In recent years, event embezzlement claims have risen in the US. It’s because dishonest types have become better than booster organizers at detecting vulnerabilities in event money-handling processes. But what can you do to reduce theft at your booster club fundraisers?
Booster club organizers must take a proactive approach against event embezzlement. There are three bases to cover: volunteer vetting, securing the takings, and recording all transactions. Club leaders should carefully plan preventative measures and educate volunteers on proactive policies. With the right strategies, there will be fewer surprises and better safeguards against nonprofit embezzlement.
This article has seven practical tips on protecting against booster club embezzlement at your fundraisers. It will help you review your current processes and implement policies to safeguard the club’s money from embezzlers. But first, let’s look at five nonprofit embezzlement examples, so you know what to be aware of.
|Myth: Embezzlement is rare at booster events, so we don’t need to worry about it.|
Truth: Embezzlement is the #1 claim type AIM processes for booster clubs, and it only seems rare because groups often want to keep it discreet.
5 Nonprofit Event Embezzlement Examples
In this context, event embezzlement refers to the misappropriation of your event’s funds. Smaller organizations like booster clubs are often at higher risk. That’s because a few trusted individuals manage the funds with little or no internal oversight from other officers and members.
Below are the five most common types of event embezzlement:
- Direct theft or misuse of hard cash from booster club events
- Theft of blank pre-signed organizational checks
- Theft of donor or member checks
- Skimming cash donations
- Vendor kickbacks
Now let’s focus on the seven preventative measures surrounding your booster club events.
#1 Know Your Cash Handlers
Your fundraisers are busy events with all hands on deck. That often means you leave essential tasks, such as handling money, to trustworthy persons. Unless you know the helpers exceedingly well, these responsible jobs can become costly mistakes.
Solution: If possible, conduct background checks on volunteers before offering responsible positions. Volunteer vetting should follow relevant local, state, and federal laws. And make sure every helper is aware of the club’s bylaws, code of ethics, and checking procedures they will be operating under.
#2 Increase Oversight Using the Buddy System
No one would dream of leaving cash unattended at a fundraising stall or kiosk. Nor is it wise to leave a single volunteer in charge of a busy attraction where money changes hands. Working alone can become overwhelming, and a stressed volunteer is more likely to make a transaction mistake, misplace, or lose cash when under pressure. Also, money changing hands at a fundraiser can present opportunities for less-than-honest parties.
Solution: Make a policy that no one is alone at an attraction where money changes hands. Instead, use the buddy system as a safeguard. That means having two members accountable for counting the cash and signing receipts to verify the amount.
|Myth: This volunteer is 100% trustworthy.|
Truth: Just because someone comes across as honest doesn’t mean they are, no matter how long they have been with the organization. They might be trustworthy, and you hope your judgment is correct, but you could be wrong. Think about this: every booster club volunteer who embezzled was once considered trustworthy enough to handle money on their club’s behalf.
#3 How to Identify Common Vendor Embezzlement Tactics
There are several ways for dishonest types to skin the embezzlement cat. Recognizing how fraudsters take or misdirect money will help you prevent them from doing so.
Fake Vendor Payments
A dishonest bookkeeper or assistant often uses the fake vendor tactic. They create bogus invoices for event products or services that don’t exist. Usually, the phony vendor is someone in on the act, such as a family member, personal friend, or partner in crime.
Solution: Create a robust vendor management process and audit your vendors regularly. Consider a multi-level payment approval system and rotate the role annually.
Dishonest club members who get to select event vendors may take kickbacks and pocket the rewards for themselves. Not reporting this money or other benefits is an act of theft.
Solution: Ensure all vendor bids for your event are openly discussed in a public meeting. Get the club’s board members to review and vet your vendor lists.
Why Your Parent Booster Needs Embezzlement Coverage
Under certain circumstances, the most unlikely people can—and sometimes do—succumb to the lure of easy cash. But did you know that booster club embezzlement claims are more common than general liability? You can reduce your risk of event embezzlement, but you can’t guarantee to stop it. AIM’s embezzlement insurance protects club events from those who take off with your hard-earned funds.
Skimming from Donations
Beware of new, overly eager helpers who volunteer to collect money from eventgoers. Dishonest types may skim from cash donations, and it’s hard to detect. That’s because the person steals the cash before it’s recorded.
Solution: Discourage cash donations and request checks, credit cards, and electronic payments if possible. Some people will always prefer to give cash, though. Therefore, involve several volunteers and assign them in pairs when collecting donations. Finally, have someone not involved in the collection process compare the total takings against the bank account deposit.
#4 Ensure Proper Accounting & Documentation
Never casually take an individual’s word when counting money and organizing documents associated with an event. That will only give dishonest helpers the green light. So, avoid gaining a reputation as someone who signs checks without reviewing supporting records. The treasurer should also review all submitted documentation before preparing financial reports. Anyone new in the role may want to review procedures with the former treasurer.
Solution: Reviewing your club’s finances should be at the top of your booster club to-do list. But no single person should be accountable for checking event takings and supporting documentation. Make sure that all checks from your group require two signatures.
A second officer should check the club’s bank account records to verify that the treasurer’s account balances match. The second officer should also sign off on your group’s bank statements.
#5 Create a Process to Secure Your Cash
Never leave cash on display or unattended at a parent booster club event. The person in charge of the station may be honest, but what about your other volunteers? It would be great to trust everyone, but the reality is that some people are dishonest. A volunteer could easily take unattended money while passing by.
Solution: Much cash can float around at a packed fundraiser. Therefore, always offer secure storage to keep money and valuables safe and away from prying eyes. For outdoor events, the ideal solutions are lockable drawers or boxes. The latter should have a lid to conceal your cash and to stop notes from blowing away.
|Myth: We can depend on audits to catch embezzlers or incidents of fraud.|
Truth: Auditors discover embezzlement by reviewing your group’s paperwork for discrepancies. Extremely successful embezzlers take the money before it’s recorded. Or, they are in charge of the initial documentation of incoming funds and can alter the initial recording to make the money disappear so it cannot be seen by an auditor. Moreover, an audit is unlikely to catch a crime where two or more “trusted volunteers” act in collusion.
#6 Invest in Embezzlement Insurance
Despite any safeguards to protect your parent group against event embezzlement, you can’t stop it completely. There will always be dishonest people in the world, and they are often those you least expect. All you can do is put measures in place to reduce temptation and carefully consider which volunteers fit best in certain trustworthy roles.
Solution: Embezzlement insurance offers peace of mind by protecting your event takings and other cash equivalents against theft. You hope you don’t need it, but it ensures theft will never leave your booster club coffers empty. And, always encourage those who witness suspected embezzlement to report it ASAP.
#7 Look Out for These 5 Signs of Event Embezzlement
Event embezzlement is often easy to identify, but it can go unnoticed if no one expects theft to be an issue. Stay on top of misappropriation in its early stages by remaining vigilant of these red flags:
- Untraceable money starts to vanish, especially petty cash
- Potential check tampering
- Transaction amounts not adding up
- Never assume a club member or officer is 100% trustworthy
- Missing or altered invoices/receipts
You don’t want to create an environment of fear and distrust. That would only damage your club’s culture and make attracting and retaining volunteers harder. You can, however, reserve a healthy skepticism that people have the potential to be dishonest.
It will pay to maintain such a level of vigilance, especially with new helpers who have yet to prove themselves.
Final Thoughts on Event Embezzlement Prevention
Be wary with your booster club’s event takings and introduce measures to safeguard those funds. Embrace the power of two to keep folks honest and accountable. Insist that all event funds are deposited at the bank on the same day and do not go home with a club member. And pay bills by check when possible, as it’s the easiest and best way to create documentation to facilitate bookkeeping.
Lastly, take out embezzlement insurance for peace of mind and to protect your club should a crime occur.