January 13, 2011
By Bob Carlson
What should you do when a trusted employee takes the equivalent of 15 percent of your organization’s annual budget?
Embezzlement and other fraud are a huge drain on nonprofits’ ability to serve their communities. Yet I consistently see nonprofits doing less than the law requires them to do to punish thieves, and far less than the most they could do to recover the lost assets.
Over the past few years, my colleagues and I have consistently told numerous nonprofits they need to do more to penalize embezzlers. Executives and board members in charge of nonprofits have a fiduciary duty to protect their nonprofits’ assets and preserve their ability to provide services. If nonprofit leaders don’t do enough, they have breached their duty, and that could prompt their attorney general to take action.
Embezzlement happens. Before my presentations to nonprofit groups, I often search the local news outlets so I can have current example available to illustrate my points. And without fail I find at least two in the previous four months or so, and those are just the ones that nonprofits disclosed and journalists found worthy of reporting.
According to the best estimate I’ve seen–a 2007 study by four university scholars of accounting— nonprofits lose 13 percent of the total they collect in donations each year to fraud.
I don’t know why organizations fail to take enough action against someone who just ripped them off. But all too often, state attorneys general have had to inform nonprofits that they need to do more.
Source: Philanthropy Today, January 13, 2011
Source: Philanthropy Today, January 13, 2011
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