Pick up any newspaper today and you can't miss stories about the current economic difficulties facing everyone. These articles, many packed with doom and gloom, may be found on the front pages. But keep reading and chances are somewhere on page six or seven, you may see a story about a not-for-profit organization that has had a theft of funds. Whether it is a bowling league, community service organization, school program or emergency service provider, the stories all read about the same. "We never expected this could happen to us….That was our most trusted member….Why would they take our money?" The scenarios are often alike as well. The person has been a long-time and respected member who could never be suspected of such a thing.
The average people who steal money from organizations don't set out to steal, but to simply "borrow" the money and have all intentions to repay the "loan." However, as time goes by, they are not able to replace the money and since no one had noticed that it was gone, they feel that maybe they could take some more, still with the thought to repay it. At this point, they rely on time and unmonitored access for the continuation of the theft. Eventually, they have taken so much money that repayment is no longer an option. By then, however, bills may not have been paid or worse, legal actions may have begun against the organization.
Theft of funds from non-profit and service organizations is a problem that is growing throughout the nation today, and emergency service providers are not immune. Unfortunately, one of the main reasons such organizations are prime targets for theft is that they may feel that a strict application of loss-prevention procedures indicates mistrust of the treasurer or financial manager who is a volunteer and trusted member. However, sound loss-control procedures are simply good business sense and should not be taken as an indication that the person handling the funds is not trustworthy.
The first and most important step is to develop policies and procedures for financial integrity and accountability. These procedures must be clear, concise, practical, and within the bounds of the laws of your state and municipality. They must clearly spell out the responsibilities for each person whose job entails the receiving or disbursing of funds. This policy should also specifically relate to documentation, execution and recording of transactions and events.
Specific measures should be followed to reduce the chances of theft:
Conduct regular audits. If you choose to do the audits internally, they should be done quarterly by an audit committee, not an individual. The purpose and responsibilities of the audit committee should be clearly defined in the financial policy. Annual audits should be done by an outside firm. Many accounting firms are willing to provide such services at no cost to emergency service providers as a community service.
Audits should cover incoming funds and disbursements, a review of checks for signatures, payees and endorsements, inspection of bank records, statements and unused checks as well as petty cash receipts. Invoices, registers and bank statements should be used as a complete chain of payables.
- Deposit incoming funds as soon as possible after receipt. All incoming checks should be stamped "For Deposit Only" with the organization's account number as soon as they are received.
- Incoming funds should be received by someone other than the treasurer and recorded before being turned over. Deposit procedures should be specific, including precise direction as which accounts receive incoming funds.
- Minimize the number of accounts the organization has open. Numerous accounts and complex bookkeeping make auditing difficult, confusing and time consuming. This often leads to fewer and missed audits or "shortcut audits," which defeats their purpose.
- Pre-print checks with the organization's name and address and pre-numbered. They also should have an expiration date. There must be an accounting for all unused checks and they must be safeguarded.
- Checks should never be made payable to "Cash" or "Bearer." Voided checks should be clearly marked "VOID" and retained. Checks should never be pre- or post-dated.
- All checks should require a counter signature. At least two signatures should be required on all checks. Rubber stamps and pre-signing of checks should be prohibited.
- The person responsible for fiscal management must provide a report at each regular meeting of the membership. This report should include all income and disbursements since the previous meeting as well as current balances and the status of each account. If this person cannot attend the meeting, a written report should be made available.
- Have bank statements sent to someone other than the treasurer or check issuer. This person should immediately review the statement and checks for any irregularities.
- The organization should consult with its insurance provider to be certain that it has the proper safeguards should a theft occur. The types of bonds as well as the limits are different and your insurance professional should review your situation to see that the coverage you have fits the organization's needs and requirements.
- Electronic banking should be prohibited. The ease such banking provides also makes it susceptible to theft of funds. In addition, the threat of cyber-theft is added.
BILL TRICARICO, director of Loss Control Services for Emergency Services Insurance Program, has over 25 years experience as a firefighter/EMT with the North Bellmore, NY, Fire Department, holding many positions, including chief. Currently, he is fire commissioner for the City of Cortland, NY. Tricarico also was treasurer of North Bellmore Engine & Rescue Company 2 for 14 years and has worked as a risk-management consultant in the insurance industry for over 35 years. He also serves on two NFPA Technical Committees. He may be contacted at firstname.lastname@example.org.