| "Our former
president embezzled over $77,000 from our organization’s general funds in a two-year period." |
|---|
A CEO of a licensed gambling organization embezzled over $77,000 from the organization’s general funds in a two-year period. The money was profits from the gambling operation that were transferred to the 501(c)(3)’s general funds.
The CEO opened another general account at the same bank as their other general account, but the CEO was the only authorized signer. Instead of depositing money donated from the gambling bank account in the regular general fund, he deposited the gambling money in the new account. Then he spent the money for personal use.
Because the treasurer did not keep sufficient accounting records and did not present a treasurer’s report at their membership meetings, no one suspected anything. The CEO saw the opportunity to steal the money, which was in excess of what the organization needed, and he knew the treasurer would be unable to track the money.
Communication—The other board members never questioned the CEO or treasurer. One reason is that there were no reports to question. The other reason was that the treasurer became aggressive if anyone posed questions.
Checks and Balances—The organization had no internal controls in place for the general funds to hold the treasurer or CEO accountable. There was very poor recordkeeping and no account reconciliation, either of which would have prevented the embezzlement.
Communication—The gambling manager reported what appeared to be an error in the treasurer's reporting of lawful purpose transfers from the gambling account to the general funds. The gambling manager was key to finding the problem.
Bank records were requested, and members learned about the new account even though the CEO had just closed the account. An outside accountant quickly reviewed the statements and verified the missing funds.
Editorial Note—The organization fortunately had a gambling manager in place who had a fully accountable gambling operation. This enabled the organization to track funds and help law enforcement determine that gambling fund transfers and general monies were used personally by the CEO.
Whether problems occur on the general fund or gambling side of the ledger, membership participation is the key to success.