In The News

Unfortunately, embezzlement in non-profits is as common as a good cause. Port of Hope has treated over 25,000 low income and indigent alcoholics and addicts throughout Idaho since 1971. It is a non-profit organization that provides a valuable service few other organizations can or will attempt.

Barry Meyers, Port of Hope’s President/CEO since 1978, was devastated when he discovered two long time trusted staff members, a mother-daughter bookkeeper team, embezzled almost $1.5 million from the organization over five years. Connie Stills is serving a 41 month prison sentence to be followed by five years of probation. Her daughter, Bobbi George, received a sentence of five years probation.

Port of Hope didn’t have a pot of cash just waiting to be stolen. Connie and Bobbi resorted to creative means to separate Port of Hope from its hard earned revenues: (1) They neglected to make employee withholding and tax deposits to the IRS and destroyed IRS notices before anyone else could see them;  (2) They stopped paying vendors and destroyed overdue notices; and (3) They created bogus financial statements using the logo and format of Port of Hope’s accounting firm. This subterfuge allowed Connie to use Port of Hope funds to pay off $1.2 million in personal credit card bills over five years.

To make a bad case worse, the IRS does not just forgive organizations that fail to remit payroll withholdings and taxes. As Port of Hope’s President/CEO, Barry Meyers is considered the responsible party and is personally liable for repaying a portion of the amount due to the IRS. His monthly IRS payment exceeds most people’s mortgage payment. He’ll be writing a check to the IRS every month for ten long years.

This was a bitter experience for Barry. In his words: “My biggest error, which is probably a factor in most embezzlement cases, was trusting these two people and believing them when they said that we were current in our deposits to the IRS and the payments of other accounts payable.”

He goes on to say, “The biggest thing I learned from this terrible experience has been that yes, you have to trust employees to some degree but you also have to have procedures in place to verify that what they say they are doing, they are in fact doing.”

Trust. But verify.

What is Port of Hope doing differently now?

The non-profit has established checks and balances by separating responsibilities so no one person (or family) controls a transaction from beginning to end. This is challenging when there are only a few people involved in keeping the books, so Port of Hope’s other strategy is to have an independent accountant come on site monthly to check the books and supporting documentation.

The Association of Certified Fraud Examiners reported that organizations that conduct periodic unannounced oversight of their books discover fraudulent activity faster, resulting in half the losses compared to organizations without this control in place.

Barry Meyers has gained wisdom and newfound respect for his fiduciary duty. Other non-profit organizations would be wise to learn from his experience.