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Remember: Embezzlers Don’t Want You To Know What They Are Doing

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Click to download this 5-page Accounting Controls Checklist

Far too often, nonprofit board members assume that their organization’s finances are safe because large sums of money haven’t gone missing.  What they don’t know is that embezzlers rarely steal large sums of money.  They don’t want anyone to know that they are stealing money so they do their best to stay “under the radar” in their illegal behavior.  In fact, most embezzlement occurs in increments of $100 – $300 and are recorded as payments to fake vendors.  Sometimes, the embezzlers even create fake invoices to justify the fake payments, further deluding board members who try to track funds carefully.

And, did you know that there is actually a group of criminals who prey on athletic clubs and programs?  Many of these entirely volunteer-run organizations have minimal accounting controls making it easy to manipulate financial data and steal funds.  In fact, just last month, another athletic program fell victim to an individual who stole up to $700,000 from their organization and a local business, both located in Paso Robles, CA. Read the story below.

Protect your organization – and your own liability as a board member – by ensuring that your organization is using proper accounting controls.  Following is a list of several recommended controls any organization can implement to help prevent financial misappropriation.  Employ as many as you can, check references and backgrounds on bookkeepers (volunteer, contracted and salaried) and remain diligent in monitoring your organization’s financial reports and accounts. If you need more assistance in protecting your organization, know that Spokes is always here to help!

Bookkeeper suspected of embezzling from Paso Robles business

By Matt Fountain

[email protected]

March 23, 2015

A Paso Robles bookkeeper was arrested last week on suspicion of embezzling at least $700,000 from a local manufacturing business over a period of six years and possibly embezzling money from the North County youth sports nonprofit where she was treasurer for about seven years.

Police say they are still investigating whether the nonprofit suffered any losses.

Denna Carol Serda, 56, was arrested following an investigation that included a Feb. 5 search of her Paso Robles home and a subsequent review of her personal bank accounts, according to Paso Robles police Sgt. Tod Rehner.

As a result of their investigation, detectives secured an arrest warrant for Serda, who turned herself in to the Paso Robles Police Department on Friday.

She was booked into San Luis Obispo County Jail on Friday on suspicion of felony grand theft exceeding $950 as well as forgery, and the San Luis Obispo County District Attorney’s Office is considering filing additional criminal enhancements for taking property exceeding $50,000, aggravated white-collar crime exceeding $100,000 and the denial of probation for a crime exceeding $100,000.

Rehner would not identify the nonprofit or the private company Monday, but The Tribune has learned they are Make-It Manufacturing of Paso Robles and the Paso Robles Youth Sports Council. Serda is no longer with either entity.

The Police Department said in a news release that Serda is suspected of embezzling more than $700,000 from her for-profit employer between 2008 and 2014. Officers believe Serda also forged more than 450 financial documents in order to embezzle those funds.

Detectives are compiling additional financial documents from the Paso Robles Youth Sports Council; that investigation remained ongoing Monday afternoon.

Greg Powell, president of Make-It Manufacturing, confirmed Monday that Serda was hired as his company’s bookkeeper in 2008.

Powell said he was served with a summons by the Internal Revenue Service, which stated that Serda and her husband, Steven Serda, were being audited for suspicious income. When he met with auditors, Powell said, he was presented with a document on his company’s letterhead approving an employee loan to Denna Serda with his signature at the bottom, which he said was forged.

Before hiring her, Powell said, he knew Serda for years through family and friends, as well as through local youth sports.

He said that he brought the matter to his insurance agent, who is also involved in the Paso Robles Youth Sports Council, for which Serda was treasurer.

“He literally went white,” Powell said. They then contacted police, he said.

Marc Dart, current president of the sports council, said Monday that Serda was one of the founding organizers of the 501(3)(c) and served as its treasurer from 2007 until January 2015.

The nonprofit consists of representatives from local sports organizations, elected board members and liaisons from the city and the Paso Robles Joint Unified School District to advise and petition the city and school district on matters related to youth sports.

Serda’s husband previously served as the sports council’s president beginning in 2006.

Dart confirmed that the organization’s board became aware of concerns about Serda from her employer and asked to discuss it with her. She came in accompanied by her husband, Dart said, and both promptly resigned in January.

Dart added that the organization has gathered financial records and is cooperating with detectives and the District Attorney’s Office.

According to court records, Denna Serda was convicted in 2003 in San Luis Obispo Superior Court for grand theft of more than $400 in property. She served 30 days in County Jail and three years of formal probation and was ordered to pay about $720 in restitution and $700 in other fines.

She remained in County Jail on Monday evening in lieu of $1.2 million bail.

All public phone numbers listed for Steven Serda in Paso Robles were disconnected as of Monday afternoon.

Assistant District Attorney Lee Cunningham said Monday that prosecutors had not yet filed charges against Denna Serda; Cunningham was not able to comment on the possibility of criminal charges against her husband.

Does Your Board Deserve A Raise?

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Time for annual reviews. For many nonprofit organizations, this is the time to review staff performance over the last fiscal year and reward good performance or address poor performance. And, the same is true for your board members. Like your employees, your board members are critical human resources to your organizations and, like employees, they, too, require a performance review.In order to conduct an effective and equitable review, however, you must be very clear in your organization’s definition of “good performance” –  starting at the board level. Board member service isn’t easy.

The men and women who choose to serve as board members for your organization are making a tremendous personal gift toward the welfare of your organization. Their intent is to do good and to strengthen your organization. Honor that intent by ensuring that they understand what your organization needs from them, providing them with the information and education required to meet those needs, holding them each equally accountable to their responsibilities, celebrating those who serve the organization well and “thanking and releasing” those who do not serve your organization well.

Not sure how to start this discussion and review process?
Read Nonprofit Quarterly’s article “Enhance Attrition or Thank and Release? Firing Lousy Board Members” for great tips on how to improve the functionality and health of your board today.

Support Volunteers Who Drive Your Organization Forward

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CalNonprofits is notifying nonprofits of a little-known provision of the Obama Administration’s 2015 proposed budget: an increase in the rate at which volunteers can deduct the costs of mileage when they drive as part of their volunteer work.

CalNonprofits is encouraging nonprofits statewide to send a letter or message to their Congressional Representatives.  Here’s an easy way to get their contact information if you need it, and a sample letter is below.

CalNonprofits acknowledges that, while there are many issues in the budget that have higher impact than volunteer mileage reimbursement, it’s important for nonprofits to speak out on this issue to collectively raise the profile of volunteerism as an important economic and social force for communities.

SAMPLE LETTER

Dear ______

I/we write this letter in support of the Volunteer Mileage Reimbursement Rate portion of the Administration’s 2015 budget proposal. As documented on page 272 of “General Explanations of the Administration’s 2015 Revenue Proposals,” it states:

“Under current law, taxpayers may deduct unreimbursed expenses directly related to the use of an automobile in giving services to a charitable organization. As an alternative to tracking actual expenses, taxpayers may use a standard mileage rate of 14 cents per mile. This rate is set by statute and is not indexed for inflation or otherwise adjusted overtime. . . .  The proposal would set the standard mileage rate for the charitable contribution deduction equal to the rate set by the IRS for purposes of medical and moving expense deduction [23.5 cents per mile].”

We still believe that when taxpayers use their own cars as volunteers to drive patients to doctor appointments, deliver meals to the homebound, or to get to a Habitat for Humanity worksite, they should be able to deduct the same amount per mile that business owners can — which is currently 56 cents per mile. Nonetheless, an increase to 23.5 cents per mile is a helpful improvement from the extremely low and unfair rate of 14 cents per mile.

As was demonstrated in the recent economic impact study of California’s nonprofit sector — Causes Count — more than one in four Californians volunteer, and California volunteers do the equivalent work of 450,000 full-time workers. In nonprofits of all sizes, there are more volunteers than paid staff. In short, California nonprofits are not only major employers, they leverage the work of millions of volunteers in service of their communities. It makes no sense for a lawyer, for instance, to be able to deduct 56 cents per mile when she drives to see a client, but only 14 cents a mile when as a volunteer she drives to a school to talk about the Constitution to high school students.

We urge you to support the inclusion of this provision in the final bill that is passed.

Sincerely,

Name, Title, Organization

10 Tips for Better Board Leadership

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  • Understand Your Role
    Are you the champion, visionary, ambassador, auditor, consultant, or investor?
  • Ask Questions
    Play Devil’s Advocate/Devil’s Inquisitor to create transparency and clarity.
  • Remember Why
    Why does your organization exist?  Whom do you serve? Why is it important to you?
  • Be Present
    “80% of success is showing up!” ~Woody Allen.
    Make attending Board meetings a priority.
  • Partner with the CEO/Executive Director
    Mutual respect, trust, commitment and effective communication.
  • Self-Assess
    Conduct regular assessments to measure Board member satisfaction and overall Board performance.
  • Plan, Plan, Plan
    Continually scan the environment for shifts and plan to meet them.  A strategic vision is like a living organism and needs regular attention and care.
  • Focus on Deliverables
    Micro-volunteering, ad hoc committees, internal vs. external committees; define a governance structure that works for you and allows you to best deliver on your goals.
  • Mentor
    Find your replacement and make sure he/she understands his/her role.
  • Operate For Impact
    Evaluate and quantify program impact so that you can obtain partners and investors.

Want more insight on being the best Board Member you can be? Get in touch with us, we’re here to provide resources and solutions. email [email protected] or call 805-547-2244.

Good News Bad News for Boards & EDs

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Listen up, nonprofit leaders! I’ve got good news and bad news.

I’ll start with the bad: according to Harvard Business Review’s April 2013 issue, corporations share many of the same governance issues that nonprofits do.  It’s both disheartening and comforting to know that good Board leadership and governance is hard to create, manage and sustain in any sector.

The good news is that the issue – and specifically the article “What CEO’S Really Think of Their Boards” – offers some sound advice for both Directors and Executive Directors/CEOs.

First, the article suggests that Directors:

  1. Focus more on the risks that are the most crucial to the future of the organization. Don’t shun risk or see it in personal terms.
  2. Do their homework to understand the issue/industry the organization addresses.  And, stay consistently plugged in.
  3. Bring character and credentials, not celebrity, to the table.
  4. Do more to challenge strategy constructively.
  5. Make succession less, not more, disruptive to operations.

 

One of the most powerful revelations presented in the article came from former SEC chairman and Aetna CEO William Donaldson: “The Board is a social entity.  And the human beings on it – they act like human beings do in groups. The longer individuals are there, the more allies they have, the more they have their dislikes, the more irrational they become in terms of personal conflict.”  He’s amazed that more work has not been done to illuminate “the social contract within a board.”

Donaldson’s comments underscore two key similarities – and often functional roadblocks – in corporate and nonprofit Boards: ownership and the importance of relationship.  Directors of public corporations do not own the companies they are directing.  They sit in their Director roles in service to the shareholders of the company.  Nonprofit Board members also do not own the organizations they lead and are in service of their stakeholders (or beneficiaries of the nonprofits programs and services).

Regardless of the sector, Directors must put aside personal agendas when they step into a Board meeting and abide by the social contract they hold with one another and their shareholders/stakeholders.

The article concluded by identifying three key takeaways:

  1. The entire organization will get more value if the partnership between the CEO and Board is strong.  If governance isn’t working, it’s everyone’s job to figure out why and to fix it.
  2. Most boards aren’t working as well as they should.  Although governed by bylaws and legal responsibilities, interactions between CEOs and Directors are still personal, and improving them often requires the sorts of honest, direct and sometimes awkward conversations that serve to ease tensions in any personal relationship.
  3. The best leadership partnerships are forged where there is mutual respect, energetic commitment to the future success of the organization, and strong bonds of trust.  Great boards support smart entrepreneurial risk taking with prudent oversight, wise counsel and encouragement.

I encourage you to share this summary in your next Board meeting packet and set aside some discussion time to explore everyone’s thoughts and reactions to the article’s findings.  Perhaps doing so could present you with a wonderful opportunity to strengthen your partnership and refine your collective focus for the rest of 2013.

If you would like to read the entire article, please feel free to stop by Spokes.  And, as always, if your organization would like a little extra encouragement, coaching or assistance in facilitating these sometimes daunting conversations, Spokes is here to help.  Just call – 805-547-2244!

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