Accountability & Transparency


There’s only one thing stronger than all the armies in the world,
And that is an idea whose time has come.
–Victor Hugo

Accountability and transparency are ideas whose time has come. The best tools for building accountability and transparency within an organization are (1) providing oversight, and (2) segregating duties so no one controls a transaction from beginning to end. In organizations, where a few people control financial processes, board members and Executive Directors must rely more on oversight than on separating duties. 

Someone who is determined to steal, WILL find a way to steal. You can’t prevent fraud 100% but you can minimize risk by being proactive – by building accountability and transparency into your culture and your financial processes. 

Unfortunately, embezzlement in non-profits is as common as a good cause. Take for example: Port of Hope. This organization has treated over 25,000 low income and indigent alcoholics and addicts throughout Idaho since 1971. It is a non-profit organization that provides a valuable service few other organizations can or will attempt.

Barry Meyers, Port of Hope’s President/CEO since 1978, was devastated when he discovered two long time trusted staff members, a mother-daughter bookkeeper team, embezzled almost $1.5 million from the organization over five years. The mother is serving a 41 month prison sentence to be followed by five years of probation. Her daughter received a sentence of five years probation.

Port of Hope didn’t have a pot of cash just waiting to be stolen. The bookkeepers had to resort to creative means to separate Port of Hope from its hard earned revenues.  Specifically they; (1) neglected to make employee withholding and tax deposits to the IRS and stopped paying vendors, (2) destroyed IRS notices and overdue bills from vendors,  (3) created bogus financial statements using the logo and format of Port of Hope’s accounting firm. This subterfuge allowed the mother to use Port of Hope funds to pay off $1.2 million in personal credit card bills over five years.

To make a bad case worse, the IRS does not just forgive organizations that fail to remit payroll withholdings and taxes. As the President/CEO and the executive responsible for Port of Hope, Barry Meyers is personally liable for repaying a portion of the amount due to the IRS. His monthly IRS payment exceeds most people’s mortgage payment. He’ll be writing a check to the IRS every month for ten long years.

To paraphrase Confucius, there are three ways to learn wisdom:
By reflection, which is the noblest
By imitation, which is the easiest
By experience, which is the bitterest
                                     
Barry Meyers understands the pain of gaining wisdom through a bitter experience. In his words: "My biggest error, which is probably a factor in most embezzlement cases, was trusting these two people and believing them when they said that we were current in our deposits to the IRS and the payments of other accounts payable.”

He goes on to say, "The biggest thing I learned from this terrible experience has been that yes, you have to trust employees to some degree but you also have to have procedures in place to verify that what they say they are doing, they are in fact doing.”

Accountability is an idea whose time has come. Enhance accountability in your organization by keeping an eye on the financials. Here are five tips and procedures for doing so:
•    Review all bank activity, including cancelled checks, at least monthly.
•    Verify that payroll withholding deposits are made timely.
•    Require that invoices, timecards and other supporting documents are attached to checks before signing.
•    Have the accountant drop by at least every few months to review and analyze transactions in high-risk areas.
•    Keep in touch with the banker, key donors and key vendors to build rapport and let them know whom to call if there is ever a problem or question about the organization.

Trust, but verify.

Denise McClure brings over 20 years of experience in public accounting, business management and non-profit board involvement to her work as a Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE).  Her business, Averti Fraud Solutions helps businesses and non-profit organizations become more profitable, secure and efficient by creating accountable and transparent work environments.

For more related blog articles click here


Share |


Tags: nonprofit, non profit, accounting software, embezzlement

For all blog posts click here

Blog Posts

Denali Payroll Saves Time

Posted on Tuesday, April 01, 2014 | 0 Comments
Here is a short video showing how Denali Payroll will save you time...

READ MORE

Financial Controls for Small Nonprofits

Posted on Tuesday, March 18, 2014 | 0 Comments

It is an unfortunate fact that nonprofits are just as much at risk of financial fraud as for-profit companies. Perhaps they’re even more vulnerable, because nonprofit employees typically share a common interest and have close relationships with co-workers. No one wants to believe someone they know and trust is secretly stealing money from the organization they believe in. Sadly, stories about nonprofit employees and volunteers embezzling money come up all too frequently in the media. For example, this story: http://ow.ly/utU9o.

READ MORE

Why Nonprofits Should Avoid Spreadsheets

Posted on Monday, March 17, 2014 | 0 Comments

For-profit and nonprofit organizations rely on spreadsheets for a variety of tasks, but spreadsheets were not designed for accounting and present significant risks. Let’s look at the reasons you should not use spreadsheets for nonprofit accounting.

READ MORE

Denali Payroll Introduced to Beta Customers

Posted on Friday, March 14, 2014 | 0 Comments
Cougar Mountain Software releases the Denali Payroll accounting software to select customers for beta testing.

READ MORE

Tax Time? What Your Accountant Needs From You

Posted on Monday, March 03, 2014 | 0 Comments

Your accountant is getting crushed this tax season.  Want to make their day and get your businesses taxes on the top of their To-Do list?  Organize your business tax records.   Getting the right information to your accountant will be a smooth and painless process if you know what they need. 

READ MORE

COUGAR PROFILE

Cougar Mountain has been making accounting software for over 30 years - our latest generation is called Denali.

Based in the Northwest United States, with on-site technical support.

Ideas and Feedback are always appreciated.


Follow us on FacebookTweet with us on TwitterGoogle+Watch our YouTube ChannelRead about us on LinkedInGive us your suggestions and ideas

Cougar Mountain Software Inc. | (800) 388-3038 | 7180 Potomac Dr. Boise ID 83704

© 2014 Cougar Mountain Software All Rights Reserved.


Live Help Software