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Charities that let people steal from them

May 18, 2017

Hardly a week goes by that I do not read about a theft, fraud, misappropriation, defalcation or egregious wasteful spending at some charitable organization. Some are perpetuated over many years – perhaps as many as seven years.

Lack of controls, oversight, disinterest, or lackadaisical care creates an atmosphere where an already weak person can spot an opportunity or perhaps an uncaught or unguarded careless mistake gives birth to a pattern of ongoing criminal action by someone that never had an unlawful thought.

Who is to blame? Management, the Board of Directors, large donors and any other stakeholder involved with the organization. Thieves spot areas where there is a lack of accountability or managers without an understanding of the financial information that is provided or should be provided on a regular basis.

Establishing and implementing controls is not that difficult. Wasteful spending and stealing appears on financial statements in categories of expenses that are out of sync with what they should be or larger than usual. It just needs the recipients to look at what they get and question illogical, unexpected or unexplained amounts that stick out as not being typical. Balance sheet changes should also be reviewed regularly with reasons for differences clearly understood. Part of a sound system is quick and reasonably accurate financial statements and supporting documentation that are reviewed by those in charge or involved stakeholders including substantial supporters.

There are generic controls that can be implemented, if not already in place. Further, almost every organization has its peculiarities requiring special attention and controls should be adapted for this. Establishing many of these controls is not costly and can usually be done quickly.

However, in my opinion, a major impediment to effective controls is neglect by those trusted with the administration and oversight of the organization. Doing it right only takes a few minutes a month. For some suggestions see my blog posted May 11, 2017. Start today to get it right. Do not place yourself in the position of having to explain why there was a theft or extreme waste under your watch.

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