Tips for Dealing With Suspected Theft

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By Eric Frazier

If an organization finds itself the victim of fraud or embezzlement, it needs to move quickly to protect its interests. Following are suggestions from Philip S. Deming, a human-resources and risk-management consultant in King of Prussia, Pa., and Edward McMillan, a certified public accountant in Forest Hill, Md., who studies nonprofit fraud.

Call the organization's lawyer, forensic financial examiner, and accountant (or other person who prepares the organization's financial reports) for advice on how to handle the situation.

Call the group's bank (and any other outside entities the organization does business with) and freeze all accounts until the situation is resolved.

Change computer passwords and account authorization.

Preserve the evidence. Lock up all original documents and work from copies.

Take detailed notes of the incident.

Know the requirements of the organization's fidelity bond, which protects employers in the event of fraud by employees covered by the bond, and consult with the group's insurance broker.

Interview all employees who would have access to the group's accounts or financial instruments. Get documented statements from all interviewees.

Conduct all interviews at the organization's offices, and during regular business hours.

If an employee or other person connected to the charity admits to theft:

Make no promises.

Get all details of how the theft was carried out.

Identify other people with knowledge of the scheme.

Ask where the money is and whether it can be recovered.

Solicit the individual's aid in recovering the stolen assets.

If any employees are dismissed as a result of the theft:

Take any of the organization's credit cards, keys, and other vital items from the employee and consider changing the door locks if necessary.

Escort the employee out of the building and do not allow him or her back in.