Being prepared is the name of the game when dealing with financial crimes. You need a solid game plan to lean on if your nonprofit is hit by embezzlement. This type of crime effects all businesses, but it hits nonprofits particularly hard given the nature of their finances. If an embezzler or fraudster is allowed to get away with their crimes, it can set an organization's mission back years. It could even completely ruin the mission depending on the amount of money stolen.
In her book "Good Counsel," Lesley Rosenthal offered some advice for nonprofits dealing with embezzlement or financial fraud. She urges organizations to resist the urge to cover up the crime from auditors, board members, or other outside authorities, as this can only bring bad press to an already negative situation. She then outlines six tips to help nonprofits recover from embezzlement:
- Make sure that the full facts are known.
- Punish the offender.
- Report the fraud or embezzlement and cooperate with law enforcement authorities and other concerned parties.
- Reclaim stolen property as quickly as possible.
- Conduct an internal investigation to determine what went wrong. Were fiscal controls or audit processes lacking? Were there weak checks-and-balances? Make sure any problem that is discovered is highlighted in detail.
- To protect against future issues, incorporate new safeguards to your existing measures.