You might be wondering, “How is that possible?”
Well, I know from personal experience that it is indeed possible.
I was once hired by a nonprofit that at the time existed mostly on
paper. Not much, including audits, had happened in the few years prior to bringing
me on. And despite having a board comprised mostly of accountants, lawyers and
business professionals, the financials were in disarray.
Over several months, I went meticulously through over three years of bank
statements, invoices and canceled checks. There were countless boxes full of files
and loose pieces of paper, including a canceled check written out to “CASH” – written
for $14,000 with nothing on the memo line!
I’ll never forget the moment I saw it or the thoughts that ran through
my head:
“What was this for?”
“Payable to “cash”; how is this possible?”
“Did the board approve this transaction?”
“How will I ever figure out how this money was spent?”
Well it took lots of detective work and lots of time, but I did figure
out how the funds were spent. (I cringe
at the thought of what might have happened if I hadn't.) I
also figured out that the check was requested and signed by the same person who spent the
funds! (Are you cringing?) So in
addition to entering all of the financial history into the organization’s new financial
management system (QuickBooks), I worked with the board to develop new financial
management policies and procedures so that every transaction, no matter how big or
how small, would be documented electronically along with the appropriate backup.
How well are you managing your organization’s financials? To ensure you
are safeguarded from financial crisis, check out these resources:
NFP Partners’ Financial Management Best Practices for Nonprofits
National Council of Nonprofits’ Financial ManagementAccountable Charity’s Tipsfor small to midsized nonprofits using QuickBooks
Also check out The Word Woman Facebook page for more nonprofit tips,
webinars, workshops, grant opportunities, and more!
Michelle, I was cringing! YIKES! Great tips and good resource links. Thanks for this post.
ReplyDeleteThanks, Jo! It is scary, huh? -- especially when I had to bring this issue to a bunch of CPAs!
DeleteToo bad. But this is not uncommon. When an agency has a lax board or a board that does not want to know what goes on, this is very common. Just here in our small area of N AL, at one time there were 5 nonprofits who were trying to recover embezzled funds.
ReplyDeleteOne Ex. Dir. spent time in jail for her dirty deed. Sometimes I don't think board members are aware that each board member is responsible for what goes on within an agency. Just because the Ex. Dir. is a friend or charming, or cute does not mean they don't have to be accountable or the that the board should believe everything s/he says without looking at the financials. As a board trainer one of the first things I tell board members is: You are responsible for this agency. YOU can be sued as a whole board and/or you can be sued as individuals as well. That usually opens their eyes and makes them want to check financials, have audits, etc. And if a Ex. Dir. is doing the job as it should be done, s/he should want these things as well. I think it is a red flag when an Ex. Dir, CEO, etc. says the agency does not need one of the above.
Diane, it's sad how common this issue is. There are far too many boards with members "in name only" or who attend meetings but don't dig in. Many boards give too much autonomy to the Ex Dir, performing very little if any oversight. One of the biggest issues is what I call "lifers". I know of an organization with a board member who's been serving without a break for over 45 years! And as you suggested, the Ex Dir is treated more like a friend. It's a recipe for disaster.
Delete