Dealing with financial crimes at your nonprofitNonprofit experts Gary G. Godsey, executive director of the Association of Texas Professional Educators, and Kathryn Engelhardt-Cronk, MissionBox co-founder and CEO, have teamed up to create MissionBox DoubleTake — a column that offers opinions about the peskier aspects of working in the nonprofit sector. The opinions offered here are based on the authors' personal nonprofit experience and may not reflect the opinions of MissionBox, Inc. These opinions should not be considered legal advice or used as a substitute for professional legal consultation. MissionBox readers are invited to submit alternative responses, which may be published here as well.
My nonprofit's bookkeeper has been stealing and I am at a loss on how to handle the fallout.
I’m pulling my hair out in horror! During our recent annual audit, outside accountants discovered that our long-time bookkeeper has been stealing money from our account. She would ask me to sign checks for monthly bills, then destroy one or more of those checks and reissue checks for that amount to herself, using my name stamp. Unbeknownst to me, notices were arriving for bills unpaid, which I thought had been paid, and she hid or destroyed them.
Yesterday, after she was terminated and ushered out of the building, we found her locked drawer stuffed with these delinquent notices, some of which are serious and immediately due. I have called an emergency board meeting, but we just don’t have the money to pay the past due bills and keep operating without financial assistance.
There is also a question of whether we should prosecute this woman. She has no money, and pursuing a criminal case won’t return our stolen funds. I am also very worried about what our donors will think if they find out that some of their donations went out the back door in a theft.
How could this trusted and caring woman have done this to us? I’m sick thinking about her, as well as the situation.
Do you have any suggestions for what we should do? It's an emergency!
Gary says ...
I am dealing with a similar situation right now. Primarily, this is a criminal situation, and must be dealt with as such. You cannot assume anything in situations like this. Report the actions immediately to the proper authorities. One thing you want to be able to do is tell your donors and others that you are doing everything possible to protect their resources.
Most importantly, it sounds like your organization could use some new polices and procedures when it comes to the accounting for and disbursement of funds. I would move expeditiously to find help in creating the policies and procedures, to shore up all deficiencies as soon as possible. Perhaps you could utilize the services of your accountant firm to work with you to make sure the polices are in place to match the types of transactions and business procedures your organization normally conducts daily. I would also urge you to get legal counsel in this situation. Having good advice in this case is worth any money that you may have to pay.
But we must reluctantly admit there will always be dishonest people in the workplace. Stay calm, collected and professional. You are not the first person that has dealt with a situation like this. Shore up your procedures and policies, work with a good accountant and primarily, be open, honest, and transparent with your board and constituents. Ultimately, your nonprofit will be stronger in the future.
Kathryn says ...
First, don’t waste time wondering why your bookkeeper became a thief. It’s a waste of your time and you will clearlyneed your time to clean up the mess she has left. It’s a heartache when an employee you trust damages your nonprofit, and those you serve, in this nefarious manner. That said, grieve later because your job is to support your organization during this challenging time.
To switch topics, this is a criminal act, pure and simple, and your must prosecute. Otherwise, she walks away to do the same deed to another trusting organization. No matter how much you liked her, she’s a scoundrel and needs to pay the price for her appalling and illegal actions.
This situation occurred when I was a CEO and I was told by both law enforcement and our bank that it's an all too-common scenario. They suggested to me that we proceed with a two-signature check writing policy and that I keep my signature stamp locked in my own drawer. If you can afford it, it also helps to have monthly financial reconciliations performed by a third party accountant. And you should include as a key part of your increased vigilance, a written and board approved operations policy that details a higher level of control and transparency on all outgoing funds.
I also suggest that you get legal guidance prior to talking with your board. Depending upon the financial damage, you need their help to either raise funds or arrange for a bank loan for your organization to catch up on your bills and continue operating. Your legal counsel will tell you the best way to proceed within the criminal justice system in reporting and documenting what this bookkeeper has stolen.
Also check your current insurance policies. Your plans may cover some level of theft coverage.
If you are blaming yourself, and I did when it happened to me, please don’t. It sounds as if you were reasonably careful and she just outsmarted you and everyone else. That’s what criminals do. They exploit opportunity to their own ends. Now that you know this can and does happen, it is time to be even more attentive. According to Fox Business News, 64 percent of small business, which includes nonprofits, report employee theft, with 30 percent of those thefts by management level employees.
I also think your donors will stand by you, if you do the right thing and get the organization stable and prosecute the thief. Let donors know in a brief email what has happened and that your board and you are on top of the situation. Some may even be willing to help.
This is an important time to handle yourself and your decisions in a calm, transparent and competent manner — with all your stakeholders. If you don’t, you could lose donors (and the trust of your board) because it may appear you cannot handle a crisis.
Good luck to you and let us know how you manage to weather this storm.