When Your Turnaround Staff Embezzles: The Importance of Board Oversight

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October 18, 2016; The Examiner (Southeast Texas)

Just six months ago, Peggy Lynn Gibson, former executive director of the Triangle AIDS Network (TAN), pled guilty to theft from the organization on the order of hundreds of thousands of dollars. Now, the very staffer who was hired to fix the mess left by Gibson has been charged with the theft of tens of thousands of dollars from the organization.

TAN, now called the Triangle Area Network, alleges Gibson stole around $360,000—the majority through checks, but also over $20,000 in property and more than $19,000 in payments to her daughter. When she was arrested, Gibson had been with the organization for only two years. While Gibson was serving time for her crime, Alecia Gamble was hired by TAN to fix internal financial controls that could address their risk exposure and prevent such a crime from occurring ever again. Unfortunately, rather than fixing internal controls, Gamble used them to her advantage, allegedly stealing between $60,000 and $160,000 through a debit card intended for the purchase of medication for TAN patients.

As the saying goes, “Fool me once, shame on you; fool me twice, shame on me.” Could TAN have taken precautions to prevent this situation, particularly the second time around? Without knowing the financial procedures the organization had in place, it is impossible to know for sure. However, the fact that so much money went missing—practically 20 percent of the organization’s income according to the Form 990s available on GuideStar—suggests that there was a fundamental lapse in the organization establishing and enforcing financial policies and procedures, especially in the areas of segregation of duties and board oversight.

Segregation of duties is basically what it sounds like, splitting up the various parts of a task between employees. The idea is that when more people are involved in managing the finances, someone is likely to catch errors or fraud if and when it occurs. A typical example would be for an organization to have one person check the mail and create a log of all checks for deposit, another person enter this information into the accounting system, and yet another deposit the funds into the organization bank account. If the bank deposit does not equal the amount of income documented on the log, for example, clearly there is an error worth investigating.

On the expense side, a standard example of checks and balances that were likely not procedure at TAN would be having one person with no check-signing authority receive invoices and print out checks as preparation for another person with that authority to review the invoices before signing the checks. This may seem redundant and time-consuming, particularly for smaller organizations that are already strapped for personnel. However, ensuring proper checks are in place saves organizations money and time in the long run, as the case with TAN clearly shows.

Ensuring that the board treasurer reviews the bank reconciliations periodically is another precautionary step that TAN could have taken to catch fraud early on; however, even the most scrupulous of treasurers could miss signs of fraud because they are not in the office day-to-day to know for sure whether charges are legit or not. This is particularly true for organizations with a heavy reliance on organization credit or debit cards, as appears to be the case with TAN.

TAN has since hired a new executive director, Dena Hughes, who brings fresh energy and a commitment to the community TAN serves. Unfortunately, as the organization recovers from two public scandals it’s still paying for, Hughes has found it difficult to get TAN back on its feet. She says that with “two high-dollar employee crimes taking up a sizable share of the agency’s funds, it’s been all but impossible to secure donors and grants.” Hughes summed up the true cost of this egregious breach of trust: “These abuses have a tremendous impact on people who need the services.”—Sheela Nimishakavi