Immediate steps for the board
Secure bank accounts, credit cards, and online platforms, and remove the suspected person's access while the facts are reviewed. Preserve financial records, emails, and accounting files, and avoid informal confrontations that could lead to lost evidence or claims of defamation. Many organizations carry crime or fidelity insurance that covers employee theft, and those policies usually require prompt notice and proof of loss. A forensic accountant retained through counsel can help identify the scope of the problem and support insurance or legal claims. Resist the urge to announce conclusions to staff or donors before the review is complete.
Reporting and oversight
In New York, the Attorney General's Charities Bureau oversees nonprofits, and organizations may need to address significant losses in their filings. The annual federal information return asks about significant diversions of assets, and the answer should be accurate. Decisions about referring the matter to police or prosecutors involve weighing recovery, deterrence, and reputational concerns, and the board should document its reasoning. Restricted gifts and grant funds may carry additional obligations to donors or funders. If the person involved was an officer or director, identify conflicts within the board so that the review is led by people without a personal stake.
Recovery and governance going forward
Recovery may come from insurance, civil claims, criminal restitution, or negotiated repayment, and each path has different timing and requirements. We help boards decide on an approach, communicate with donors and regulators, and handle employment issues with the person involved. We also review controls, such as dual signatures and independent reconciliations, to reduce the chance of a repeat. Our role is to help the organization meet its duties while protecting its mission and relationships. Where the person offers to repay, any agreement should be reviewed so that it does not undercut an insurance claim or a criminal referral.
