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Nonprofit Radio for February 8, 2019: Financial Fraud

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Tiffany Couch: Financial Fraud
It can happen in your org. How do you prevent it? What are the red flags that reveal it? What do you do when you discover it? Who are the likely perps? Tiffany Couch is a forensic accountant and CEO of Acuity Forensics.

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Hello and welcome to Tony Martignetti non-profit Radio Big Non-profit ideas for the other ninety five percent. I’m your aptly named host. Oh, I’m glad you’re with me. I’d be thrown into Al just thesis if I had to endure the pain of knowing you missed today’s show. Financial fraud. It can happen in your organization. How do you prevent it? What are the red flags that reveal it? What do you do when you discover it? Who are the likely perps? Tiffany Couch is a forensic accountant and CEO of Acuity Forensics. Tony, Take two. Did you become an insider? We’re sponsored by pursuant Full Service fund-raising data driven and technology enabled Tony dahna slash pursuant by Wagner. CPS Guiding you Beyond the numbers regular cps dot com by Tell US Attorney credit card processing into your passive revenue stream. Tony dahna slash Tony Tell us and by text to give mobile donations made easy text. NPR to four four four nine nine nine It’s a privilege and a pleasure to welcome Tiffany Couch to the show. She is CEO and founder at Acuity Forensics, a forensic accounting firm in the Pacific Northwest. She has over twenty two years experience in accounting with the last fifteen years focused on forensic accounting. Her expertise is fraud, investigation, forensic accounting, internal control, risk assessment and complex litigation. She’s been a source to The New York Times, Forbes, CNBC, NPR and the Wall Street Journal. Tiffany’s company is at acuity forensics dot com, and she’s at the Tiffany couch. Welcome to the show, the Tiffany couch. Different couch Different, eh? Hello. Welcome to the show. Thank you. All right. You okay? There. Now I’m great. Okay. We got you Don’t know what happened. Okay. Okay. Um, forensic accounting. I said it like four times in your introduction. Esso. I guess this is what you do. This is what you know. Um well, not only I guess I know for a fact, because, uh uh, I know you’re Bonified. So tell me what what have forensic accountant does? We’re I’m a nontraditional of C. P A. So no taxes air audit here, one hundred percent of what I do is really, you know, prepare reports and prepare information for lawyers. Court for clients who are either in litigation are potentially preparing for litigation, much of which is related. Teo investigating white-collar crime. So forensic accounting, are you Are you looking at numbers like tracking dollars backwards to find sources and pathways? Oh, yes. How do you do? How do you do that? Well, we’ve got We’ve got a great case right now where we’re working on a case where this woman took money from a business and we can see in the banking account she clearly was spending all of my clients money on her personal items, so that part’s sort of the easy part. But my client’s telling me, well, my book’s reconcile everything in the My and my accounting records reconciled so well, I can trace the loss and the bank account. The next question is, Well, what the heck happened in the books to make it all reconciled to the bank? And what we figured out is that she was entering these transactions as other vendor names or, you know, dumping a bunch of stuff together and putting it in as an amount in the books. And so so, yes, my job is part treyz sing and part sort of sluicing through the books. Did these false transactions get entered in the books? If yes, how so? And communicating to our client, You know, here’s what happened. Here’s how much your losses are and, you know, let’s talk about what your options are going forward. So So at the end of that, you produce then a real set of books. A real set of Yeah, but no one called. Yeah, general ledgers and, you know, property profit loss statements like, do you? Do you have a real set to compare with the phony set. If that’s part of our engagement, that will be something that we do. Yes, sometimes we hand over our work and let the bookkeeper’s or, you know, somebody else who can do that at a lower rate than us. Put the books back together again, and we sort of blessed their work. But they take, you know, all of the things that we did to go back and re create the books. But sometimes the court Ah, and others the lawyers asked us to recreate the books so that there is a you know, like you said, it’s said a good book that the client can have not only for, you know, prior years, but in perpetuity. Onda lot of the work you do is with Non-profits regrettably, yes, that, sadly, ah, lot of our work is with non-profits what we I say non-profit from more vulnerable to this sort of thing, eyes that because we’re trusting people by nature, that’s one that’s probably one of the biggest one here. You’re trusting. But it’s really the idea that you’re there to do something really good in the world, right? That non-profit was started because of the goodness of somebody’s heart or a group of people who wanted to do something great in their community. And what we find is that we often when we have that mindset of our world or of, you know, the way that we operate, we cannot possibly imagine that somebody is not operating in that same way. You are, right? Why? Why would somebody steal from us? We’re we’re rescuing, um, stray cats. You know what? Why would somebody steal from that mission? Personal person? I don’t care for count, so that’s a bad example for me personally. But we’re rescuing stray dogs. You know, that’s a that’s a very that’s a very we are We’re the little League. Uh, we’re the local church. You know, we could just make the long list of all of the non-profits that you can just think of in your very small vicinity from where you’re sitting right now today and you can identify all of these non-profits and you can say, Well, that would never happen to me or that would never happen to them. They do such great work. And in fact, there’s multiple reasons why non-profits lose out. Unfortunately, the first one is that mind set. And so we often don’t. I actually understand that people are not operating, you know, out of the goodness of their heart, even though they’re acting like it. So there are. There are bad actors who are baseball coaches and P t a moms, and they’re the PGA mom there the board members with access to the money. They are the wonder most wonderful executive director, the up and coming executive director who was, you know, accomplished in under forty. And she was just making waves in the in the town that they were in and being ableto fund-raising money like nobody’s business. And she was taking that money and spending hundreds of thousands of it on, you know, Victoria’s secret and going to Las Vegas and having a really nice time on their dime. I see. Okay, way. Just have about a minute or so before our first break. Tiffany. Okay, what are what are just like thi’s this and we could spend more time on it after the break. What are some of the risks? Teo Non-profits if if they do suffer a loss? Well, there’s lots of weaken taught. Well, well taught us talk about reputational risk. Let’s talk about the risks that put them invulnerable. First in the first place. And then if that fraud does occur, let’s talk about the reputational risk to them, Um and and the pros and cons of not moving forward with the case. If this does happen because there are pros and cons of moving forward with the case, I think first we should talk about what puts them uniquely at risk. And then how do we handle it from there? Okay. Okay, we’ll do that. Now, sometimes, uh, we have to take a break. I forget where we were. So I’m counting on you to remember that. Okay. Oh, I’m no problem at all. Thank you. All right. Pursuant, their newest free E book, The Art of First Impressions. Do you need more donors? This is all about donor acquisition. It includes the six guiding principles of ineffective acquisition strategy. Also how to identify your unique value and use it to your advantage. And it includes creative tips as well. You’ll find this at Tony dahna slash pursuant. Remember the capital P for, please, to get that book now let’s go back to financial fraud and, uh, Tiffany. Uh, so where were we? Oh, the pros and cons of going forward. But you said there’s something we should talk about first before you wanted before that. What is that? Well, yeah, let’s talk really quickly about the risks, because it’s more than just the risk that were in the world in the space to do really good. Right. Non-profits air. Particularly a risk for a couple of other reasons. Andi, I would really love to point that out to your group. Killer standing. Yeah, let’s go. So number the second one, in addition to where we’ve got a great world view, is that we don’t have accounts receivable or we rarely have accounts receivable. We’re relying on those donations on those fund-raising dollars, and so we don’t always know what’s coming in. We don’t always know what shows up in the bank, or if somebody walks in and write a check out of the goodness of their heart or gets on our website and makes a donation. We don’t always have sort of a great tracking of those incoming dollars. In a typical business, you have accounts receivable, right or you have inventory that you’re selling and you can You can track you know what you think your business is doing. And so that lack of accounts receivable can make non-profits particularly vulnerable to cash or even, you know, check skimming schemes. Meaning I take your money before ever makes it to the bank. You never even see a red flag. Big risk. And but the next one or the last one we should really talk about is just this idea that we don’t have enough resource is right. Every non-profit is usually doing a great job of managing their money. And and they seem to think they have few Resource is. And as a result, they often have too few people having too much access to either money coming in or the money going out without a lot of oversight. And so that perceived lack of resource is can often mean we don’t have the right internal controls and and creates that bigger risk for non-profits. Okay, so you need to invest in. You need to invest in in controls and oversight. So So if you don’t have the expertise of Ah, are we talking about just something simple. A simple was a bookkeeper and bringing in a freelance bookkeeper. Is it that simple? It can’t be that septum. I teach non-profits that we don’t even have to pay for somebody extra. We need to hone in on the resources we have, maybe with the board. So it’s somebody in house is handling all the money coming in, You know. Do we have a simple system of tracking man and taking and separating? No. The money coming in from the person who takes it to the bank. Do we have somebody reviewing the bank statements and canceled check images Or or like the non-profit I just told you about? Everybody knew on the board. But the guys that the lady myth, gentlemen and men and ladies who signed the checks. They knew there was a credit card. They paid it. Every month they sign the check for it. Not one person ever asked to look at a credit card statement and had somebody asked to look at a credit card statement. Guess what would have happened? Her fraud would have been uncovered in this in the first month. Victoria’s secret Victoria’s Secret would have been apparent. Yes, because We’re not putting Victoria’s secret items in our fund-raising baskets at the gala. Right? So I don’t know. That could be again that actually have to be the best dealings. That really wonderful people who are in our non-profits who are our volunteer boardmember They just don’t realize some of the simple things they could be doing to minimize and reduce their risk. Okay, Although, you know, I was saying way of Tiffany, call back. Okay? Tiffany, would you please? We gotta Really It’s getting really scratchy. Is it better now? OK, wait. Hold on. Hold on. Is it better now? No. Okay. Would you, please? Yeah. Would you please hang up and call right back? In the meantime, we’ll take our second break. It’s not your fault. Don’t blame yourself. Wagner, CPS. They have a block post for you, which is differences between your nine ninety and your financial statements. Have you ever looked at these two things and seeing that the same description has two different numbers? Seems like they ought to match. Especially if the same firm there’s Tiffany, especially the same firm is doing both. Write your nine ninety and your financial statements. You would think they would match. There are very simple explanations. You can learn them by going to wagner cpas dot com. Quick. Resource is and then blogged. Okay, we have Tiffany Back-up. I’m here, don’t you? Are you sound? Sounds stronger and brighter. Okay. Yeah. Very good. Very sorry about that. I was just getting all crackly. Don’t blame yourself. You know, there’s a long distance between us. You’re down in, uh, down in Raleigh is not right in North Carolina. No, I’m actually in the Portland, Oregon, area. You’re Oh, that’s right. You Pacific know up in the Pacific Northwest with my saying that? Yes, Pacific Northwest. Well, there’s a lot of theirs. Even that much more territory. So please don’t blame yourself, eh? So what I was saying, I want to get this joke out. If it kills me, I’m going to say this that, you know, the gala where they give out Victoria’s secret items in the take home bag. That could be the most fun Gail I’ve been to ever. It could be. I mean, I wonder how much money people throw it. That non-profit so that’s not dismissed that idea out of hand. But it is a red flag. I’m certainly aboard. It would certainly be a random black. And that’s really the most heartbreaking part of my job is when I walk in, they think they’ve found something or they’re not quite sure. And I find it so quickly and they think, Oh, my gosh, you know what’s wrong with us? How stupid can we be or were so embarrassed? And I want everybody who’s experienced this or or maybe experiencing that just put that out of their minds. Because these folks use their ability to be a liking, to be trusted to perpetrate these crimes. And they’re always the last people we would expect. Yeah, Okay, let’s let’s let’s go to that. Who you say something else about the potential perps, aside from being most trusted they have to be in control so they don’t leave the office very much. They tend to be the first ones to work. The last ones to leave. They’re very well liked, usually by management. Or like if they’re the wonderful executive director bringing all the money in. They don’t take vacations, right? They don’t. They don’t take vacations so much. Oh, yeah. They won’t take vacations. They might. I have a lifestyle that doesn’t make sense as compared to what we know we’re paying them. And And they, uh, I had one non-profit here. Where was a volunteer who was feeling She was a volunteer treasurer. So it was a small non-profit. It was her job to take the money to the bank and write the checks for the non-profit. And she would never give anybody a basic financial report. And when they asked, she got mad and said, You’re bullying me. She sort of started using some code words like you’re bullying me. You’re pressuring me and I you know, And so all these nice boardmember told these other two guys Hey, you need to be nice to her. You’re We’ll just give her some more time and that time and extended to eighteen months, which she never gave him. A bank statement never gave him a financial report, and she ended up stealing nearly all of the small non-profits money. Like how much did she steal out of in comparison to their annual budget? So probably greater than sixty percent. Oh, my goodness. And they were asking all along for financials, and she got defensive and said, You’re bullying me and like, why are you pressuring me like that? Yep. And then all the nice people on the board said, Oh, well, we’re so sorry. We don’t want to offend you and then told these two guys that said Hates our fiduciary duty. Hey, we should be looking at this, told those two guys to back off my goodness, where they were vindicated in the end, Holy. But But, you know, I was just going to say, You know, it just takes too long sometimes, and then severs relationships, you know, in a non-profit. It can really I always call it this just really sad divorce of, you know, we’ve got all of these people, and we’ve got the people who were all for the accused and the other people saying, Hey, wait, we should take a look And I always say, you know what? It’s always better to work together to just figure it out so that we can make an informed decision. Yeah, that’s hard to do, though, when tempers are running high and one that one faction is afraid that this woman is going to leave. What was? Did you say she was the treasurer? Yep. Yeah. One fraction. One faction, not fraction. One faction is afraid that the trusted treasure is going to leave. And the other one is just, you know, just raising some questions and once wants to look deeper and, you know, they can’t come together. Sounds you know your matter, right? And hard to imagine polarization. And it’s that scarcity mode. We’re so lucky to have this wonderful person sarrantonio awesome. How could you say all those terrible things about Tony? He’s done all of this for us for this long. And And so all of those emotional connections with Toni or with that trusted bookkeeper are there. And people don’t want people want to rely on that instead of, you know, actual evidence and information. And that sort of thing. All right, So now so our suspect looks like beloved. I’m going to take it to the CEO level below that CEO brings in a lot of money, doesn’t take vacation, comes in early, stays late. You better have financial controls if you have a CEO like that, right? Oh, absolutely. Can have great connections in the community. Yes. Well liked in the community, too. Okay, so you’ve seen this? I mean, you’ve seen you’ve seen popular people in the community get dragged down in the in the local, the local yokel newspaper. Or like, the three yellow sheet that comes out once a month or something. Is that’s all the newspaper? All right, you’ve seen that. Uh, listen, here’s what I say. If you took every single one of my clients. But there was a publicly traded company to the smallest of small non-profits. Then you had asked them on the day before the fraud was uncovered. Hey, rank your employees from most trusted, least trusted just ranked them. You’re you’re fraudster and be in the top three every time without fail. And it doesn’t matter. The side of the organization, The nature of the organization there always the most liked and trusted person, the organiser nation. And they’re always the last one anyone would have ever expected. All right. Very interesting. Yeah, that’s really cool. Um, okay, so, uh, what are these? Um, what are these people doing? How did they How did they accomplish their their devilish means? That’s a really great question. If we really break it down to three simple things, your money is coming into your non-profit. It’s coming in, Really wire. It’s coming in via maybe papal. It’s coming in via check. It’s coming in B Akash. There’s all these methods that money comes in, and they just simply steal it or diverted before Never makes it to your bank account. It’s what we call a cash skimming skiing. So I urge everybody out there to make sure that they understand how all their money comes in and verified that there’s a way to track it. Um, it’s the most common scheme and non-profits e-giving so simple as, um, let’s say you’re using PayPal. Then someone has to look at the monthly monthly income statement, which monthly income report, which should be easy to get from papal, get it internally and compare that with what gets deposited into the bank. Is that it? Right? OK, we need to make sure that the person who’s managing the papal account doesn’t have access or the ability to change the bank accounts or anything else in papal to divert that money to a different. And they of course, they are not the one doing this reconciliation that I just described this already. There’s somebody else. OK, Very good. So the more fear track yet? All right, I’m a I’m a I’m a I’m a cf a was certified forensic cannot be seen E And I’ll tell you, this is not the one little the little league that I sort of mentioned earlier. They were so proud of themselves because they had a way for everybody. She was feeling the concession stand money, and they had to a way for my dahna popcorn money, popcorn, popcorn and juicy fruits. Money, That’s what’s and all of the money for the registration that just got better. But they were so proud of themselves because they had account sheet inside of the concession stand. So when you know when the volunteer parent would do the concession stand, those people at the end of the day would count the money and fill out the count sheet. It was beautiful, and then they put the money and the count sheet together in the safe and get one of Is the treasurer strong to take the money to the bank, which would have been great except for what they Yet they kept be count sheet with the money. So she took the count sheet through the count sheet away, and then she absconded with the money instead of going to the bank. So it’s very difficult to go back and figure out what the volunteer people had counted because nobody separated the count sheets from the money so that she didn’t they basically, she was able to remove the audit trail. I see right. She had access to both the money and the council. So we want to make sure we have a good count sheep, but that the person who’s taking the money to the bank is not also the same person filling out the count sheets. O R. You know has access or reckon reconcile ing that count sheet with correct the bank statement at the end of the week or the end of the month, right? Exactly, because they don’t want them to change it. Popcorn money that pisses me off like baseball popcorn money. Oh, it’s the worst. How much money? How much? What did she get away with? A couple thousand dollars? No, no. Twenty five. Twenty six thousand. Shit. That’s a lot of popcorn. It’s a lot of money. That’s a lot of popcorn and hot dogs. Maybe this Maybe there’s something to this. No, no, don’t say that. So that that’s the number one, right? So that way, we have really great control than our ends up in the bank exactly where it should go. Okay. One of the most common frauds in general is that that person now have access to write you air tanks or to pay your bills or, you know, process your payroll and they write checks to themselves. They pay their own personal bills. They paid for your credit card and their credit card, too. And so basically, they’re using the money in their bank account in your bank account for their own benefit. And the most heartbreaking thing about these schemes because they’re literally on the face of the of the bank statement. We just did a case for Ah, pretty large and prominent non-profit where the woman was giving the executive director said, Oh, I’m going to give you online access so you could pull the bank accounts. And so, you know, you have to do all the codes and we were on the phone together, and I’m doing the codes and getting in on online banking. And so as she was still sort of talking to me, I I pulled a September twenty seventeen bank statement. I’ll never forget it, and I go. Do you guys have a one thousand four hundred eighty five dollar mortgage? She said, Excuse me and she goes, All of our buildings, they’re donated. We don’t have renter, you know, mortgages on our buildings and I go So you don’t pay one thousand four hundred eighty five dollar market and she goes, we’ll know what what? What are you looking at me like I’m looking at the first very first page ofyour September bank statement. Then I went to the second page and I said, Well, do you shop it? You know why you have three utility payments that you’re paying Well, we only have one building. That doesn’t make sense. I said, Well, you know what about X y envy. And so literally on the first page of the bank statement was this woman’s not this woman. I was talking to you there. The trusted beloved bookkeepers fraud. Um, and it was it had been on every single bank statement going back six years and not one boardmember not one exit, not the executive director. Nobody had ever looked at the bank statement. Six six years of mortgage and utility payments. Oh, get it? Got better. I’m shopping. She paid her property taxes with their money. Um, yeah. Okay, so that’s what I really I am a broken record. I heard if you should be sending your bank statements and canceled check images, you can get those images. You use it to pay a few extra dollars a month, get those images and send them, for example, to a boardmember who has no, who’s not signing checks or has any access to the money. Those statement should absolutely be routed in paper to somebody else who has no access to the money so that we’re verifying our expenditures. And if we’re not and don’t rely on online banking to do it because it just takes too long to load. All of those Check image is very simple. Look through of a bank statement and canceled checks that are printed on paper and come from the bank. I realized it’s not green or, you know, iko friendly, but it’s the best. You know it’s the best investment of your time ten or fifteen minutes a month for most bank statements, and you’re going to catch the majority of Franz, go through and explain again why you prefer in paper instead of having the Boardmember go to the online well, the online banking will work, and I don’t want to discount that. But when you’re trying to look at an actual check image on online banking, it takes a long time to load the images. And you could be sitting there for a very long time. Loading image after image after image and most of us don’t have time for that and would get a little bit bored with it and might might not be as diligent. If those images come in paper, you’re going to be much more. You’re going to just quickly, much more efficient at their. It’s quicker to flip through pages then was to click, and then you gotta look at the bat. Well, I guess you would have to look at the back, but you gotta click through each one. Wait for too lo o thes. Online banking systems have that information. It just takes a long time to toe load the image. Are you ever on the phone with the perp? Oh, I I I have gotten confessions out of perfect perpetrators. Yes, that’s part of my job. But how about well, while you’re doing the investing, he’s like that one you were talking about where you were looking through and as you’re on the phone, wait on. The phone had already left, but yes, there have been more than when I was at a private school not too long ago, where they asked me. They said things aren’t quite right, and they had me looking and I started asking the woman questions about ten or ten thirty in the morning, and she literally got up, got red and ran out of the building. So I I it’s not uncommon for me to actually be investigating are looking into things when the perpetrator still there. Oh, wow. All right, That’s right. That’s exactly I was going to ask. Have you ever been on the phone with them as your uncovering it? Like what they sort of said they’re present in their office? What do they say? What they say? Oh, that deer in the headlights. I can explain it all. You don’t understand what you’re looking at, or I have to go the bathroom. Suddenly my kid’s sick in school, and they literally leave and don’t come back. Wow, you don’t understand. I don’t trust this woman. She’s a forensic accountant, right? You don’t underst took a book. Teo, I’ve been here twenty years ago. How dare you say something? You know me. I’m so loyal. I work here all the time. I’m I haven’t gotten paid the what I should should be getting paid. And I just let them keep talking to me because they’re just rationalizing what it turns into. A confession must leave. Okay. All right. Definitely. We got to take another break. This is Tony. Take too. Of course. What else would it be? Have you become a non-profit radio insider yet? Because I know you’re going to, um, have you gone to tony martignetti dot com and clicked the insider alerts button name and email. That’s all I’m asking for. You want to be an insider because that’s how you’re going to get access to the private playlist that I’m setting up. I’ve already got about five or six of these done there’s There’s more coming. Um oh, many more s o I’m going to do that private playlist, and this is exclusive to insiders. Okay, I want you to be an insider. So go to tony martignetti dot com. Click the insider alerts button very prominent on DH. You will get access to the extra content that I’m doing with lots of guests. When Wei go into a topic that we didn’t cover on the show did not cover, or we’ll go into something deeper. Okay. Twenty martignetti dot com and I rushed through that tony martignetti dot com and then you click insider alerts. All right, let’s go back. Teo Kiffin, Tiffany Couch and financial fraud. All right, So these are great stories. What, you’re you’re on the phone with the part where you’re there in the office, even and they excuse themselves to the bathroom and then they’re never seen again. Correct. Wow. Alright, they grab their purse or their, you know, sometimes leaving their personal effects at the office and they leave it. He’s a cellphone behind. That’s more evidence. Oh, yeah. Or or try to sit there and try and figure out how much I’ve got in to convince me how wrong I am. Right? You’re the Robert Mueller of Trump doesn’t know how much he has. The more he says, the more deeper he digs himself. We don’t depart, no comment. I don’t do politics. So Okay, so we got the check. Only I’m sorry you got the cash skimming. We got the personal bill payment. What’s another year writing checks to themselves with various method just writing checks. That’s is not it again, I said I was asking, What’s another nefarious method to carry out these desperately no payroll? All right, just I write myself more payroll or I call in more payroll to the Carol service if we have an outside payroll service. Um, and so I’m basically paying myself more than you have authorized as the border as the executive director and so I made because I have too much control over that payroll process. I either pay myself more salary, give myself more hours. I don’t My taxes out of my check. I just pay myself extra check. I mean, it’ll come back to xero. Taxes is not so bad, is it? Is that Is that really illegal? Is that really bad? Yeah. Yeah. All right, I suppose. Okay, I know. I know it is. All right. So those who are most common, you know, in a non-profit we could see other things, like, you know, corruption schemes where folks have an inappropriate relationship. Maybe they’re on the board, and so they’re able because they’re a boardmember and have a business, They’re able to get a contract with the non-profit. And we see schemes like that where, you know, we don’t have those arms length transactions between the board are Excuse me. Between the non-profit and the vendor, um, and WeII do see those sorts of things. They’re a little bit more rare, but they do happen, and I’ve seen them happen and again, these smallest churches. I saw this happen and and and larger organizations as well. So I don’t want to discount those conflicts of interests or kickback schemes. They do happen. But I like to focus folks on the, you know, the vast majority or ninety percent of all frauds, which are those ones we listed? I just skim your cash or divert your cash before you make it to the bank. I pay my own. Um, you know, I just write myself checks or use your banking account like my own. I pay myself more payroll. I used your credit card on Victoria’s secret or to take my family on vacation. And and if we focused, if a non-profit focused their attention on that, those few things which are the most simple Teo, either avoid or tohave oversignt over, they’re going to reduce their risk by my, you know, greater than eighty percent. Okay, okay. We’ll focus on the main the main areas. I’m still thinking about that tax one. I’m not sure that’s so bad. Actually, I think you’re rationalizing over there. I’m fantasizing. I’d love to. Not. Okay, maybe maybe you and I will talk. Yeah. I mean, you know how to get around that You know how to avoid the you know how to avoid the people like, you know, very true. You do. You do? I don’t know how I know, but yeah, I know who they are. You want to. But I I come across the girl next door will turn you. I’m going to turn you to the dark side. Oh, yeah? I’LL make it worth your while. I’ll make it worth your while. You’d be surprised what I pay in taxes. You’d be surprised. I’m telling you you know how much money and that would have to take. You don’t know how much. I don’t know how much money I make. That very alright. Alright now certain dark side. So All right. What? Um okay, so in the payroll scheme so since we we’ve we’ve talked about what the problem is and then howto had prevented, or at least minimized the risk of it on the payroll side. What do you do there? Toe toe? Make that very light. Very unlikely toe happen in the event of heroes processed outside, which I think most folks are returning to now they’ve got an outside payroll service, you know, running their payroll that make sure those pay those processed payroll reports are sent over to again, You know, the boardmember or the executive director. Somebody who is not the person calling in payroll or having the or the person who’s processing payroll and the reason being is I can. It’s a great example of a scheme where they where my client said Hand I approved payroll. I said, Great, When do you approve payroll? While I prove it, when everybody turns in their timecards and they’re, you know, PTO requests and and I I approve it and send it over to Sally. Well, then what happens? Well, Sally calls it into the payroll system, and I said, Great. Well, then, what happens? I don’t know things because he never looked at the payroll after Sally called it in. And what was Sally doing? Sally was paying herself more pay. We’re all giving herself over time and paying her daughter, who wasn’t even working there. And so so it. Had anybody been looking at those payroll reports after payroll is processed, they would have picked up on that right away. And so again, very simple. All of this sounds very simple, but it’s truly once those perpetrators understand what you’re looking at and most importantly what, you’re not looking at it. And they’re going to sign the opportunities to, um, you know, potentially geever your money. And again, not necessarily because they intend Teoh right at the get go. Although some people do, they might just be dealing with something difficult their life and decide well, they need a little bit month of money to get through. Well, that’s still a conscious choice. I thought very true. I I thought you were going to say, they make a mistake and it doesn’t get caught and know that the great. And then they realize, Hey, I could do this on a regular basis. Forget the mistakes. So I’ve talked to a couple of, you know, big time fraudsters through some of my work with the association of Certified Front examiners. And a couple of them have absolutely explain just that, that they made a mistake. The mistake didn’t get caught, and they realized that a loophole existed and they took advantage. They waited like they’re wait a few months to see or they weighed a quarter. If they’re really smart. I’ve thought this through thiss tax thing is, I’m working on this with you So now they wait. They wait a good amount of time. If they’re smart, they’ll do it right away. You wait and nothing happens. One quarter of full quarter goes by a couple of board meetings. The the audit committee has met, and whatever. Whatever you think might be an obstacle. And nothing happened. Who? Okay, all right, so so a lot of what you’re saying, All of what you’re saying is is the, uh, the prophylactic. Uh, what involves another person? But suppose we have to suppose you have to. Bad actors collusion. Yeah, but that’s just means we have another. Okay. So we have different levels of weight or collusion a CZ we all know in throughout this country. Now, collusion is not a crime, but could Pearcey is we’ve learned that from Rudy Giuliani, So s o the crime would be conspiracy, but But you could have a couple of bad people, right? I mean, how how protected do you need to be? Um, you know, that’s going to be much more rare, because it’s some point somebody’s going to tell somebody’s going to break, so it’s not going to go on forever, so I will be honest collusion is really hard to uncover because you’ve got, you know, potentially two people uncovering or excuse me, two people working together to cover up something nefarious. So that’s really where we have to have that I am a big proponent of having those outside boardmember, especially those who don’t have access to the money or to the contracts of that sort of thing, to really be providing that oversight, that that has teeth, that we’re not just looking at financial statements that somebody’s prepared and knowing that that’s what you’re going to look at. So they make it look like anything that they want but that you are actually identifying what force documents. There’s a few of them here that are key that would help us uncover, whether it’s one one bad actor or to, um, you know, how can we in engender the bee work of usually it’s the board members to provide that oversignt okay. All right, So somebody outside the office, correct. And we’re not relying on the auditors, by the way, because the odd on ly for percent of fraud they’re found from a financial statement on it. Really? Alright, I hold that point we got to take another break. Save that. Save that one. Tell us can use more money. Don’t don’t get it The way I’m describing. Don’t don’t do The purpose of today’s show is to prevent fraud, not to encourage it, so don’t turn this around one. Eighty. All right. But if you do need a legitimate new revenue source legitimate now you get it from Tell us Get that long stream of passive revenue as cos you refer Process credit card transactions through teller dafs. Watch the video, then send those potential cos there to watch the same video. And it is that tony dot m a slash Tony Tello’s Let’s do a little live listener love which I can’t do can’t do city and state because we’re not live with pre recorded with Tiffany couch today. But the live love goes out. You know it, You hear me? Say it Live Love goes out to each of our live listeners and the podcast pleasantries. The vast majority of our audience over thirteen thousand people listening in the time shift pleasantries to you. I’m grateful that you’re with us. Thank you. Pleasantries. Alright, enough now. Okay, let’s go back to Tiffany Couch different. You were able to hear what I was saying right about. Did you hear what I was just saying about turning them, Turning this backwards and saying, Well, these are good ideas. I could do. I could make some money this way. All right. Well, yeah, it’s very true. I always have to be very careful because And I realize I absolutely realized that when I teach people how to prevent fraud, I am by default. Potentially, there are some bad actors in the audience. I hope not. But we have to assume that there could be We have better actors were listening. I’m sure we have thirteen thousand. Way. Definitely. We definitely have. Bad actors could develop, just got laid off. And I can’t make my Morgan. Oh, my gosh. Coach him to raise your hand right now. Put castles or are you out there? Call in right now. And you are here because we know you’re out there. Okay. True. Alright. We have we have some maybe, like one half of one percent. Would you say I Well, I think at least ten percent. Yeah. Ten. Thirty for-profit baizman bad listeners. Oh, my God. All right. I want you people to stop listening. If you’re the bad act, if you’re if you’re one of the one hundred thirty stoploss sinning. All right, now we’re safe now. The ten percent is no longer Listen, I think you have a great Ani, and tonight your numbers are way lower. Well, I’d like to think so, but we you know, we represent a cross section, but now we’re safe because the bad actors, I just admonished them. They’re not listening. And they’re not here anymore, and they’re not. Listen, So the audience size just strength by ten percent. Thirteen ten percent. That’s thirteen hundred. No, wait. Come back, Come back! No. Forget what I said. I hope they didn’t listen to me. Nobody listens to me. Nobody listens to this show. Nobody listens to me. So don’t worry about that. No, I’m sure they didn’t leave ten percent. That’s thirteen hundred, not one hundred thirty. But see, this is why I’m not a forensic accountant. One hundred thirty one percent. You should have caught me on that fifteen hundred. I don’t want to go down to eleven thousand seven hundred. Listeners know I don’t either. I think we were gonna bump you up to twenty as a result of it, because everybody’s gonna say, Want to say what? Right? I can make a lot of money. Listen to the show. Yeah. No, no, no, no. I know. All right, but bad actors stay with us. Do not unsubscribes keep listening. Okay. Um, all right. So where the heck are we? We’re talking on it. Oh, I asked you about multiple multiple people and and and you said only four percent of, uh, crimes. Fraud is found by an audit correct on ly auditors. Buy-in If we look at the statistics in terms of how fraud gets uncovered, the most common way is by a whistle blower tip. Somebody see something and says something about forty percent of all frauds or uncovered that way with the lowest right right around the lowest. About four percent. It’s actually like three point six or eight percent of frauds being uncovered by a financial statement. Bought it. Because a financial statement on it is not designed to uncover fraud. It’s there to make sure that the financial statements are reasonably stated reasonably. And it’s a fair and accurate assessment of right before noon, and they’re looking at number one there, looking at materiality. So they’re looking at transactions that are other hyre level on. And we all know are we all should know that fraud happening, usually at a lower level. Number two. The auditors are taking a random sample, so they’re not quote. Looking at everything is a common misconception that the auditors air looking and everything, and then I always say, the auditors air are wearing the Scarlet Letter A under their blazers. A’s for auditor, of course, because just like a non-profit, auditors tend to be actually contrary to popular belief, Really nice people who go around thinking that, you know, I’m a nice guy and I’m a trustworthy guy. The people I’m dealing with it at the non-profit er are people I can trust. And so they’re going to be just human nature, more likely to believe what somebody tells them rather than go get that stand of evidence they need. And so, you know, it just becomes this this unfortunate misconception that, you know, auditors, we’re looking at everything. And if there was fraud, they would find it when in reality, it’s the honor system. So I don’t want those folks out there saying Oh, well, number one, we have great employees That could never happen to me. And oh, by the way, we have a clean audit every year, which means there must be no fraud. The Dow non-profit I’m dealing with where where It was all on the front page of the bank statement and went on for six years. Clean on it every year? Yes. Lots of years. Okay. You say stop. You say substantiative. I say substantive. Is that really a West Coast? Could be. I just went to law school in Philadelphia. Uh, maybe that’s I don’t know, but substantively, I would’ve said substantive. I almost didn’t. I don’t look up the word you said substantiate. What? Where does that? But I assisted out. Forensics did. Out. Okay, There you go. All right. So what are some things that we should be looking for? Let’s move to that with red flags with you. Will you explain some, But But let’s go into Should we do that? Let’s do a couple of red flags, and then we and then we got a couple of the ones that are just the most comic the most common. The one that I hear over and over and over and over again. Tiffany, did you see? You should have seen what she warned us. Tow work everyday. Or you should have seen where they took their vacations. Or you should have seen the car she was driving. I’ll never forget. It was It was a non-profit. Um, I just can’t I did what they did, but they they provided a really wonderful service to our community. And I caught this woman stealing a lot of money. And this was one of those cases where I interviewed her. She got red, she literally turned purple and she and left. She ran out of the interview room, grabbed her purse on her way out. And me and the was one of the people that were very key in the organization. We and they were very. They were highly trained professional before they retired and became a non-profit volunteer. Or really, they were getting paid. You were. You were. You were volunteering for this organization. I can’t remember. I think I probably wass or, you know, they they had hired me for for a very small amount. And so we We stood there like with our mouths gape as she ran out and got into her brand new Lexus. And I mean ah, brand new, beautiful Lexus. You would if it was just gorgeous car. And this guy says, Do you see what she’s driving? And I said, Yeah, we should mark that down. Did you tell me she only works part time and that she’s a single mom? Yes, she works part time. She’s a single mother. She has three children at home who are teenagers. We all know how expensive teenagers are. And he said, Look at that car out there and it was just old Toyota, you know, probably one hundred thousand miles on it, he goes, You see that car out there and I said yes and he goes, That’s in my car. And so it’s just an example that people will observe that the persons lifestyle doesn’t make sense, especially when we know what we’re paying them, and especially what we if we know what their circumstances are at home or what their spouse makes or something like that. It is a huge red flag, and people are often too embarrassed or two. You know, they don’t even know how to deal with it. And I want everybody to be able to ask questions about how come that person has that. And do they have access to our money? And can that lead you to, you know, look at some things that need to be looked at? This is Tiffany This way. This is the number one red flag. The number of people want people’s lifestyle just doesn’t. But they’re very doesn’t fit there. It does not fit their what everybody knows about either what they make or just there. You said no, right? We kind of know it. I know. You know, if people are have a spouse or significant other and what that person does or if there’s a single mom or they’re going through a divorce like we know when we work with people every day, kind of what’s going on in their life. I got you. Okay. Okay. A big red flag. Number two, if they will know when. This is when we have the one bookkeeper with all of the control or the one treasurer with all over the control, and they will not give you basic financials on a timely in a timely manner. It is the year twenty nineteen we should, with a press of a button, be ableto print a financial statement, get online and get a bank statement, get online and get a credit card statement in any sort of delay in giving you basic financial information, especially if it’s coupled with How dare you question my integrity? Or that should just be a huge red flag and should not be tolerated. Okay, like, eighteenth month case that you were talking. I say, you know, three days. I mean, it should be, like, ten, ten or fifteen minutes. Really? Shit. All right, we gotta take our last break. Okay? Let’s do it. Text to give. Can you use more money? Don’t do it. The way I talked about with Teller this, please. For God’s sake, do not turn this thing on its head. I’ll never be. I’ll never forgive myself if we lose more than ten percent of the audience from more than ten percent of the audience goes south. Ten percent. I could live with thirteen hundred. I guess, uh, I guess we got to write them off. Okay. Um, legitimate revenue source here’s another way. Mobile giving. I can learn about it with text. Gives five part email many course. You’re only five emails away from raising money legitimately through mobile e-giving Easy, many course to start it. Text NPR to four, four, four, nine, nine nine. Okay, Tiffany, we still got several more minutes too. And if you and that’s a really interesting red flag, OK, the first one especially, but I just got the second one to the delay. You should be ableto way. Should be able to provide documentation within a couple minutes. Really, really fast for. Okay. Um, now, there’s one incongruity I got. I can’t I can’t let this go. You said that the people don’t take vacations because they have to have control over things so they don’t. They won’t go on vacation. But then you said they take lavish vacations. It’s very true. So you’re very right. The one of the big red flags is first oneto work last. When they leave, they don’t take vacation. If they’re afraid that, you know, while they’re gone, something could happen. They won’t take a vacation than okay. You’re still going to see lifestyle issues like I’m dealing with a woman who didn’t take a vacation in ten years. But she warned brand new clothes every day, shopped all the time, had beautiful things. And it didn’t make sense with making twelve dollars an hour. Alright, so other so. But vacations for somebody who does take vacations and usually will happen is there’s so efficient, so wonderful They’ll button up their desk and they’ll leave and nobody will touch it, right? Because they’re the trust of book he burned. We could go a week or so without the bookkeeper. Then you might see that they do take a vacation, but they’re never gonna have any cross training or let anybody touch any of them the money or the book or the financial. All right, all right. We gotta move. Teo, what to do when you when you do discover something on now, is something that we talked about earlier. You said questioning whether you should even go forward. Does that? Does that mean questioning whether you should even investigate? Well, here’s the best. The non-profit in the nonprofit world. We have this reputational risk. If somebody finds out that I’m the victim of a fraud, they’re never going to doe donate their money here. And so these boards are dealing with this scarcity issue in this fear. And when I was trying to explain it, the beginning is, I understand the fear and I I understand the reputational risk. But I want you guys to understand that that is not necessarily going to be what happens to you. Because on the flip side, when you take care of business, when you say this doesn’t happen on our watch, when you go back to your by-laws and realise that your by-laws actually say that you have to investigate, I have to protect your assets, then people actually want that right. People want the board or the executive director’s they want you guys taking care of business. And so number one that’s important. And number two guess what everybody else is looking at in the organization. Oh, I could steal. And then I get away with it. Great. I’m going to steal, too. Do we want to send that message, or do we want to send the message? Hey, lists and not on our watch. And here’s what’s goingto happen. We’re going to call the police were going to call our insurance company. Um, you know, this is going to be a reputational risk for the perpetrator and we as the border going to take care of business and not only make sure it never happens again, but send the message to our community and to our organisation. This is not acceptable. So I just want to make sure that everybody understands that I understand that reputational risk. I understand the fear, but usually the opposite is what happens. Okay. I see. All right, um, and your advice for what to do when it’s first uncovered. I was surprised that the first thing you do you that this wasn’t the first thing you said call the police. And then and then, In fact, later, you suggest maybe you shouldn’t call the police. Yeah, so actually, I don’t recommend calling the police right away. And here’s why what you can You can get a You can get a police number, but the police in most jurisdictions are not going to investigate a white-collar crime because white-collar crime is paper intensive. It’s time intensive, and they don’t. I usually have the resources to do that. And so what I recommend is that they either call a forensic accountant or they use their resource is in house under the under sort of the supervision of a forensic accountant to put their case together for the police. Because then it’s going to be much more likely that the police are going to investigate because you’re handing it over to the police. Why, I always say with a pretty pink bow on top, I actually asked for two things. If somebody calls me Number one, do you have, Ah, employment law attorney? Do we call an attorney? Let’s just make sure you’re doing everything right in regards to that person’s employment and been number two. Do you have employees? Dishonesty? Insurance? I please. Everybody out there. When you get off of this podcast, make sure you have at least six figures of employees. Dishonest. E. I haven’t heard of that one. Employees decided it’s going to probably only cost a few hundred dollars a year for a premium, but the average lost to a non-profit for a fraud scheme is ninety thousand dollars. That’s average on, and I am eats usually much more in my experience, and so I want to make sure you have six figures of employees dishonestly insurance. So actually, the second call, I’m asking you to make it to your insurance broker to figure out what your coverage is. Our because not only is probably going to help you recoup your money from the insurance company, it may or may not pay for my feet. Okay, okay. We have to leave it there. OK, I’m gonna do it. I’m I’m going to ask Tiffany if she can spend five minutes with me because we’re going to shoot an insider video because there’s mme. Or to talk about what to do when you discover it. So this is why you need to be an insider. And hopefully we’re going to get this with with different Tiffany. Thank you very much. You will find her. The company is at acuity forensics dot com and she is at the Tiffany couch. Tiffany, thank you again. Thank you so much, Tony. My pleasure. Next week, Jane Takagi returns with diversity in HK Clu, jh in and governance. If you missed any part of today’s show, I beseech you, find it on tony martignetti dot com. We’re sponsored by pursuant online tools for small and midsize non-profits data driven and technology enabled. Tony dahna slash Pursuing Capital P by Wagner. CPS Guiding you Beyond the numbers regular cps dot com by Telus Credit card and Payment Processing your passive revenue stream Legitimate Tony dahna slash tony Tell us, and by text to give mobile donations made easy. Another legitimate revenue stream Text NPR to four four four nine nine nine ah. Creative producers Climb Meyerhoff. Sam Liebowitz is the line producer. The show’s Social media is by Susan Chavez. Mark Silverman is our Web guy and this music is by Scott Stein of Brooklyn, New York You with me next week for Non-profit radio Big non-profit ideas for the other ninety five percent. I still think I still think it’s substance to go out and be great hyre. You’re listening to the talking alternate network. You’re listening to the talking alternative network. Are you stuck in a rut? Negative thoughts, feelings and conversations got you down. Hi, I’m nor in Sumpter potentially ater. Tune in every Tuesday at nine to ten p. M. Eastern time and listen for new ideas on my show Yawned Potential live life Your way on talk radio dot n Y c. Hey, all you crazy listeners looking to boost your business? Why not advertise on talking alternative with very reasonable rates? Interested? Simply email at info at talking alternative dot com. If do you like comic books and movies? Howbout TV and pop culture. Then you’ve come to the right place. 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And on my show, that conscious consultant, our awakening humanity. We will touch upon all these topics and more Listen, live at our new time on Thursdays at twelve Noon Eastern time. That’s the conscious consultant, Our Awakening Humanity. Thursday’s twelve noon on talk radio dot N. Y. C. You’re listening to the talking alternative network. Hyre.

Nonprofit Radio for March 7, 2014: Society-Level Giving & Fraud!

Big Nonprofit Ideas for the Other 95%

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My Guests:

Page Bullington & George Durney: Society-Level Giving

Page Bullington and George Durney
Page Bullington, Tony Martignetti and George Durney

Page Bullington and George Durney, both with Blackbaud, reveal tactics for setting donors’ sights to your society giving level, whether that’s $250 or $2500. (Recorded at bbcon 2013)






Gene Takagi: Fraud!

Gene Takagi
Gene Takagi

“Diversion of charitable assets” can hurt you badly and embarrass you terribly. Where are the vulnerabilities and how do you protect your nonprofit? I’ll walk through it with Gene Takagi, our legal contributor and principal of the Nonprofit & Exempt Organizations law group (NEO).




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Hello and welcome to tony martignetti non-profit radio big non-profit ideas for the other ninety five percent. I’m your aptly named host. Oh, i’m very glad you’re with me. I’d be thrown into endo cardio fibroblast doses if it came to my attention that you missed today’s show society level giving paige bullington and george durney both with blackbaud revealed tactics for setting donorsearch ites to your society e-giving level, whether that’s two hundred fifty dollars or twenty five hundred dollars and that was recorded at bebe con the blackbaud conference last year and fraud diversion of charitable assets can hurt you badly and embarrass you terribly. Where are the vulnerabilities and how do you protect your non-profit i’ll walk through with jean takagi are legal contributor and principal of the non-profit and exempt organizations law group neo on tony’s take two i’ve got a speaking gig coming up. We’re sponsored by rally bound peer-to-peer fund-raising and by t b r c saving you money on credit card processing fees and now i introduce the interview from bb con on society level, giving welcome to tony martignetti non-profit radio coverage of bb khan, twenty thirteen were at the gaylord conference. Center outside washington d c in national harbor, maryland. My guests are george durney and page bullington. Their subject for their seminar was earning that society level gift. George durney is director of sales target analytics. Paige bullington is also a target analytics as director of professional services george page welcome thank you. Glad to be here. Yes, tony, thank wasn’t have you? George has revealed that he hopes to start up have a washington morning joe he’s actually sitting here practicing, saying good morning, washington so i don’t know how much longer he will be at blackbaud talking aboutthe time this show airs, you may be hearing him on w a m u welcome again, let’s see, we want to get that society level gift page. What’s what’s the first bit of advice or what? We’re let’s define what we’re talking about that it’s everybody underst starts at the same place. Typically when we’re talking about a society level gift we’re looking at individuals that are giving between a thousand dollars up to just under ten thousand kind of a very specific range, um and it can swing a little bit lower a little bit hyre for organizations, but that’s usually the rains that we’re looking at, ok, and we’re finding non-profits having trouble getting to that level? Yeah, it can be a challenge. They look different than other types of donors, so sometimes kind of finding them identifying them. Keeping retaining these types of donors can be a struggle, but there’s a huge payoff when you can choir and get to know donors at that level because they often are the most supportive and engaged of your organization. Ok, morning talk show host yes. What what would you like to add to the introduction? Well, and i think obviously page hit it perfectly, but one of the key things that thousand dollars donors also considered by some a mid level donor for gotten segment of their portfolio there, big on direct mail, low end donors, annual gifts they focus on major e-giving but sometimes there is a lack of strategy and focus on that thousand dollars donor-centric breaking that barrier and we did a lot analytics for today’s session breaking that barrier is critical in terms of retention in lifetime are long term value, so just a knowledge of understanding that and then having a focus on it. Is a big win, okay, so we’re not trying to get this donorsearch for one year, but there’s long term payoff teo breaking that this thing, this glass ceiling of of a thousand dollars that’s exactly right? We’ve seen hyre retention schnoll rate and hyre gains in terms of the year over year giving so it’s it’s a critical step on the path and it’s not a path where some are going to become. We’ll call it major donors and let’s to find a major donor, and everybody does it different totally tony, but let’s define it is like about ten thousand dollars there’s, some that that’s a step in the journey and others that it’s quite honestly, where they’re going to settle on and be comfortable in that level for years and can be extremely profitable in good for organizations. Tohave that group of donors okay, let’s, let’s, start with the advice, george with you. What? What’s what’s. The first advice to getting there. What? Well, actually, i’m sorry right now. You i withdrew the question sort of do we need to know where we’re starting? How do we figure out what we’re starting with? Absolutely that’s the first thing, probably the most important thing any non-profit could do, especially the smaller non-profits is have a value assigned to each donor-centric elif, you will on typically organizations do it on an annual basis, so being able to understand the potential and then what they get today out of that donor differential should help them allocate resources. So knowing that is the first step in the journey of being effective and efficient, moving donors up to that thousand dollar level and obviously retaining him and moving beyond. Okay, okay, paige, but way have this baseline, we’ve assigned values current and potential. Where do we go from there? I think the first step is to start to treat these individuals differently. We know from our research that they have different asset profiles, different demographics, and so the message you’re going to put out there, whether it’s via direct mail face-to-face cultivation or over the phone needs to look different than how you might cultivate a twenty five dollars, donor. Okay, well, let’s talk about some of the differences. What should they be? I think quite often, and this is a personal to some of the areas that i’ve worked in you have to understand and have a different type of connection with them, so understand they want to engage powerthru mission, they’re going to see themselves as an investor with your organization and making them feel that there have more of a steak, and what you’re doing is really important if you’re going to get people at that one thousand dollar level. It’s crucial. Okay, well, how do we do this? What kind of words do we use? What kind of channels do we communicate through? George is raising his hand, you know, somebody was actually walking by saying, sorry, tony george, actually, popular guy georges actually not engaged in the conversation. He’s looking at people walking past. I’m engaged in the conversation, so i will ignore george and we’ll stay with you. So what? How do we do this? Specifically? Specific communications channels what we’re gonna do, george, you’re out nastad i would say direct mail is still a great way to engage these donors. It’s probably going to be with more of a high end package and what i would call some insider information. A good example. I worked with healthcare foundation that started a fellows program and through that program, they engaged these one thousand dollars donors and prospects with insider information on where the health care system was going so that’s kind of one example a lot of organizations will do face to face but do larger scale event so it’s not that one on one that you may use with a major gift prospect, but maybe you’ve got a one too many where you have ten to twelve people in a small cultivation event again, you’re cultivating the moor is an insider, and you’re really giving them access to your leadership quite often, because again they feel different. They feel more like an investor so it’s important that you specialize and capitalize on that feeling, is there ah, size george paige mentioned one to twelve roughly over which you shouldn’t go where you start to lose that connection that yeah, there’s, no doubt about it. I don’t think there’s a magic number in terms of drawing the line on the page, has some great experience because she was doing this on a regular basis before she joined target, but one of the things we talk about is everybody has a clear definition of that major gift. Prospect, and they say one hundred fifty prospects or donors are assigned to an individual. This kind of cultivation lends itself. Paige was saying tomb or direct mail support and more over the phone, really a less of an investment initially in these donors, but an effective way to do it, and you could manage a broader portfolio. And i think this speaks to almost in a murder, and we’re seeing with some of the non-profits kind of an emerging new job title, if you will, that mid level gift officer, which isn’t that senior gift officer it’s, a little bit of a junior person, and the majority of their efforts are done over the phone or email, but yet they’re establishing personal contact, right? Those personalization. And they should be able to handle north of a thousand prospects on something like this because of the level of connectivity and cultivation. This isn’t somebody you need to go visit and spend the weekend. Okay, but let’s, let’s stick with the different channels. As you were waving to your fans in the audience a multi task paige and i were talking about channels. Yes, you mentioned you mentioned the phone. What would how would we start to engage someone there? Let’s say they’re giving it the i don’t know two hundred dollars on we want to we want to get that thousand dollars ceiling how do we start to engage them by phone? So? So the first thing is, we’ve got to identify the right person because not every is we mentioned before, not every two, fifty donors, the right one to cultivate, so once we’ve identified the right one, thank you, cultivate right then the question is its multi-channel and i and i think his page, you’re saying it’s, not just the phone, right? It’s all the channels we want to hit him with it continue to hit him with direct mail. Even online efforts create custom portals for these folks to come in, you’re really trying to connect and engage, and the phone conversation is going to be about discovery, right? Understanding who they are and why they give you right, because each donor, especially at that level, has different motivations. And you need to be able to differentiate, and we talked about it today, and we got a lot of questions from the audience that we have donors who come to events and give because thie event sponsor or their lead on the event a friend of theirs, they’re not engaged in your mission, but they gave just for that person almost attribute gift that’s probably not the person that we’re goingto invest in cultivation because they don’t have a connection game because of their personal relationship to the friend, right? And you’re not going to get that on an ongoing basis. That wouldn’t be that i won’t say we’ll get any dollars, but it’s probably not the best use of your time and not the best owner to target on and that’s where understanding and the phone becomes a great vehicle because in a direct mail conversation or it isn’t a conversation right? It’s a one way communication. I can’t assess that, but if i’m talking with somebody and i understand their priorities, i can quickly assess is this person on the path, if you will, to want to be maur engaged and committed to our organization, right? You can probably qualify the person in just a few minutes based on how well they received the call and and how engaged they are pages talking about engagement in this process, you could probably qualify them. Not that you’re gonna brush them off, you know, in a couple minutes, but within certainly within a fifteen minute phone call. If you’re able to get them that long, the un engaged person may disconnect with you before them that’s, right? If you’re able to get on the phone, stay on the phone with someone that long you can, you can tell exactly. You can weigh always say every donor is valuable, but not every donor is of equal value and it’s important to understand that value. And then there is, paige said, the engagement level and there’s ways to look at engagement in addition to just a conversation that requires some individual to sort it out. It’s attending events is a good indication the mohr events they attend, the more times a volunteer, these air, all good metrics of engagement that in and of themselves, they’re not necessary significant, but when you combine that with other information on that particular donor is paige talked about before assets age, other philanthropic giving activity while the sun you’re starting to paint pretty cystic picture of the person you want to invest cnn right, and make them really engaged. They didn’t think that shooting the good ending. 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Two, one, two, seven, two, one, eight, one, eight, three that’s to one to seven to one eight one eight three the conscious consultant helping conscious people be better business people. You’re listening to the talking alternative network. Paige, we’re talking about the whole breath of the relationship, right? As as we’re figuring out who the people are that we should invest the time exactly a lot of it starts when they’re a direct male donor away up to some of these individuals becoming major gift owner. So you really have to take a holistic look at that lifetime value of the donor, and that helps inform who you’re going to pull out for this more intimate and sort of engaged level of cultivation. So clearly your record keeping is gonna be important no it’s not going to help tohave a spreadsheet from the two thousand events well, and then one from the two thousand three events and right, and and then trying to coordinate that with a with a fund-raising spreadsheet and maybe a volunteer list. That’s that’s not goingto work well, right? You know, you hit on a key part on, unfortunately, many smaller organizations because they don’t always have the resource is needed that’s just where all that information resides on disparage spreadsheets all over the building with different people and not saving that information. More people know about their shirt size and who attended. All the events, right and event attendance and any other engagement volunteering, i’m on the board of meals on wheels. If i show somebody who comes to our events who volunteers on a regular basis and there’s assets, they’re the probability for a more significant connection and gift goes up exponentially. Do we? Paige, do we bring volunteers in to help with this process? Or is this more? Because it’s ah, a donor that in the big scheme is mid level, as george was saying, is this more suitable for staff? I think i can see both sides of that. So is george said, you know, for some individuals, the volunteer, maybe the initial no connection that’s really important to bring them in to get that first gift. Having said that, you probably need a very focused effort from staff to continue to manage a population of maybe a thousand plus donors and prospects. It’s unlikely that volunteers are going to be able to do that quite as in sort of a discipline. Fashion is your staff might be able to do okay. So maybe then bring volunteers in at the stewardship. Thank you. Point. I think that would be a great point, and then certainly, if you’re doing events, say you’re hosting a cocktail hour to get to know these individuals, the volunteers may come into play as hostess again is people that open initial doors, but for that structured prospect management, my thought is that you’re gonna lean pretty heavily on your staff to ensure that that happens. Okay? Wei have plenty of time together, let’s, let’s diving deeper into some more, some more ideas around around breaking that thousand dollars stealing. Go ahead. No one thought that struck me as we were talking earlier is we’re talking about the disparate spreadsheets and sort of where you keep your information is, i think, it’s really important for organizations to understand that you don’t know everyone don’t assume that off the top of your head, based on anecdotal information that you already know and understand who these people are. And it happens a lot when we consult with organizations will come in, we’ll do a screening and they’ll say it’s, fine that you know you’ve found cem cem, new lower level donors. We already knew all our major prospect, and nothing is more fun to me sometimes didn’t actually. Bring out a list of let’s, say, a hundred people, and have people sort of sit back in the room and dio i had no idea. Oh, i didn’t know they could given that level. So i think that’s a key point when you’re trying to develop this program that we really shouldn’t assume that you know your data as well as you think you do. You probably know it pretty well. You can always knew it better. Okay, george could be a little humbling that i have to admit that you don’t know your data and your prospects as well as you thought you did. Exactly. And i think paige is right on point what the organization needs, whether we support them or somebody else does it is they need a discipline process toe analyze that donor base and segment that don’t and without making it an infomercial, pages put together a service over the last year that we’ve had great receptivity on for smaller non-profits on a subscription basis that comes in and makes it as simple as possible puts an m on the record for a major donor and a for an annual donor and it’s at that thousand dollar level on asset size. So you have an idea of the capacity there and a recommended next ask amount or a dollar amount on that donor and something that’s simple used in the hand. You know, all of a sudden it becomes a brush in the hands of an artist if they know howto share the passion of that mission with those right people and the right channels in the right allocation, all the sun you see, huge performance improved. What kind of support? Jorge does the person who’s doing this outreach need from the organization? Maybe from leadership? Well, from leadership, they clearly need a good case for support. I think that’s it and an essential item, they need that case for support. And they also need to be able to show accountability as to what the organization is going to do with those dollars. And i think that’s fund-raising one on one. Tell me why i’m in again and then tell me exactly what you’re gonna do with that. And and, you know, most organizations have embraced that, and i think now more than ever, non-profits or more transparent than ever. And the donor’s let’s. Face it expect that because they’re getting that level of transparency on page brought it up in our session. People aren’t giving donations anymore. They’re investing right? Sure, paige, do you have? Ah, sense of how we would hold the person accountable. Who’s doing this outreach? I mean, i beyond just who goes to valladolid level within x number of months and who doesn’t? How can we assess their their effectiveness? I think you hit on one of the first points number one it’s the conversion of people from lower level giving up to this thousand dollars society level gift that would be, i would say, one of the most important primary. Second dearly of that, i would say acquisitions i mean, i think it’s reasonable too, to expect that you’re also going to bring in some new donors at this level. So it’s not just going to be sort of a conversion path, you’re also sort of out there prospecting on dh then thirdly, had states retention it’s great to get them there also want to make sure that we’re keeping them there were keeping these folks engaged, so i think you know, under those three things you form. A baseline for some really solid metrics let’s spend a little time talking about that retention because now we’ve spent time getting getting them to that level. What what’s your beginning opening advice on keeping them at that level? Well, the first thing i would say is there some great bassline knowledge that suggests that these donors wants an individual gives the thousand dollars or more? They retain it a higher percentage relative to people giving it a lower amount, so i’d first of all, just saying put it out there that you can expect ah, hyre level of retention beyond that, you’ve got a steward, these folks and i go back to earlier comments about keeping them engaged on dh that’s going to be a key, you know, we know that that once you sort of open your wallet and get engaged, it’s an organization at that level, you’ve got a higher level of inclination, but it’s not going to be automatic, that you’re going to stay there. I mean, i use myself as an example. I gave a thousand dollars to an organization for a year, they were doing a very special campaign, i felt super engaged cause i was really passionate about what they were doing after that campaign. I kind of fell off, you know why? Because of their shortcomings in keeping you engaged or for your own interests change? Yeah, to a certain degree, it was sort of, you know, we kind of finished the campaign, they shifted focus, and i didn’t really hear a whole lot about, you know, kind of the new mission and how it translated to my interest areas, and they’re great organization. It’s it’s not, you know, sharp criticism, but that’s just an example of how, you know, for me to continue giving it that level, i really needed to feel more engaged because that’s not an insignificant amount of money and my attention sort of shifted elsewhere. I think this is critical, george, especially as a campaign wraps up it’s structured around the campaign, whether the campaign is, you know, something online and quick, maybe latto great sixty day campaign. Or maybe it’s a more traditional four five year campaign. When that campaign wraps up, how do we keep? How do we keep people engaged? What were we talking about now? Yeah. There’s. No doubt there needs to be. Some transition in some constant connection and, you know it is page pointed out, it’s interesting we saw in the study that we did eighty percent of the donors, eighty two percent once they hit a thousand dollar level, eighty two percent of them retain, and about seventy percent of those actually gave mohr now that’s what’s the corresponding statistic for those under a thousand under a thousand it was about sixty five percent, and when you got lower in the pyramid or on the food chain for gifts he got in the thirties. But i think another metric is paige talked about the ability while averages is, you know, a very deceiving right, because there’s all wireframe clolery all the outlier, all the outlines on this, and we’ve seen organizations even a five thousand dollar gift level that only retain twenty or thirty percent of their donors. Even at that level, they’re retaining a relatively small percentage. A lot of times, those air event driven donors is a good example, right? They do a lot of events, they do the big galas and they’ll only retain a small percentage, and yet others air retaining north of eighty and their entire portfolio right through the organization’s pretending lo don’t lose your point, but no, they’re constantly having to acquire eggs and spend so much more money acquiring new donors to replace right, the master says, and you know, a cz you said the mathos where it’s the leaky bucket, you know, it’s leaking, leaking and i’m constantly filling, filling, filling i’m chasing and it’s hard to string together, you’re over year solid, sustainable growth without having a solid retention left. And while this thousand dollars threshold is appears to be important, it’s not magical unless you put in the discipline processes around retaining and engaging and connecting and stewarding those relationships and as page mention and you hit on it, it has to evolve right? Because i’ll get a multi year commitment because of a capital campaign. But now what’s the incentive, i’m not building a building anymore. I’m not expanding a soup kitchen. Why do you need the money? And why must i continue to give it this level and that’s sometimes that’s amore, difficult conversation and a real challenge than it is to say they were building this building because we need it and therefore you need to give to keep us sustainable. Yeah, yeah, the case for the campaign is usually hopefully pretty straight forward, right? There has to be a plan, right page for transition after that campaign. Absolutely. And i was just thinking one of the things we haven’t touched on too much in regards to steward shevawn retention is the involvement in the visibility of leadership with these donors. So george talked about you. You do have to hold them accountable. You’ve gotta have a strategic vision. But one of the things that we know from past studies and sort of deep breathing with clients after campaigns is how important it is for these individuals to see and feel that the leadership of the organization is out there sort of building the case of in the community, coming back and talking to them and engaging them with that vision if leaderships not connecting with them. It’s very likely you’re going to lose them. Okay. Well, there’s ah, there’s an answer to something i asked earlier was, you know what kind of support to the the people with the gift officers or the officer at this level need they need leadership is george said they need the vision you need concise mission so that they can convey it and well beyond the campaign. Right? Unlike a major gift, they don’t need the leadership to make the ask right. They should be responsible for that relationship. They should be able to store it, but they certainly as you pointed out, they need the tool kit and they need the commitment. Okay, we have we have a few minutes left. Either one of you. What more would you like to say about breaking this thousand dollars ceiling? Go ahead. I was just going to add it’s just important. I mean, i you know, when we were thrown out a couple of statistics and we’ve talked about how you do it, i would underscore for organizations that getting to this level securing them retaining these individuals can really help underwear under gird your mission in your vision and really provide a firm base of financial support where sometimes annual getting and even major giving to a certain degree can be a little more volatile. And this really can become sort of a study platform and a foundation that i think the importance is sort of underemphasized right now. And i’m just a big believer that it can provide a nice pool of support steady, solid donors that really could be crucial to your organization’s success. George, would you like to leave us with you know, the question we get asked all the time is how do you find these? How will i find that thousand dollars donor zoho lled income the size of the assets, the real estate that they have one other giving that they do and the more and more data you look at, the more more you realizes there is no one silver bullet there’s no one thing that you could look at and say that person has a lot of assets because he’s been study after study, people of great affluence are not necessarily all very philanthropic they give, but that doesn’t mean they’re going to give it a certain level. So there has to be a combination of the ability to give and the willingness to give and that’s where requires some level of analysis and segmentation to really get to that point as opposed to tell me somebody who’s rich, give me the next millionaire and then that’s how i have a strategy? What do you love about this work? Analytical work that you’re doing, george, you know, there’s it we can help people immediately. I feel like every time we work with a client, we’re going to make them better. There is no doubt that if they follow in using information, it’s going to make a more efficient, more effective. We had one client who was here before standing in front of you that we help. And we identified on ly about three hundred prospects. But they raised twenty one million dollars in eighteen months from those prospect that were not on anybody’s agenda. Tony, they had not. You know, they were there. Some of those folks had given five hundred thousand dollars a year forever that’s such a grand slam, you. Twenty one million dollars. Every hundred unidentified prospect, obviously on unknown process unknown prospects down right down under the view, our line of sight from there in their folks. Page, what is it you love about this work? I would ask you really the same sentiments, but i’ll put a slightly different spent on it. I my background is in fund-raising for a number of years and i did. Not have analytics. When i did it, i would have given my right arm to have had it, because i know what it does. It allows our clients to spend their time on their mission and doing what they wanted. You and we really it is what george said. We really help them. And how can you not feel good about that? I mean, i feel great every day about what i get to do. So it’s it’s a privilege to work with the team i work with, as well as the clients we work with. Paige bullington is director of professional services at target analytics. George durney, formerly director of sales at target analytics. Now host of george durney show five a m two a m on w a m u r. We’ll put you on tv and he was like, yeah, that would be prefer tv. I want to say good morning, washington good morning, washington. Thank you very much. Both of thank you notes from you. You were very good. Your audition is you now have your addition. Real way. We have it. Tony martignetti non-profit radio coverage of bb khan twenty thirteen. Thanks so much for listening. I love going to these conferences, and next one will be next week at non-profit technology conference live listener, love, let’s, start abroad this week, korea. Lots of people in korea, multiple in soul, thank you. Also, young, jean and sanju. I hope i’m pronouncing those right on io haserot live listener to love to the korean peninsula in japan. Fukuoka you’re pretty. You’re you’re very consistent listener, if it’s the same person and also takashima konichiwa here in the u. S new york, new york. Cambridge, massachusetts. Atlanta, georgia, irvine, california. Beverly, mass, jackson heights, new york. They’re out of the woodwork live listener love to each of those like these great, all these states checking in love it and, of course, those of you listening on the time shift podcast pleasantries to you love our podcast listeners as well. You know that there are two companies that helped me bring non-profit radio to you, and one of those is rally bound. They support the show and they make simple, reliable peer-to-peer fund-raising campaigns friends asking friends to give to your cause. You know, you can claim a discount as a non-profit radio listener. People have here’s an example of one of the rally bound campaigns friends circle they raised more than half a million dollars in their annual five k walk. Now rally bound is not necessarily for events like runs and walks and rides. Ah, could just be a campaign that’s, not event driven, but this one was for friends circle. And they did very well pick up the phone that i mean, you could go to their website, but i like talking. Pick up the phone, talk to joe mcgee. You’re not going to get somebody to talk to at kickstarter or indeed go go. But you will it rally bound triple eight, seven, six, seven, nine o seven. Six my friend joe mcgee. Or of course, rally bound dot com if you prefer that way. Also tea, brc cost recovery. Supporting the show. Do you accept? Credit card gift if you do, then you should talk to them because they save money on those pesky credit card fees. Trc talks to your existing credit card processor, then you don’t need to be switching, talk to your existing processor and get them to lower the fee that you’re paying on each transaction. If you, uh, if you look at your statements, you’ll see that those, uh, those pesky little fees add up. If they don’t lower your rate, then you don’t pay them there. You would talk to yourself, rabinowitz, and when you talk to him thank you for sponsoring non-profit radio trc dot com or again, i like to talk method two, one two, six double four, nine, triple xero i’m delivering a workshop on charity registration at the foundation center in new york city, the’s charity registration laws are these things that require you to register with state authorities in each state where you solicit donations. So if you have a donate now button, for instance, on your site than you’re soliciting in about half the states in the us, if you’re sending email or u s mail those air solicitations also in the states. Where those messages land, the workshop is on tuesday, march eleventh at ten o’clock in the morning and it’s free and there’s info on my block at tony martignetti dot com. And that is tony’s take two for friday, seventh of march tenth show of this year. Jean takagi is with me you know him he’s, the managing attorney of neo, the non-profit and exempt organizations law group in san francisco, he edits the popular non-profit law blawg dot com and on twitter he is at gi tak gt a k jean takagi welcome back. Thank you so much, tony, how are you? I’m doing terrific, lee, how are you doing out there in san francisco? I’m doing, actually, and i’m actually in newport beach today. Oh, newport beach is that, well, is beach. So is it south of san francisco? It’s just the valet. Okay, way south. Okay, cool. Um, we’re talking about fraud. This with this, uh, this month, the fraud, fraud losses. These things can be considerable. Yeah, absolutely. That side interrupted. You’re not interrupting at all. Go ahead, it’s. Your turn. What? You know, i was looking at the chronicle of philanthropy this morning on their online website, and one of the top stories is oxfam’s extra cheese, please. Guilty to defrauding charity and that’s about one hundred eight thousand dollars, which probably small for oxfam. But, you know, always an alarming thing for the public to see. And incredibly embarrassing for oxfam. Absolutely. There’s more than just the money here, there’s the reputation and oftentimes that’s that’s the biggest loss of all the loss of the public trust in the organization. Okay, um, well, we you know, you and i have talked about audits before isn’t an audit, it actually turns out is not going to catch a lot of fraud. Or is that right? Yeah, i think so. What some people are saying is that not its only catch about three to four percent of the frauds that that are eventually figured out by the charities. So that’s a very, very small proportion, although there’s still very good. And what an audit might do is tio provide tips on getting internal controls in place. To prevent fraud from happening. I don’t want to downplay the importance of a financial audit, but it definitely doesn’t result in the capture of a lot of the fraud that goes on. I saw something that said that a lot of fraud is found by by tips like whistleblowers. Yeah, absolutely. There. There having a good whistle blower policy is a great tip for preventing fraud and really establishing what what we like to call from, you know, from a lawyer’s perspective, the tone at the top in terms of making sure that the board has said the prevention of fraud and the integrity of the organization keeping the integrity the organization is a paramount priority is really important, and having things like a whistle for policy that strongly protective of employees that might blow the whistle on somebody commiting or defrauding the organization is really important and sometimes tip lines that air man by third party providers can also can also be helpful in allowing employees to feel that they can remain anonymous during during those tips. Oh, that’s! Interesting that’s like the makes me think of those signs on the backs of trucks. How are my driving? The exact one, eight hundred number say this guy just swerved right in front of me. The same. Okay. Okay. I didn’t know that the only seek. I guess you can outsource that. Obviously through a provider. Okay. That’s. Interesting. Um, all right. So as not surprising, your pointed leadership is key in terms of policy setting and andrea lee. Not just policies, but but the tone, right? I mean, you want you need to be perceived as unethical moral leader of this organization. Yeah, absolutely. And that should sort of be embedded in everything that an organization does. Its values should come out in all of its policies and its practices. And i think maybe the second part is really important because we could all have. I’m like the seinfeld at the sub with the rental cars. Anybody can take a reservation. But it’s, whether you can keep the reservation that’s important than here, it’s the same thing. It’s, uh, you know anybody, khun develop or, you know, download some policies and say that there the policies of our organization. But if the board takes the tone at the top and really enforces it and you know, just by even giving a presentation in front of your employees and volunteers and anybody else to say without accusing them, but say, you know, integrity is, you know, our life, blood and here the things that we want to do to preserve our integrity on dh, you know, having anti broad policies and whistle blower policies and strong internal control that’s all part of it and displaying it out in front of the staff and employees, i think that’s that’s just very important preventive measure that i think is very, very effective as well. But you also have mentioned the other part of this which is enforcement, if a nem ploy e steps over the line and transgresses somewhere, do we covered up on dh and try to rationalize on their behalf? Well, you know, we don’t pay them enough for are they having family problems, you know, or do we deal with this the way the policies call for and and you know and in a strong way hyre waiting as a lawyer, i liketo after one way and that’s like let’s comply with law let’s, make sure we report it, get our money back way. Have to take reasonable steps to do that. But when i reversed the question to you, tony tone, if you were serving on the board of an organisation and you found out that your executive director has gone through some incredibly hard times and suddenly had the opportunity and under such pressure that, you know, she decided to borrow ten thousand dollars with the intent to pay it back by the end of the month. But she didn’t, and she got caught doing that. Now, is that something you want to report to the police and, you know, have it all come out in the newspapers or do you want to do something else? First of all, i want to go on record saying, i hate when you turn these questions back on me. I want that to be said explicitly, i don’t like it one bit. No, i would i would be pretty stern. Yeah, well, do i want the publicity’s you mentioned, you know, reporting it to authorities? She certainly if this is a fireable offense, whether she paid it back or not, you can’t borrow money from the organization unless the board approves some kind of alone. And then there have to be arm’s length arm’s length terms to it, a market rate of interest returned so oh are paid back, so you can’t just borrow privately and then whether you pay back or not with interest or not it’s not right if it’s not approved by the board. So to me, this is a fireable offense. Now, would i go to law enforcement? I i probably would, but i would want to know whether this needs to be something that’s going to be made public. And if they can’t a sure something private oh oh then then i wouldn’t want to pursue it with them. I would i would talk to law enforcement, but i would i would want some kind of i don’t know if you could get a guarantee maybe maybe this is maybe it’s naive to look for, but that’s what i would want because i would not want i wouldn’t want this to be public. Yeah, and that’s the tricky part, isn’t it? Because non-profits are supposed to be very transparent with what’s going on? And they in fact have to report to the irs and the form nine ninety whenever there is a significant diversion. Of charitable assets, whether recovered or not. So wait have to report they might not report the name or the position of the person that diverted the assets in the form nine, ninety that might be a bad idea, and if they don’t have absolutely, you know, substantial evidence that that this person actually committed it and just had strong suspicions about it, then they have to be careful of defamation. So, you know, you want to approach this very carefully, but way sort of concoct also the facts and circumstances of when it would be appropriate to go to the police when it might be, you know, appropriate not to when it’s right toe hyre person and i agree in most cases, i think, you know, and an executive would have lost trust here sheer he had done that, and, you know, it would definitely be interminable effects come, but you know, if it’s going to go out to the press, that could ultimately damage our mission and our ability to, you know, conduct our charitable programs and benefit are beneficiaries and do i want that to happen, you know, depending upon the offense, maybe it’s mia kulpa, i’ll you know, fall on my sword and they will do a better job next time, but maybe it’s not covering up. Maybe i just don’t want to make a big deal out of something that i think may have been small and may have been preventable, and then something that we could easily fix so tough questions, but okay, i mean, i would agree that it should be disclosed disclosed the way it’s supposed to be, and you’re saying there’s a requirement toe reporter on the nine, ninety then i would i would do so what i meant by being circumspect about talking to law enforcement, although i said i would, but, you know, doing it cautiously was i’m trying to avoid the press, but now if somebody later on reads it on our in our nine, ninety, which is a public document, then then i would say, you know, yeah, way we dealt with it, we fired the person, and we disclose that the way we’re supposed to because you just get you discovered the disclosure you read our nine, ninety, we just chose not to go to the press, but that’s, you know, a way we don’t have. An obligation to do that isn’t isn’t that sufficient transparency? I’m turning back. Yeah, i’m asking you. I think so. You know, a cz longest year transparent where you have to be. So the nine, ninety is where you’re required to go, whether you’re required to go to the police and report a crime committed against the organization that you know, that that’s actually amore involved issue. And you may not always have to go to the police, you know, especially under the circumstances that gave me that may not be something that you go to the police for, especially if you get the money back. But it may absolutely be interminable offense that you want to terminate your executive and feel like you’ve lost all trust of that person. Oh, yeah, but anything that goes to the police has the potential for going out to the press and it’s, not the organization. That would probably bring it out to the press. But somebody else that gets wind of that story in the public record. That might be part of the police from your okay. Okay, i understand that you have some ideas about some some red flags that would suggest that there’s a hyre potential for fraud in an organization let’s talk about some of those. What were some of those? Well, i guess the three what what are identified? The three conditions that exists for when fraud takes place and charitable assets are lost is when somebody has the opportunity to divert those assets, somebody may be experiencing some outside pressures from economic situation. In our example, and somebody khun rationalize it, for example, maybe they sabelo i’ve been underpaid for five years of working here on whether it’s, you know it’s justifiable is not is not the matter, but they’re sort of self rationalized it in their own heads and windows. Things exist that’s when fraud occurs and the red flags air, having things like very poor internal controls, an environment where everybody is so trusting of one another that there are no double checks. You know, andi, um, there’s excessive control by an executive director who has the right to make dispersement without anybody looking over, you know, for his shoulder when you do have underpaid staff. If if your staff has been underpaid for a number of years and you’ve got disgruntled staff members that might be a bad sign if there’s a lack of attention paid by the board and the lack of financial management experience. Buy-in leadership. Maybe. Program directors have always been sort of raised up to lead the organization’s, because they have the highest profile and the most respect. So the programmatically. But maybe they’re not the best financial managers, and they don’t know how to spot thes problem areas, or developed the right procedures and policies to protect the organization. That’s where things go wrong, okay, we’re going, tow. We’re gonna go out for a break for a couple minutes, and when we come back, jean and i are going to keep talking about fraud and some ways you can prevent it. Aside from policies like training, for instance, so stay with us. You’re listening to the talking alternative network. What? Have you ever considered consulting a road map when you feel you need help getting to your destination when the normal path seems blocked? A little help can come in handy when choosing an alternate route. Your natal chart is a map of your potentials. It addresses relationships, finance, business, health and, above all, creativity. Current planetary cycles can either support or challenge your objectives. Time. Montgomery taylor. If you would like to explore the help of a private astrological reading, please contact me at monte at monty taylor dot. Com let’s monte m o nt y at monty taylor dot com. Are you suffering from aches and pains? Has traditional medicine let you down? Are you tired of taking toxic medications, then come to the double diamond wellness center and learn how our natural methods can help you to hell? Call us now at to one to seven to one eight, one eight three that’s to one to seven to one eight one eight three or find us on the web at www dot double diamond wellness dot com way. Look forward to serving you. Talking alternative radio twenty four hours a day. Lively conversation. Top trends and sound advice. That’s. Tony martignetti non-profit radio. And i’m lawrence paige, no knee author off the non-profit fund-raising solution. Welcome back to big non-profit ideas for the other ninety five percent to get some more live listener love huntington station, new york joined us welcome and pompel oak in the philippines. Welcome, philippines. If you’re going to, you’re going to listen regularly put, let me know howto say hello to you in your native language. I like to do that. So if you’re going to come back, which i hope you will put on the facebook page or or twitter, let me know how to say hello to you. Okay, jean, let us continue with our ah what do we what’s? The euphemism for this diversion of charitable assets? Discussion? Yeah, um some training. How about you mentioned it casually? Let’s, let’s spend a little time on some prevention through training. Terrific. Well, i think again, just identifying the problems for employees is a big part of this. The solutions that you can have towards fraud prevention, letting them know that you know that there are risks of fraud and that you’re taking steps to to address him is a good thing. So just having the training in and of itself is great, but what you should do in the training is another kind of area where you could really help yourself if you’re an organization and i think part of it is tio have the staff included in identifying what the potential risks are to the organization, on the ground on the ground. They may be the ones who best know the areas where the problems are or where possible. Fraud can take place where employees or an executive khun misuse the organization’s assets, not just their funds, but perhaps there taking equipment or inventory home on dh things of that nature, training them on internal controls, the implement policies. We talked about enforcing policies but training the fact how tio implement the policies is also just critically important. So and doing that in the training as well and doing it at all levels trained the board, train the staff and make sure your executive particularly is trained on how to spot brought on how to try to prevent it. Let’s talk about something that’s very common, like it’s. Kenny petty cash metoo reimbursements. Where do you think the you know the balance is between burdening somebody with substantiation versus trying. Teo, make make sure we have the right, internal control around our our cash is i don’t know it is one hundred fifty dollars, beyond that is it has to be done by check or something. I mean, you know, give me help me out with the petty cash reimbursement problem. I think the big problem with petty cash is allowing petty cash to go out without getting receipts coming back in, and then we’re talking about a five dollars, starbucks copies and, you know, we’re not so worried about if it’s a one time deal. But if people are starting to take from petty cash to buy office equipment like a printer, the fax machine broke down. We have three hundred bucks for a fax machine, and you’ve got that petty cash lying around and proper receipts are not brought back in. Um, that’s that’s a big problem in a very, very easy way to commit fraud. Another easy way to commit fraud is to make up expenses so somebody could say our fax machine broke down in tears. You know, jnj repair services, here’s the receipt for, you know, one hundred twenty bucks, and you just keep seeing that same vendor come up over and over again. The fax machine seems to break down. Yeah, right. Yeah. Or now. J and j does plumbing now all of a sudden, because the because the urinal, the urinal, the middle urinal is not working in jay and jay. They fixed it for us. Make sure that works. Well, they’re very talented. Well, i’m not saying that you well, you still have one on either side. I said was the middle one. So you still have the one left on the right. But jay and jay is, you know, a multi disciplinary. Ah, provider. Yeah. And actually, acronyms are very, very easy way for organizations to commit, or people to commit fraud within organizations. And, for example, if the organisation’s name has an acronym, that anybody could make up a side business or company and use the same acronym, the donors that are donating checks, teo jnj charity may suddenly find their checks being diverted and, you know, put into j and plumbing account. Have you would not know any different. Have you seen this with with clients? Have you had to deal with fraud and any of your client organizations? Yeah, usually after the fact tony’s after the frog has taken place, and the organization’s air tryingto get back to speed and know what to do next. That’s, that’s, often times where we will come in. So are you called that the crisis stage, like where it’s just been discovered, usually right after that. So there may. There may be somebody else who deals with the first level crisis, and then we’re come. We come in after, okay, any any story you can share anonymously. I always get feedback from listeners that they love stories. Any anything you khun say, that they’re being there, be a lesson learned. Um, good question, you know, there there are times when we come in after an embezzlement ah heard and and, you know, the board may have not always been paying the most attention, teo what’s been happening, so i think that learning lesson in all of this, andre, actually, from you’re learning lessons that may come up with that the board that was asleep at the time on allowed their organizations to be victimized by by fraud have got to really stand up and do something to fix that and that’s just to show to the public that they are, you know, an organization that is trying to put the best use of their their money, and they don’t let these things just look away very easily. So putting in the right system’s putting in the right people very, very important, and we’ve written some opinion pieces for the chronicle of philanthropy on the i don’t know if you remember the three cups of tea case tony yeah, vaguely. Yeah, we just have about two minutes left, jean, but yeah, go ahead, summarize it. So so basically thie executive and the founder of an organization had been using organizational assets. To promote his own book and book tour, getting very, very substantial monies for that an organizational assets were used for those purposes. Eventually he came into some sort of settlement with the attorney general of the state to rectify it. But the board it ended up looking very poorly on and had to go through a bunch of steps to re mediate that they had let it gone too far and for boards to say, hey, let’s, now talk about these things. They’re all sorts of articles, the press loves to jump on them and fraud, and, you know, if we look at fried and overall businesses, we’re talking about average organizations losing five to six percent of their total revenues to fraud, and if we took that and looked at total non-profit revenues and said the same ratio applies, we’re talking over ninety billion dollars a year, so fraud is a big deal. I don’t want to overstate the case, but fraud prevention is a big part of the board’s responsibility we talked about tone, the tone of top and just making sure that they’re exercising their fiduciary duties right at the start. It is really important, we have to leave it there. That’s a perfect place to leave it. Thank you very much. Jean takagi. He is managing editor of neo non-profit and exempt organizations law group in san francisco. You’ll find his popular blogger at non-profit law block dot com and on twitter he’s gi tak gene, thank you very, very much. Thanks. Have a great day. Thanks. You too. Next week on archive show because i’ll be at end now. Ntcdinosaur the non-profit technology conference getting amazing interviews with lots of smart people just like we did it become at and t cme already fully booked with conversations about data, the cloud your boards like c r m i don’t like econ isms. Yeah, i don’t like akron isms first because they don’t exist. They also don’t like acronyms. So of course we’re talking about constituent relationship management on social media to, of course, that at ntc, i’m gonna leave that conference with, like, twenty interviews to play very soon. And that is next week. Wednesday get there. And then thursday and friday doing the interviews rally bound and t brc keep them in your thoughts and prayers. They support non-profit radio. Please thank them. And check them out. Rally bound, dot com or triple eight seven six seven nine o seven. Six t brc dot com, or to one two, six double four, nine. Triple xero. Our creative producer is clear meyerhoff sam labor, which is our line producer. The show’s social media, is by julia campbell of jaycee social marketing and the remote producer of tony martignetti non-profit radio is john federico of the new rules. Our music is by scott stein. A special shout out to julia campbell of jaycee social marketing. Welcome, first week produced promoting the show. Glad to be working with you. Be with me next week for non-profit radio. Big non-profit ideas for the other ninety five percent. Go out and be great. You don’t think shooting. Good ending. You’re listening to the talking alternative network, itching to get anything. Cubine are you stuck in your business or career trying to take your business to the next level, and it keeps hitting a wall? This is sam liebowitz, the conscious consultant. I will help you get to the root cause of your abundance issues and help move you forward in your life. Call me now and let’s. Create the future you dream of. Two, one, two, seven, two, one, eight, one, eight, three, that’s to one to seven to one, eight one eight three. The conscious consultant helping conscious people. Be better business people. Hi, i’m lost in a role, and i’m sloan wainwright, where the host of the new thursday morning show the music power hour. Eleven a m. We’re gonna have fun. Shine the light on all aspects of music and its limitless healing possibilities. We’re gonna invite artists to share their songs and play live will be listening and talking about great music from yesterday to today, so you’re invited to share in our musical conversation. Your ears will be delighted with the sound of music and our voices. Join austin and sloan live thursdays at eleven a. M on talking alternative dot com. You’re listening to talking alternative network at www dot talking alternative dot com, now broadcasting twenty four hours a day. Have you ever considered consulting a road map when you feel you need help getting to your destination when the normal path seems blocked? A little help can come in handy when choosing an alternate route. Your natal chart is a map of your potentials. It addresses relationships, finance, business, health and, above all, creativity. Current planetary cycles can either support or challenge your objectives. I’m montgomery taylor. If you would like to explore the help of a private astrological reading, please contact me at monte at monty taylor dot. Com let’s monte m o nt y at monty taylor dot com. Are you suffering from aches and pains? Has traditional medicine let you down? Are you tired of taking toxic medications, then come to the double diamond wellness center and learn how our natural methods can help you to hell? Call us now at to one to seven to one eight, one eight three that’s to one to seven to one eight one eight three or find us on the web at www dot double diamond wellness dot com. We look forward to serving you. Talking. Hyre