CENTER TWP. — It’s not an uncommon headline, but it’s always a shock when it hits the news.
A church youth minister charged with stealing from the collection; a Boy Scout troop leader under investigation for misuse of dues money; a volunteer firefighter accused of illegally selling equipment.
Because fraud in nonprofit organizations has long been an issue across the county, the Beaver County Legislative Delegation conducted a seminar for local volunteer groups to learn more about how to protect themselves.
Held Wednesday night at the Community College of Beaver County, Misericordia University professor and accountant Fred Croop was joined by Beaver County District Attorney David Lozier and defense attorney Charles Bowers to discuss practical ways to prevent fraud in nonprofits.
Croop established a list of “basic controls” that organizations can implement for prevention. He explained that it might be difficult for small groups to follow all of the guidelines, but said that even trying some can help prevent fraud.
He suggested organizations “establish responsibility” so that at least two people are involved in every financial transaction. That might mean requiring two signatures on every check or forbidding the practice of pre-signing checks.
Croop said nonprofit organizations and clubs that maintain any amount of money should make sure all of its members are aware of club rules. To do so, the rules must be written down and accessible to members.
“Everybody should know what is allowed, what is not allowed,” Croop said.
If the rules aren’t in place and available to members, it makes prosecution more difficult if a fraudulent event should occur.
“Without it being in writing, it’s very difficult to prevent these things from happening,” Croop said.
He also said organizations should establish a budget for every year.
“It’s very difficult to spot when something is wrong if you don’t have a budget,” he said.
Organizations should require a treasurer’s report at every meeting, have regular audits and place term limits on the position of treasurer. Croop suggested that a treasurer serve for no more than three years. Often, he said, having the same person hold the role longer is a “recipe for disaster, no matter how honest that person is.”
The largest losses he has seen in his accounting career have been cases in which the treasurer was the same person for a very long time.
He suggested that duties be rotated so that individuals or volunteers know, at some point, another person will do their job and check their work.
“It prevents things from happening,” Croop said. “Prevention, of course, (is) the best way to deal with the things we’re talking about.”
Lozier and Bowers agreed that a loss of money is often discovered when a person leaves the organization, such as after an illness or accident that prevents them from doing their job.
“It is when they are no longer there to cover what they were doing,” Croops said.
When a person steals from an organization, it often starts small, he said.
“Everybody is human,” he said. “These are good people who start out with $10 and say, ‘I’m going to pay it back.’ I’m sure you’ve heard these things.”
Then that $10 becomes $20, “and then it gets out of control,” he said.
According to Lozier, any theft over $2,000 will be prosecuted as a felony.
“I have never seen one of these cases be less than $2,000,” Croop said. “It is a felony if they can prove that you have taken $2,000 or more.”
Lozier said cases often extend from a family emergency — for example, an unpaid hospital bill or a roof that needs to be replaced. The person intends to pay it back but realizes that no one even noticed the money was gone.
“They didn’t mean to do it in many cases,” Croop said. “A lot of times, it’s greed, but in many cases, they just get caught up and not able to catch up.”
Bowers said he has represented several people in similar circumstances. He said they aren’t bad people.
“They’re good people; they’re volunteering their time for these organizations. They don’t start out to do this, but something happens,” he said. “It usually is something that starts small.”
Bowers said the treasurers often don’t realize how much was taken, and members of the organization are often shocked when they learn of the theft because they are trusted members of the group.
“If (the controls) are in place, this doesn’t happen, or it’s caught a lot earlier,” Croop said. “We’re talking about preventing it.”
For more information about the presentation and ways to prevent nonprofit fraud, visit www.misericordia.edu.