MID-SIZED NEW ENGLAND TOWN: 10/30/2003 - YMCA's executive director confirmed Wednesday that he'd asked [town] police to join an investigation into missing money at the association. [Executive director] said an internal investigation began in August. He declined to discuss the amount of money that is missing but said the person who is the focus of the investigation no longer works at the YMCA. "It's premature to give details," he said, adding that he expects the internal investigation to conclude within a week to 10 days.

[Executive director] said that although the YMCA had not publicly disclosed that an internal investigation had begun, board members were alerted. The decision to involve the police followed inquiries from [newspaper] about the investigation.

YMCA board members referred questions about the investigation back to [director]. "That's [director's] role. I'm not going to make any comment," said local attorney and board member [name]. "It's my feeling we ought to address issues like this through our executive director."

"What we're doing is trying to relegate this to a single person as the contact person, said board member and treasurer [name], a [bank] vice president. "When the investigation is completed, we'll establish a course of action which (sic) would reflect our responsibility to the YMCA and to the community."

[Board treasurer] said the full YMCA board learned of the investigation at its September meeting. "The executive committee was aware before that," he said.

The [name] YMCA has 3,000 members, an annual budget of $6.1 million and 330 full- and part-time employees serving about 16,000 people annually. It has recreation [and] wellness and child care programs at its 70-year-old brick building and at 48 other locations in [first], [second] and [third] counties. The YMCA raises money with fees for service, state and federal funds for child care programs, United Way and its own annual appeal.

[Executive director] began as president and chief executive officer of [name] YMCA in February. He was circumspect about how word of financial discrepancies came to his attention. "We were alerted that there might be an issue and we followed up," he said. "That's where we are now." He said the investigation has required an extensive examination of the YMCA's accounts. It hasn't been established when the losses began, he said. "There are more questions than answers. It's taken us some time to unearth this. We have boxes, literally boxes of records and computer reports that have been generated," he said. He said one staff person has "spent a fair amount of time" on the investigation since it began during the summer.

"We like to think we're different," [YMCA president] added, "but perhaps we're not. We're subject to the same kind of frailties that can happen anywhere."

• even YMCAs are not immune to fraudulent loss...
  • sometimes a person does not have or does not get inoculated by the Y's spirit of honesty
  • sometimes even basically honest people succumb to temptation or perceived desperation
• a trusted employee embezzled monies from the YMCA over a period of time
• the employee originally had restricted access to money because of prior indiscretions, but over a period of many years gained the trust of the association and was placed in a position of trust

• what caused the break of trust... tough economic times, simple temptation, or something more complicated
• the extent of internal security checks and balances... the extent of loss

• a criminal background check should be run on everyone who will have any financial aspect to their job before they are hired or before they are placed into that position; prior written consent must be obtained from the individual...individuals who should receive such scrutiny include
  • those who receive membership payments or process scholarships
  • those who solicit or receive donations or gifts
  • those who handle petty cash accounts
  • those who arrange purchasing or receive shipments t
  • hose who process accounts payable, payroll, or expense accounts
• a personal credit check should be run on everyone who will have any financial job responsibilities before they are hired or before they are placed in that position (same people as the above section)
  • written consent is required before obtaining such a report
  • if the report adversely affects your decision, a copy of the report must be given to the applicant/employee and s/he must be informed of her/his right to challenge the report under the Fair Credit Reporting Act (FCRA...USC ¤1681)
  • federal bankruptcy laws prohibit using bankruptcy as the sole reason for declining employment or advancement... see http://www.eeoc.gov/facts/qanda.html for more details
• surety bonding should be seriously considered for individuals or positions that have frequent or significant access to checkbook authority or cash
• most applicable insurance coverage is terminated with regard to actions of a specific individual at the time the insured association learns of any theft or dishonest act committed by that individual
  • timing of the dishonest act is irrelevant... it could have occurred before or after employment
  • conviction of the dishonest act is not required... just knowledge
  • giving someone a second chance is not necessarily a bad decision, but it is one that is not covered by
  • the insurance contract and does not have that protection afforded to it
• loose procedures encourage dishonesty... create protocols with built-in checks and balances
  • those who receive monies should be different from those who prepare deposits
  • those who prepare deposits should be different from those who make the deposits
  • those who reconcile bank statements should be different from both of the above groups
  • those who reconcile petty cash accounts should be different from those who access them
  • those who receive goods or services should be different from those who authorize themt
  • hose who authorize payments should be different from those who sign the checks
• if you use a software program for receipts, payments, etc., be certain that the security levels are appropriately set so that individuals can only access the portions of the program for which they have authorization... failure to set those levels may allow unhindered access throughout the program
• easy accessibility encourages dishonesty... store valuables in secure locations
  • cash should be kept in a cash register or locked drawer; every transaction, depletion or increase, should be thoroughly documented... it is best if every access is automatically recorded (e.g., register tape, etc.)
  • petty cash should be kept in a locked container in a locked drawer or cabinet that is accessible only by the person in charge of the fund; every transaction should be recorded
  • checks and signature stamps should be stored in locked locations separate from one another and accessible only to those with the authority to use them
  • valuable inventory should be stored in secure areas that are accessible only to authorized personnel