May 21, 2009 | Read Time: 1 minute
If an organization finds itself the victim of fraud or embezzlement, it needs to move quickly to protect its interests. Following are suggestions from Philip S. Deming, a human-resources and risk-management consultant in King of Prussia, Pa., and Edward McMillan, a certified public accountant in Forest Hill, Md., who studies nonprofit fraud.
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Call the organization’s lawyer, forensic financial examiner, and accountant (or other person who prepares the organization’s financial reports) for advice on how to handle the situation.
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Call the group’s bank (and any other outside entities the organization does business with) and freeze all accounts until the situation is resolved.
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Change computer passwords and account authorization.
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Preserve the evidence. Lock up all original documents and work from copies.
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Take detailed notes of the incident.
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Know the requirements of the organization’s fidelity bond, which protects employers in the event of fraud by employees covered by the bond, and consult with the group’s insurance broker.
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Interview all employees who would have access to the group’s accounts or financial instruments. Get documented statements from all interviewees.
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Conduct all interviews at the organization’s offices, and during regular business hours.
If an employee or other person connected to the charity admits to theft:
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Make no promises.
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Get all details of how the theft was carried out.
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Identify other people with knowledge of the scheme.
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Ask where the money is and whether it can be recovered.
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Solicit the individual’s aid in recovering the stolen assets.
If any employees are dismissed as a result of the theft:
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Take any of the organization’s credit cards, keys, and other vital items from the employee and consider changing the door locks if necessary.
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Escort the employee out of the building and do not allow him or her back in.
