The Nonprofit

A nonprofit focused on the performing arts. 

The Situation

A payment clerk manufactured phony invoices to a pre-approved vendor with whom the clerk had an arrangement for sharing the profits.  

The Resolution

An annual financial audit uncovered the crime, and the guilty parties were convicted, but not before the employee had embezzled funds in the six-figure range.  

Good financial controls would not allow an arrangement to pre-approve vendor payments. A best practice would be for each individual invoice to be approved by one person, then a second person would issue the check (but not have signature authority), and finally, a third person would review and sign the check.  

In a small nonprofit, the approver may also be the check issuer, but should not have signature authority. 

From the Claims Files stories like the one above are intended to be informational in nature. Please contact your insurance broker and/or agent for your specific coverage implications based on your specific situation.