If you Google "fire chief arrested for theft" you will get over 4 million results. Headlines range from the theft of department equipment to the embezzlement of thousands of dollars. These chiefs are not alone. Firefighters of all ranks have managed to shame the good name of their department. These types of headlines can make fundraising and a plea to pass levies a challenge.
Theft in the firehouse does not just damage the reputation of a single fire department. The impact is felt across the industry. According to Ohio Attorney General Mike DeWine1, "When theft or misappropriation of assets is reported or even suggested, plummeting public confidence spreads beyond the affected organization and endangers future support for other nonprofits as well." It is a problem that impacts everyone. Here are seven basic steps to minimize the risk of internal theft in your firehouse:
1. Require background, reference and credit checks
Know who is managing the funds. Some of the most likeable people have turned out to be thieves. As Oscar Wilde said, "I can resist anything but temptation." Stop them at the door. The first method in mitigating the risk of internal theft is preventing those with poor decision-making skills from becoming part of the team. It is important to look at criminal history and to also conduct reference checks. A lot can be learned about an individual from past behavior and the feedback of former employers.
Conducting credit checks of team members entrusted with fire department finances is another protection method. Those with a poor credit history are at a higher risk of acting unethically out of desperation and temptation. Often employee theft starts with the intention to pay the "borrowed" money back before others notice it is missing.
2. Internal and external checks and balances
Have multiple sets of eyes to help catch both intentional and unintentional mistakes. Be sure to prohibit the signing of blank checks. Require multiple signatures on checking and other financial accounts. It is important that those approved for signing are independent of one another. Avoid authorizing family members and close friends. If online bill paying is being utilized, ensure more than one person has access to the accounts for routine monitoring.
Reconcile the bank statements monthly by both someone inside and outside of the organization. Cross-reference each check with approved purchase orders to verify the expense was authorized. Avoid having donations, operational checks and other financial documents being sent to home addresses. Have a fire department-owned location, such as a post office box as the point of entry.
Protect your inventory. Routine inventory checks are another internal tool to keep expensive equipment from landing on an Internet auction site. Conducting a quarterly inventory of department-owned property ensures that all property is accounted for and available for use. This prevents a member from "borrowing" something and not returning it.
3. Develop procedures for expense requests and reimbursements
Expense pre-approvals should involve a paper trail with signatures to help prevent abuse. Requests for reimbursement should also require a form and the supportive documentation verifying the expense. Avoid issuing department charge cards to multiple members. Credit card statements should also be closely monitored each month with charges being matched to pre-approval forms and receipts.
4. Set clear leadership expectations
Leadership also has a responsibility. Develop an organizational culture with clear behavioral expectations. Organizations should be using a code of conduct, such the National Firefighter Code of Ethics, as a standard for outlining behavioral expectations. This document won't prevent internal theft, but it can serve as a clear benchmark for member behavior.
A code of conduct should be introduced to all new members during orientation. Not only should they read and sign it, leadership should also go over each point verbally to explain its importance. Each year it should be reviewed with all team members and include updates. A clear expectation of organizational polices and conduct ensures members know exactly where the boundaries lie.
Members should be encouraged to report concerns of dishonest conduct without fear of retaliation or dismissal. Leadership should also have a plan in place to respond to any problems that should arise. The plan needs to include how the situation will be communicated to rest of the team and the public.
5. Rotation and cross training of duties
The rotation and cross training of duties is another way to uncover embezzlement. Not only does scheduled breaks in duty allow issues to be discovered in a more timely manner, but it also ensures a trained replacement is ready to handle financial duties for continuity of business.
6. Routinely change passwords and combinations
Unfortunately, not all members achieve lifetime membership status and some are forced to leave. Implementing a policy to routinely change passwords and combinations after member departure is important. It is also good practice to change all passwords and combinations at least once a quarter.
7. Recognize the red flags
Leadership should always be watching for the potential red flags. Concerning behaviors should not be ignored and need to be addressed immediately. Some of the potential warning signs to watch for include:
- Being territorial and secretive of financial records
- Having an unwillingness to disseminate financial information
- Implementing a change in how records are kept
- Missing financial records
- Debt lacking supportive documents
- Unexpected change in personal behavior
- Not taking vacations or being in favor of rotating duties
- Major variances in revenue and/or expenses compared to previous years
- Reluctance of an audit
- Unpaid bills and late payment fees
- Late or absent financial reports
- Extravagant purchases, trips, or other lifestyle changes
References
- 1 DeWine, M. Ohio Attorney General, (n.d.). Avoiding theft in your nonprofit
See Candice Live at Firehouse World: Candice McDonald will be presenting "Reputation Management in an Era of Citizen Journalism" during Firehouse World in San Diego, Jan. 25-29. Find out more at FirehouseWorld.com.
CANDICE MCDONALD is a firefighter/EMS Officer with the Winona, OH, Fire Department and works for NASA in emergency management. She is the co-chair of the Cumberland Valley Volunteer Firemen's Association Reputation Management Committee, an active member of the ResponderSafety.com outreach team and the Fire Corps State Advocate for Ohio. She is currently pursuing a doctor of business administration with a specialty in homeland security and holds a master's degree in organizational leadership, a bachelor's in business administration, and associate's in health and human services. She is an instructor at Stark State College. Find out more at: www.CandiceMcDonald.com.
