-Times and lehighvalleylive.com the changes that have been made to prevent future problems and to rebuild public trust. Dave Crim, the new president, said the group will continue making changes to continue improving.

So far, the Steelers group has revamped its board to include 14 voting members and has developed new bylaws and a new organizational structure. Two people -- the president and treasurer -- now have keys to the group’s post office box and the Steelers now have a land address. In the past, only the president had a key to the post office box.

Other changes include: A ledger and accounting software to help track money; daily bank deposits with photos taken of the drop bag and deposit information; a snack bar cash register that aligns with the accounting software and money counted independently by two different people.

The experts say theft, fraud and embezzlement can happen to any nonprofit group -- large or small.

Betsy Landers, president of the National Parent Teacher Association, says theft, fraud and embezzlement don’t happen often within PTAs, but every theft is troublesome.

Theft, fraud and embezzlement costs U.S. groups more than $400 billion a year and the average organization loses about 6 percent of its total revenue to these crimes. The perpetrator is often someone that others within the organization know, like and trust.

That’s why it’s important to have checks and balances in place -- to protect the organization, its members and the people it serves.

Good internal controls not only help organizations detect these problems early but also could prevent desperate people from acting on impulses to steal from or defraud an organization.

Laura Bay, the secretary-treasurer of the National PTA, says theft and fraud occur when someone has 1) opportunity 2) motivation and 3) rationalization.

Other tips for creating good internal controls are: Open and review bank statements; reconcile bank accounts monthly; verify wire transfers; avoid using debit cards, check cards or credit cards; verify cash received and cash deposited; never take money home; review accounts payable vendor lists with an eye toward suspicious names and addresses; protect checks, including storing them safely and never pre-signing them and prepare budgets.

Board members have a financial responsibility for the organization and shouldn’t be afraid to ask questions when things don’t add up and to continue asking questions until they fully understand financial processes and feel safe with them.

Bay says it’s important for members to report anything suspicious, such as when the profit made in a fundraiser doesn’t seem to add up. Members should never confront anyone directly but should report their suspicions to board members, according to Bay. Board members should then investigate, including calling for an audit or financial review, Bay says.

When an organization is sure money is missing, Bay says, it’s important to contact the police and the group’s insurance company.

Nonprofit groups such as local PTAs and booster groups are invaluable and serve our communities in many ways. It’s important for them to try to protect themselves from theft and other financial abuses and to report problems when they occur.

When they do, they can effectively and efficiently serve their communities and retain the public’s trust

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