Protecting Against Theft

Imagine working hard to raise money for your organization to then meet a goal, go to buy equipment or supplies and all the money is… gone. The unfortunate truth is that the people who cause the most loss for organizations are internal members, most often treasurers or leaders with access to funds. Why? This usually happens because tight and rigorous measures are not put into place. We want to trust our team members, but when internal audits, safety measures, and regular check-ups are not in place, it becomes very easy for people to fall on hard times. They may feel they can “borrow” money, usually with intentions to replace it, but become addicted to the lack of checks and balances. It can cause a spiral, sometimes accumulating in losses into the hundreds of thousands of dollars. 

How do we avoid this? We will look at some procedural best practices here, but it is best for you to go back to your organization and make sure there is a tight and specific process in place listed in your by-laws or another official procedural manual. 

• No one person should have control over any account. Business accounts, even for non-profits, should be controlled by multiple authorized signers who are either voted on or chosen by a collective group. 

• All authorized signers should get copies of the statements and activity in any bank account or loan the organization may have. If possible, printed statements from the bank are ideal as they are harder to tamper with. 

• When writing a check, there should be a need for multiple signatures on that check, or at the very least there should be a sign-off process for all authorized signers. This could look like a receipt or log that is signed when a payment or a purchase is made. 

• Internal Audits can be even more crucial to an organization than external audits. Internal members or signers understand the organization better and will know what expenses should be paid or what items should be purchased. For example, an external auditor may not see anything wrong with an organization purchasing 5 laptops, but if an internal auditor sees that and knows no new laptops have entered rotation, there’s a red flag thrown sooner. 

• A board or an executive team should be assessing the financial situation at every meeting (typically monthly). When the treasurer presents financial documents, logs, or details what money was spent and on what, it allows everyone on the board to understand where money is going, see where it was spent, or make decisions on how it needs to be spent. It allows for accountability and full transparency. These documents should have a standardization that will assist the reviewers in spotting any tampering. 

• Whenever cash is involved, dual control of that cash should be a priority. Collecting cash at a fundraising event? One person should not be left in charge of the cash. It should be in the presence of two people and counted by two people before being put into a secure bag or envelope. Both people signing off on that envelope or count will ensure accountability. 

• Know your budget for the year. Have line items for major expenses. Know monthly expenses and have a committee approve when any changes need to be made. The board should approve the budget and any changes should go through that board or committee as well. 

Unfortunately, a lot of times these situations include people working together. That is why having a board or a committee that includes checks and balances and procedures that are clearly in place will allow for full transparency and will ensure every money move is accounted for. It isn’t a bad idea for the treasurer to be turned over from time to time as well. Maybe they can only serve for a year to three years. This will help ensure that no one has control or the ability to access the money for long periods of time while flying under the radar. It is very hard to recover money once it is gone. Even if the people are caught and charges are pressed, they may not have enough assets or ownership of items to ever really recover losses incurred. Don’t let this happen to you. Sit down with a committee and plan out a very specific and clear money management document, including logs for transactions and clear instructions for authorized signers and budgeting. The extra time spent will be money saved. 

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For more on this topic, listen to this episode of The McNeil Podcast, Are Your Money & Assets Safe?