It’s a “real life” Christmas story for members of the Board of Chicagoland Toys for Tots. According to a Chicago Sun Times report (12/20/11), the story began in April 2011 when the Board learned that at least $25,000 had been embezzled. Ordinarily, the charity buys about 20,000 toys each Christmas and distributes them to Chicagoland’s poor and disadvantaged children. Toys for Tots receives hundreds of letters from families and institutions asking for toys. Sadly, this year it appeared so many requests would have to go unanswered, so many children would be disappointed.
Toys for Tots VP Tom Dertz was reported as saying “It’s tough, these are people that often don’t have anything.” As in a Dr. Suess book, it appeared the Grinch had prevailed and definitely stolen Christmas.
Those of us who work with not-for-profits (NFPs) and in governance and compliance for all corporations know that NFPs have the same, if not often greater, risks of embezzlement as any for profit corporation. Why greater for a NFP?
Good NFPs focus on their mission of receiving contributions and spending as much of them as possible in fulfilling their mission (and not growing their organization’s size). So, they often don’t invest in appropriate safeguards for their funds, such as up to date financial reporting systems and information technology. In smaller NFPs, there may only be one person in the organization that has access to the financial records which is not bad, in and of itself, but the system may be lacking the appropriate checks and balances. Sometimes the chairman of the board is also the chief executive officer/president/executive director and this can make it even more uncomfortable and difficult for other board members (particularly those recruited by the CEO) to request or demand access to financial records.
NFP boards frequently are large, which can sometimes lead to a lack of direct accountability or, at least, understanding by board members of their specific responsibilities. NFP board members may think their primary purpose is to contribute financially to the organization or to help bring in new members rather than bring their business acumen to the organization. Even very successful business people who are well qualified to serve as financial experts on publicly traded boards sometimes put down their guard when serving on a NFP board. After all, if everyone working for a NFP with a great mission focuses on the mission, they must all be good people, right? Wrong…
Here’s the account from the Chicago Sun Times (and let’s not jump to any conclusions but let’s just say that this is an example of something that might go wrong in any NFP environment). It’s reported that when Board members were alerted to the alleged theft in April, they started asking questions about one of the charity’s accounts. At that time:
“...a board member resigned, saying that his wife was sick and needed to be cared for, they say. The former board member’s wife — who also volunteered with Toys for Tots — took an overdose of pills at the organization’s warehouse, they said.
Contacted Monday, the former board member strongly denied that he or his wife had done anything wrong. He acknowledged that his wife had been taken by ambulance to Christ Hospital from the Toys for Tots warehouse following an incident in April and said that she’d been diagnosed with bipolar disorder.
The former board member said his home was in foreclosure and that his financial troubles began when his wife “went on a spending spree.” He said he does not believe that she stole from Toys for Tots and that “nothing has been proven” but added that “anything’s possible, because she’s bipolar.”
Police have not spoken to him or his wife since April, he said.”
There are so many stories of embezzlement in NFPs. This one is not so different than any other. Lessons learned? Corporate governance principles applicable to the for profit corporate world are a must for all NFPs, large or small, because no NFP can afford to fail in its mission because of an internal theft or embezzlement.
Like all good Christmas stories, this one has a happy ending. ChicagoBusiness reported today that as a result of the Chicago Sun-Times report, Toys for Tots Chicagoland received an anonymous $25,000 gift made in memory of former Chicago Bears great Sid Luckman. This was followed by sizable donation from CouponCabin LLC, that matched the $25,000 as well as an undisclosed donation from Groupon Inc.
ChicagoBusiness attributes the anonymous donation to Fred Latzko, a real estate developer who did not comment on the donation by said in an e-mail that “Sid Luckman was an amazing person. The situation sounds fantastic for Toys for Tots with such a windfall that maybe they can look to share their fortunate situation with a smaller children’s charity that could be short of donations this Christmas.” Seems Mr. Luckman, who passed away in 1998, inspired Mr. Latsko by making similar donations to children’s charities over the years. (Ironically, Mr. Latzko has his own story…)
Acts of lovingkindness inspire us all. The day has been saved for Chicagoland’s children. All in all, an additional $55,000 was raised to cover the losses.
Happy holidays to everyone!