We’ve all seen the stories on the news: a trusted community member, parent, and friend caught stealing funds from a local organization or business. The actions of this individual have left their local community reeling. How did this happen—we believed this person was trustworthy?
While shocking, the reality is that embezzlement—the official term for this kind of theft—occurs all too often in small and medium-sized community organizations like youth sports teams, parent-teacher associations, neighborhood associations, and religious groups. Whether you’re a parent of a child paying dues to a local sports team or a community leader looking to protect your local organization, it’s important to know what to look for to prevent theft.
The Warning Signs
Often times, smaller organizations rely on the work of dedicated volunteers to provide operational support. Medium-sized organizations and small businesses may have paid staff members, but many times these employees might have a second job or other commitments. Because these volunteers and employees work hard for little or no compensation, managers or leaders may be reticent to ask about their methods or process for fear of upsetting or offending the person in question. Regardless of organizational structure or personal concerns, it’s important to know the possible warning signs of theft. They include:
- An employee or volunteer who has a lifestyle well above their means
- Drug and alcohol abuse
- Evidence of compulsive gambling, persistent borrowing or bad check writing
- A strong objection to organizational changes or oversight, especially where finances are concerned
- A preference for working alone or refusal to provide documents in a timely manner when asked
If a staff member or volunteer within your organization displays one or more of these signs, it’s important for leaders to begin to document concerns and ask for access to important financial documents. Remember that accusations without documented concrete evidence can result in further legal problems for your organization. If you think you may have been a victim of theft, seek the advice of law enforcement and legal counsel.
Even if your organization or business has not been impacted by a serious breach of trust like embezzlement, it’s important to create safeguards to protect your funds and personal information for the future. Too often, small organizations take a casual approach to record-keeping and structure which can be a breeding ground for problems. Here are some inexpensive ways that your organization can combat theft:
- Provide oversight – Many small organizations have their resources stretched thin. It can be difficult for a community group to find those willing to take on the extra work and responsibility required to provide oversight of both volunteers and staff, but it is extremely important that safeguards are put in place to prevent theft. This includes written designated roles for leadership, board members, staff, and volunteers. If possible, the descriptions for those in leadership positions—especially those who might handle money—should have clearly-written procedures for oversight and review. For example, the Treasurer should be required to provide monthly cash flow reports to the Vice President, or the person responsible for collecting money for t-shirts is required to provide the cash to the President for review prior to deposit. Having a system for review that involves multiple parties can help.
- Avoid cash when possible – It’s easy for someone to walk away with cash if they choose to do so. There are lots of non-cash options available for payment that can put money directly into a selected bank account. Options like PayPal, Venmo, and Square put the power to process payments electronically, making it harder for cash to just walk away.
- Document and scan receipts – If your organization has lots of money going out, make sure you are collecting receipts, scanning them for the future, and keeping a record of the transactions. Programs like Quickbooks and Quicken offer this service with their accounting software, but free scanner apps are available for phones, too.
- Share account information – If possible, more than one person should be able to access the online banking account for your organization or have authority to request information from the bank. Giving only one individual sole control over your organization’s finances is not only a tall order for just one person—it’s also a risk that your organization shouldn’t take.
Seek help from a trusted professional – whether you’re taking the reins of an established organization that historically has not kept good records or you’re starting a new entity, club, or group, take the time to seek out advice from a professional who can help you get organized. Jemma Financial offers a full range of services that
can help put your organization on the path to financial success, including online workshops and information about safeguards and best practices. Learn more at www.JemmaFinancial.com.
We often like to think the best of others and their intentions—especially our neighbors and community members. However, theft and embezzlement are a big problem that can cripple an organization and plant the seeds of distrust in a community. Whether you’re a community leader, coach, parent, or patron, it’s important to stay alert and engaged to make sure your organization isn’t the next victim of embezzlement.
Securities offered through M.S. Howells & Co., Member FINRA/SIPC. Advisory services offered through Jemma Investment Advisors, LLC, a registered investment advisor. M.S. Howells & Co. and Jemma Investment Advisors, LLC are not affiliated.