The Buried Truth in Your Chapter 990s and How You Can Access It

In an economic climate that makes every dollar precious, no organization wants to lose 5% of its annual revenue to fraud. In its 2016 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners found that the typical organization, no matter its size, loses a median of $150,000 from a single case of occupational fraud. In fact, 80% of companies said they experienced fraud in past years.

Chapter leader positions are a great opportunity for members to learn the ropes of fiscal responsibility. However, with so much on their plate already and a limited background in organizational finances, it increases the chances for mistakes. Recognizing and identifying the risk factors of financial mismanagement can allow you to offer help before the problem reaches crisis level. Ask yourself if any of the following factors are putting your chapters at risk:

• Insufficient training and orientation resources
• Limited time for officers to spend on chapter financial duties
• Annual turnover of chapter officers
• Lack of financial policies and procedures

Even with training and procedures in place, you can’t rule out the chance for fraud. There are, however, steps you can take to minimize your chapter’s risk.

Ask yourself if your chapter leaders would be comfortable seeking you out for help. They should feel confident you are ready and able to respond appropriately. Let chapters know that if they see something, they should say something and will be protected from repercussions. Establishing a whistleblower policy will ensure chapter leaders who report are shielded from retaliation. You can also consider an anonymous hotline run by a third party that can be used to report unethical behavior.

While financial policies and procedures may not sound warm and fuzzy to chapters, in the end, having tight guidelines to follow will make them feel more secure. Here are some items to consider adding to your policy:

• Establish term limits for chapter leaders and volunteers.
• Require 2-3 representatives to have access to review online banking.
• Provide technology that can automate bank reconciliation and have it reviewed by chapter leadership on a monthly basis.
• Separate financial functions such as handling from record-keeping or purchasing from payables.

It can be daunting to oversee these prevention strategies for all of your chapters. Consider an online banking platform that can automate these functions for you and your chapters. An automated platform can minimize financial risk for chapters and take some administrative duties off National.

A virtual banking platform eliminates the burden of reporting while at the same time providing fraud controls like spending approvals and notifications. Consolidated platforms have one master bank account for National divided into separate virtual bank accounts for each chapter. Chapters can interact separately while also allowing National to monitor accounts for fraud red flags.

Alternatively, you can build up the resources to manage chapter finances at National. Chapters may see this as a loss of control, so it’s important to provide complete transparency and adequate response times to payment and information requests. By outsourcing back-office processes, officers and volunteers can focus their time on chapter programming and engagement.

Fraud can happen to any organization — having the proper plans in place can reduce the risk to your chapters and the headache of dealing with the consequences of being unprepared.