Keeping Your Group’s Money Safe

It is a beautiful winter day—snow is falling, fireplaces are crackling, the air is crisp and clean, and someone is embezzling your group’s money. You could not possibly blame the treasurer who volunteers all their time to keep track of the money, and no one will think of the 20-year volunteer stealing from the group. Could you?

If you are asking yourself why someone would steal from an organization they fervently support, the answer is simple—opportunity or need.

A few years back, The New York Times printed a story about a Pennsylvania youth soccer league treasurer having to stand in front of several thousand children to tell them a story. That story was how he stole $120,000 in membership dues from their league. Was it a crime of passion? Did he experience some personal stressor in his life? No. He admitted there was an opportunity to take the money, and he knew that no one would notice.

Just this year, The Oklahoman reported a case of embezzlement by a small-town librarian. She worked for the town for over 30 years, but she experienced a financial hardship when her husband’s medical bills skyrocketed after being diagnosed with a terminal disease. The librarian’s knowledge of how the library handled money from fines and room rentals allowed her to abscond with over $15,000 in just a few months.

So how do you keep your group’s money safe? Work!

The first thing to do is have a risk assessment of every part of your financial operations to see where the money comes in and where it goes out. When that money comes in, how quickly is it deposited? Who knows exactly how much money was received? Who deposits the money? Who authorizes the expenditure of funds? Who writes the check? Is there a debit card floating around? This process will take time, because you must be honest and non-partial.

Once you know those risky points, you need to figure out how to fix them. You have a policy for who counts collected money and who reports the final tally to leadership. There is a process to make sure deposits are made timely and communicated to those charged with financial oversight. You regularly update the signatories at the bank so only those in charge can legally sign checks while making sure those taking in the money are not the same people authorized to spend the money. Moreover, shred that debit card so it cannot be misused, even if just accidentally.

Once you have your fixes in place, you must continuously review them. Find new holes in the process so you can fix them. The easiest way to find a flaw is by timely reconciling your bank statement every single month. You make sure that every deposit and every expenditure the bank shows are already in your accounting system. When a transaction comes up as missing, you need to investigate immediately. Ask those allowed to handle money at any level why the transaction was not reported. Keep a record of unreported transactions to see if it was just a fluke or if it is a routine occurrence. It will feel like a never-ending cycle, but it will show the world that you are taking the management of your money seriously.

Mid-way through the year, perform an internal audit of all the accounting records for that year. Can someone not in charge of the money match every transaction to proper documentation? Do any transactions seem odd or out of character for the group? Is there a vendor name that is new or odd? These are all questions that should be asked to allow transparency to sparkle.

The one thing that you can always do to protect money is not typically the most comfortable thing in the world—talk about it. Make sure lots of people in the group know how much money there is, how much money comes in, and how much money goes out. Have your bookkeeper show a balance sheet, profit and loss statement, and general ledger each month.

We always hear that knowledge is power. Well, knowledge of your group’s finances and controls is your power to make sure every dollar is accounted correctly. Don’t be afraid to ask questions, perform independent procedural reviews, or request additional financial reports.

If your group needs some help with these tasks, the World Wide Web has you covered. There are many quality sources available to small and medium-sized organizations. Companies like Blue Avocado, Intuit, and AICPA all offer free tools and user-friendly blog posts on internal controls, risk assessment, and basic accounting. If you need more specific help or some one-on-one assistance, contact your state’s accounting board or accounting society. There are also community foundations and non-profit governance organizations in your area that would love to help you achieve your accounting goals.

The more you study the money, the less likely it will appear to be an easy target. Just remember it starts with you—one question, one step, and one goal at a time.

Jeremy has been ringing handbells for over 20 years. He enjoys that handbells have taken him all over the world throughout the years—Walt Disney World, San Diego, Atlanta, New Orleans, London (U.K.), Toronto (Canada), and more. When he is not ringing, he operates an accounting and payroll firm in Oklahoma City. In his spare time, you can typically find Jeremy on stage or in the studio.