The Embezzler Next Door
- By Sandra Pfau Englund
- January 1st, 2016
I recently had dinner with Amy to learn more about the theft at her daughter’s high school. Press reports indicated that at least $14,000 was stolen from the school spirit store over more than a year. The school’s support organizations had weak internal controls; discovery of the theft, I learned, was almost happenstance.
“Everybody was shocked,” Amy said. “All the volunteers were friends, and no one ever expected any of us to steal from the kids and the school.”
And that is exactly what made stealing from the spirit store so easy. Although financial controls were written into the group’s bylaws, the group rarely enforced them. Everyone trusted one another. As soon as someone complained that getting two signatures on checks or that any other control was too onerous, the rule was ignored.
Amy had a good job, was married to her high school sweetheart, was active in her church, and doted on her only child, a daughter on the cheerleading team. Amy is also the embezzler.
Who Steals and Why?
Recent studies about why people steal identify two main categories of thieves: (1) those who steal by rational choice and (2) those who steal because of a psychological reason, such as kleptomania. Crime statistics indicate that women are arrested for embezzlement more often than men, and that one-in-12 shoppers steals. The decision about who to steal from is commonly related to social factors, opportunity, and the perceived low risk of apprehension.
Those factors are often present in school support organizations. Volunteer leaders are usually friends who have known one another for years. The trust level is high. That leads to lax financial controls and failure to enforce any financial control policies. Embezzlement is a crime of opportunity. So how do you stop it?
How to Stop It
Parent Booster USA, an organization that provides education and guidance to help schools and their support organizations comply with fund-raising rules, offers up three simple steps in its theft prevention program, It Takes 2. By adopting the rule of “two” — two people to count cash, two people to sign all checks and two people to reconcile the bank statements — the school will improve its financial controls and greatly reduce the risk of theft. Prosecuting those cases of theft that do occur will reduce the perception that embezzlers will not be punished.
1. Counting cash. Cash should always be counted onsite, immediately after being collected, by two unrelated people. The counters should record the amount collected and the date, then sign the cash tally sheet. Cash should be deposited immediately into the organization’s bank account with a copy of the deposit slip sent to the treasurer. When we met with Amy, she said this rule was never followed at the high school spirit store. Amy counted the spirit store cash by herself and made the bank deposit, which facilitated her stealing money from the store.
2. Signing checks. Checks should require two signatures, and blank checks should never be presigned. The two-signature requirement should be printed on the school support organization’s checks above the signature line. Otherwise, no one, including bank personnel, will know that is a necessity. Amy noted that requiring two signatures on checks was included in her organization’s bylaws but was never enforced.
3. Reconciling bank statements. A second person without signature authority should reconcile bank statements. If the treasurer has signature authority and does the reconciliation, a second person should review bank statements every month within 30 days of the statement’s issue date. Amy noted that requiring two people to review and reconcile the bank account definitely did not happen in the booster group.
Meanwhile, 1,300 miles away, the headlines reported yet another case of embezzlement (just 1 of 20 such headlines in the previous five months): “Former Monroe PTO Treasurer Embezzled $45,000.” When I called the school district superintendent about the case, he noted that it was the third time in his 30-plus-year career that he became aware of someone stealing from a school support organization in a district where he worked. “Eight mothers came into my office in tears,” the superintendent told me. “The treasurer had been their friend; they trusted her.”
Implementing strong financial controls is not just a good idea. It is necessary to prevent support organization theft.
— This article is excerpted from the December 2015 issue of School Business Affairs, published by the Association of School Business Officials International. www.asbointl.org.
This article originally appeared in the January 2016 issue of School Planning & Management.
Sandra Pfau Englund, Esq., is executive director of Parent Booster USA, based in Winter Garden, Fla.