Embezzling and stealing– they are the same issue!  Recent newspaper articles address several profit and non profit entities where embezzling was identified by a staff member or volunteer treasurer.   This means the little league booster team, the band parents support group, the Rotary Club, the local Chamber of Commerce, or a school support group,  any and all groups, including businesses that handle money.   In some cases, the amount of money stolen was in excess of $20 Million dollars.

BACKGROUND

How do you prevent this from happening at your organization?  Good internal controls are the key.  One key internal control is that at least 2 different, disparate individuals must sign all checks or authorize any expenditure of organizational funds.  This needs to be somewhat complicated– for a very valid and good reason.  Having 2 people sign any expenditure authorization ensures that a proper “check and balance” system is in place to prevent stealing and embezzling.

To obviate the challenge, some individuals allow the use of a “signature stamp” to be used to sign the check or other financial document.  We strongly recommend against this.  Expending money, be it a non-profit group or a profit making enterprise should be hard to do.  In that way, at least there is constant oversight of all funds expenditures.

A non profit executive director was caught embezzling over $5,500 for repair of a home air conditioning system.  When caught, the board president made a motion for the board to immediately terminate the director.  Sadly, the board of directors did not support the president in this action.  The money eventually got paid back, the executive director continued working at the non-profit entity for 3 more years and then retired.  No legal action was taken against the individual.

Many non profit organizations as well as profit making enterprises never elect to seek legal action against an employee who has been caught stealing from the firm.  The reasons are many– however, in the non profit sector, the lack of confidence in the organizational management and trust of the board of directors is usually the primary reason.  In profit making  enterprises, the  amount of negative publicity the firm receives is usually not what a company desires.  A corollary concern is that future customers and clients may question the management of the company.

OUR ADVICE

We always suggest strong, legal action, no matter how small the amount is that has been identified as having been stolen or embezzled.  The short term negative publicity that is garnered is  overcome by everyone knowing that your firm or organization will not tolerate thefts.

Establishing strong internal controls, a 2 person check/expenditure approval policy and frequent, timely reviews of all financial documents are paramount to ensuring that the company does not encounter a nasty surprise with lack of funds or more significantly, loss of substantial operating capital.