Ever wonder what the #1 claim type that AIM Insurance handles? Believe it or not, it’s embezzlement. Yet, because parent-teacher groups fear information about the impact of embezzlement of their group’s funds getting out to the public, it often remains a shameful secret. And unfortunately, it’s quite common. PTA, PTO, and Booster Club embezzlement often continues for months or years before it’s discovered. And often, the less structured your parent-teacher organization is, the greater chance your funds could be targeted for embezzlement.
Embezzlement is a crime that cuts across demographics and tax brackets. Circumstance can tempt even the best of people to dip into their group’s funds when stressed. After all, a small personal loan no one knows about to cover a lean period seems innocent. But soon, it can get out of control, and the more someone rationalizes and successfully embezzles, the more they commit the crime.
When the economy is tough – like right now – AIM sees an increase in embezzlement claims filed. So what can you do to protect your parent-teacher group’s funds? We’ve assembled some tips to help you protect your group’s money.
Be Ever-so-Vigilant With Your Group’s Funds
First and foremost, never allow any money from your group to ever go to a member’s home. That means reconciling and depositing cash into your bank account daily, even if you have to visit an ATM to do so.
Second, always use the buddy system. Two members should always count the money and sign the receipt to verifying the amount.
Finally, consider getting rid of your petty cash. Yes, it’s inconvenient to go to the bank or ATM to get money before each event, but petty cash is the most challenging form of money to keep tabs on. Eliminate your petty cash can erase one of the most accessible embezzlement opportunities.
Be Smart, Use Checking
Smart checking practices remains the best payment method to protect your parent-teacher group’s funds, thanks to the paper trail that it leaves. You should also require two signatures on all checks.
Here are some checking no-nos: Stay away from blank checks or checks made out to cash. And consider leaving your checkbook in the care of a non-signer. Doing so helps ensure that multiple people know when checks are being written and for what.
Finally, pay all of your bills and invoices when possible by check and not cash. Again, this creates a traceable paper trail instead of the guesswork that paying with cash can cause.
Avoid Debit and Credit Cards When Possible
Credit and debit card numbers can be easily copied and used by others. Instead, stick to checking as your primary method of payment.
However, we realize that there are times when using a debit or credit card is necessary. That’s why you should keep a register of the check-ins and check-outs of your parent-teacher group’s credit/debit cards and checkbooks. To keep them secure, keep access to card paying methods down to a limited group of your members.
Strive for Accuracy and Transparency of Your Group’s Funds
The more accurate your books are, the lesser the opportunity for embezzlement and the greater the chances of discovering embezzlement in the unfortunate case it happens. Conduct an annual audit/financial review of your PTA, PTO, or Booster Club’s accounting books and consider working with a professional CPA to double-check your findings. Some accountants even offer services to non-profit organizations like your parent-teacher group on a pro-bono basis.
One way to improve accuracy and transparency is by requiring members to submit receipts for all purchases. And to increase the security for all entries, have a non-signer physically receive, review, and sign your organization’s bank statements before closing the books at the end of the month.
Your primary goal should be to improve your group’s overall transparency. The more eyes that review your accounting books, the more difficult and less opportune embezzlement becomes.
Purchase a Bond Policy
Bond coverage protects your organization’s money and covers anyone your group trusts with its funds, from the President, Treasurer, and other board members to parent and student volunteers. If someone makes off with your hard-earned donations, this coverage can replace them quickly so your group can keep on supporting your children and school.
AIM offers standard bond limits at levels of $10,000, $25,000, and $50,000, all of which have an affordable $250 deductible (higher limits are available).
This level of protection takes just a few minutes to purchase. Call us 24/7, at 1-800-876-4044 or read more at https://aim-companies.com/embezzlement-insurance/.
How Do You Identify Embezzlement of Your Group’s Funds?
Why would someone commit a crime like this against your organization and the school your children attend?
Donald R. Cressey, a well-known criminologist, explained why someone commits fraud using the Fraud Triangle. This theory explains the three reasons why people commit the crime of fraud or embezzlement: opportunity, incentive, and rationalization.
What are the circumstances that allow fraud to occur? They could be the fact the members are given too much trust, or your group’s accounting practices are so lax that getting away with taking funds is easy and offers a very low risk they will get caught.
Also called incentive, refers to the circumstances that could lead one of your members to take the money. These circumstances may include ongoing debt, loss of employment, or vices like drinking or gambling that are costing them more and more as time goes on.
With the opportunity to take the money and the pressure to need it, the final side of the triangle explains how embezzling members justify their actions. They may think that they work hard for the group and deserve the money. Or perhaps they feel that no one will miss the cash or that they will quickly be able to pay it back. They could even believe that no one cares, and if they did, they would enact better safeguards on the organization’s funds.
Watch for the Following Signs of Embezzlement
- Untraceable cash is disappearing
- Evidence of check tampering (payee names are changed, amounts on bank statements are different than the group’s books, cases of check forgery)
- Keep an eye open for “fraud testing,” when a potential embezzler tests your security by committing a minor, deniable trespass before committing a more extensive theft
- These could include minor clerical errors, misplaced petty cash, and “forgetting” to return a credit/debit card
- Trust the members of your group, but keep a watchful eye for these signs
- Anyone going through financial strain
- A member that suddenly begins to live above their means
- Someone showing a possessive attitude towards holding onto payment methods or counting money
- Odd transaction amounts or frequent and missing/altered invoices or receipts
- Another tell-tale sign is when individuals report they donated money to your group that was never received or vendors contact the group to say they’re still awaiting payment.
How Do You Deal With Suspected Embezzlement of Your Group’s Funds?
If you have a credible suspicion of embezzlement, the first thing that you should do is contact the police. A police report will be needed when you file your embezzlement claim with AIM.
After gaining a copy of your police report, submitting an embezzlement claim with AIM is easy. Visit https://aim-companies.com/report-a-claim/ and fill out the form. You can return it to AIM by email, fax, or mail with a copy of the police report that names the person suspected of embezzling the funds.
Filing a police report is the most challenging part of any embezzlement claim, as the individual you suspect of the crime may be someone well-trusted by your group and even a friend.
Just because you’ve reported this crime to the police and contacted us with your claim doesn’t mean that your group’s funds are safe. Immediately freeze your group’s funds, cancel all of your payment methods and work with your group’s bank to move your parent-teacher group’s funds to a new account. Then, you may reset your payment methods.
If you are unsure where the embezzlement is coming from, limit the sharing of any new payment methods with as small of a group as possible.
AIM Stands Ready to Support PTAs, PTOs, and Booster Clubs
By following the safety practices outlined in this blog, you have a better chance of keeping your organization’s hard-earned funds safe. In addition, AIM offers embezzlement insurance that covers you even when people aren’t trustworthy.
To learn more about our embezzlement insurance, visit https://aim-companies.com/embezzlement-insurance/. Have a question about embezzlement? Want to know something specific about coverage or how to file a claim? You can reach us at 1-800-876-4044.