Monday, November 25, 2013

Passing the Buck - Fraud at Non Profits

Another example of how non profit organizations cover up fraud by letting the fraudster off with restitution and dismissal. By allowing a fraudster to repay an embezzlement with an agreement for repaying the ill-gotten funds and then terminating their employment without criminal prosecution is a poor excuse for preventing occupational fraud. These terminated employees then go out and find another position at other non profits and often repeat their behavior. Once a fraudster escapes prosecution without any criminal record they pass their problem onto the next employer.

According to the follow up report in the Washington Post on November 24, 2013, an investigation of a fraud at the Progressive Policy Institute revealed that the officials did not call the police or alert donors of the incident. Instead they agreed to forgo legal action in exchange for restitution. The manager who embezzled the funds went on to work for nonprofit and political groups in Florida, serving as a finance director at one. Shame on the managers who agreed to settle so they could hide the fraud from the public and donors.

On the issue of occupational fraud organizations must have a zero tolerance policy and take all action necessary to prevent the fraudster from repeating their behavior and putting subsequent employers at risk. If organizations fail to do this then they are not performing the due diligence that is required for ethical behavior