Nonprofit Embezzlement Cases
Employee embezzlement can occur in many different ways. Sometimes, it’s as basic as using a company credit card for personal shopping; while in other cases, it involves complicated check forging schemes that cost an organization substantial amounts of money.
The following nonprofit embezzlement cases are just a few examples of the types of embezzlement out there, which is why partnering with an experienced business accountant is so critical.
● The chief financial officer of the Capital Area United Way in Michigan was found guilty of embezzling close to $2 million by writing fraudulent checks to herself and forging signatures from supervisors. The fraud went unnoticed until the trail of missing checks was seen by the new CFO, after the former one resigned from her position.
● A former employee, who handled the finances of a West Virginia nonprofit that helps elderly and mentally ill people, pleaded guilty to charging more than $200,000 to an American Express account and making deposits to her private bank accounts.
● The program administrator of a Washington D.C. organization for science education pleaded guilty to embezzling over $200,000 that was designated for public schools.
These are just a few of the many nonprofit embezzlement cases that end up in courtrooms around the country. Often, when a nonprofit organization is the victim of embezzlement, the perpetrator is a person you would not expect. At the same time, there are warning signs you should look for and steps you can take to reduce risk.
Here are steps you or your business accountant can take to prevent your organization from becoming embroiled in one of these cases:
1. Be Watchful for Red Flags
According to the Association of Certified Fraud Examiners, it takes around a year and a half, on average, to discover workplace fraud. Critical observation is one of the most effective management tools in preventing embezzlement, as you may be able to recognize behavioral warning signs that allow you to detect fraud and take action in its early stages, before you are forced to spend even more money on nonprofit embezzlement cases.
Some common characteristics sometimes displayed by those who embezzle include:
● Abrupt work schedule changes
● Choosing not to go on vacations
● Sudden shifts in lifestyle, such as purchasing a bigger home or a more expensive vehicle
● Struggles with drug abuse, alcoholism, or gambling
Individually, these behavioral changes may be explainable, but make sure you take notice if they occur alongside other financial abnormalities. An experienced business accountant can help you to recognize common signs of fraud more effectively.
2. Solicit Employee Feedback
As shown by numerous nonprofit embezzlement cases, embezzlement frequently occurs when a person is given both a motive and an opportunity. For example, a person in charge of an organization’s finances may be disgruntled with their work environment, or they may be experiencing financial hardships. In many cases, other employees hear about these motives first-hand, which is why it’s important to provide channels for reporting suspicious activities.
One of the most economical and effective internal controls is providing an anonymous hotline that allows staff to report suspicious activities. The Association of Certified Fraud Examiners discovered that organizations with an employee hotline were able to detect fraud nine months earlier, on average, compared to companies that did not have a reporting system.
With an employee hotline in place, it’s possible to look into concerns discreetly without confronting innocent employees. If a business accountant finds that the individual is innocent, the person in question may not have to know that an investigation occurred. This is vital, as false accusations can lead to legal actions, including charges of discrimination. Many nonprofit embezzlement cases would not have become nearly as serious if there had been preventative measures in place from the start.
3. Proactively Prevent the Problem
The best strategies for preventing embezzlement differ depending on the business operation, but most organizations can implement four tactics to help stop embezzlement before it starts:
● Pass receipts and disbursements through a secure business checking account
● Create separation of financial duties among employees
● Review financial statements regularly and thoroughly
● Have an unrelated third party audit the books
Practically all nonprofit embezzlement cases begin as crimes of opportunity. Taking these simple steps removes the opportunity in situations where it commonly exists. Better yet, they don’t cost much, considering how much they could save an organization in embezzled funds.
A Forensic Accountant Can Help
When it comes to fraud in the workplace, it’s best to err on the side of caution. After all, detecting embezzlement early can save your organization a significant amount of money, time, and resources, especially because paper trails can become increasingly complicated and difficult to trace over time. Look at any number of nonprofit embezzlement cases, and you’ll see what a struggle it can be to investigate long-term fraud.
A forensic business accountant is a powerful ally that can help you determine if fraudulent financial activity may be occurring at your organization. As the old adage says, an ounce of prevention is worth a pound of cure. Contact us today to learn more.