Protecting your Organization from Fraud

Last week’s headlines were all too familiar. The Treasurers of two local youth basketball leagues had stolen about $159,000 from the leagues. The thefts occurred over several years. In both cases, the Treasurers simply wrote checks out of the league accounts to themselves. This story has been repeated too many times over the last several years—in youth sports organizations, Home and School Associations, churches, fire companies, nonprofits, and businesses. The theme is the same—a trusted long time employee or volunteer steals money from the organization by writing checks to their own accounts or for personal expenses.

How could this have been prevented? The rule of two. In any organization, regardless of size or whether it is staffed by volunteers or employees, at least two nonrelated people should be involved in every transaction. What does this look like?

1. If someone writes and signs checks, then someone else receives the bank statements and reviews the canceled checks. Any unusual payee names are questioned. This step alone could have prevented numerous thefts.

2. For special events when cash is collected, there are two volunteers collecting and counting the money. They sign off on the total amount prior to the deposit.

There are numerous other controls but these two alone could reduce the amount and frequency of thefts significantly.