Tips for Stopping Internal Theft Before It Starts
Updated: Dec. 3, 2019 | Categories: Revenues
What would you do if you found out that someone – a committee head/member, a board member, a crafty chapter member – was stealing from your chapter?
“That would never happen in our chapter,” you think to yourself. “Our members are all honest, trustworthy individuals.” Unfortunately, sometimes it’s those people you don’t think will steal from you who are the very ones you need to worry about.
How dangerous is internal theft?
When someone in your chapter steals money and/or property from your chapter, that theft includes things like:
- Computers and blank checks
- Checks from members and guests
- Cash from events
- Improperly signed checks or signature cards
- Payments to fictitious vendors
Internal theft is much more common than you may think, as validated by these statistics from SheerID, an organization focused on identity verification.
- Amount stolen annually from U.S. businesses by employees – $50 billion
- Percent of annual revenues lost to theft or fraud – 7%
- Percent of employees who have stolen at least once from their employer – 75%
- Percent of employees who have stolen at least twice from their employer – 37.5%
- Percent of all business bankruptcies caused by employee theft – 33%
- Percent of theft by employees who had ideas stolen at work – 29%
- Average time fraud occurs before detected – 2 years
Could your chapter survive this type of loss, financially and reputationally?
Decreasing your risk of internal theft
Once you learn someone is stealing from your chapter, it’s too late. But there are steps you can take to reduce the risk of that happening:
- Have policies and procedures everyone is aware of. Document how to handle those things you’d hate to lose, like cash, checks, computers, etc. No one, including your president or treasurer for example, should be allowed to take your checkbook home, and no blank, signed checks should be kept for when signers aren’t available. Communicate your policies in your meetings, on your website, and in your communications, and remind everyone of the downsides of not following them, including punishment for those who break these rules.
- Define responsibilities. If your chapter doesn’t document the responsibilities of its board, committees, members, etc., you’re not alone. This gap is common in chapter organizations, but that doesn’t mean it’s good practice. Without definition and documentation (and the visibility we just talked about), boards hear things like, “I thought Sarah or Joe was going to check that invoice.” Define responsibilities for all steps of a process, like invoice management. Who creates your invoices, checks them, and approves them to be paid?
- Have a system of checks and balances. Related tasks, like those in our invoice example, should be handled by different people, as should certain tasks, like counting money and depositing checks. Have one person verify the amounts another person has counted or have two people count money together. Most importantly? Understand your board members’ (and committee members) responsibilities, so you won’t hear that a committee chair has stolen cash from an event, because you didn’t know that this person was responsible for holding the cash (and kept the checks in his pockets as they came in); counting the money; and depositing it.
- Lock it up. This includes both hardware and software. AV equipment, computers, cameras, swag, checkbooks, and checks you’re waiting to deposit should be locked away when they’re not in use. And, extend that lock to your software programs by password-protecting them.
- Manage your money well. Make sure your chapter’s financial management is overseen by the right Is that an accountant or a bookkeeper? It depends on your exact needs. And, have structures that ensure your funds are where they’re supposed to be. This includes reconciling your bank statements monthly and appointing someone other than a check-signer as your reconciler.
Is everyone in your chapter – board members, committee members, chapter members – doing all they can to prevent internal theft? Without a few controls, your chances for internal theft grow exponentially, as does the risk of those you trust becoming those you shouldn’t have.