Wednesday, July 3, 2013

Preventative Measures Against Charity Fraud

by Gary Snyder

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.

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 TheExpress-Times and the changes that have been made to prevent future problems and to rebuild public trust. 

To their credit, this is what they did to make sure that it doesn't happen again:
  • they revamped its board to include 14 voting members;
  • they 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;
  • they put a ledger and accounting software system in place to help track money; 
  • their daily bank deposits were made with photos taken of the drop bag and deposit information; 
  • at their snack bar, cash register is aligned with the accounting software;
  • the organization's money is counted independently by two different people.
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.
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.

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.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics,, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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