Ethics 1
Ethics in Nonprofit Organizations
Aleta Ginn
31 Mar 2011
Ethics 2
On 15 March 2010, Eugene M. Naukam III was convicted of 41 embezzlement counts
and one conspiracy count in the State of Oklahoma. His wife, Anna Naukam, the executive
director of Oklahoma Court Appointment Special Advocates (CASA) Association, an
organization for abused and neglected children, was convicted 4 September 2009, of 1
conspiracy count and 148 counts of embezzlement for siphoning hundreds of thousands of
dollars from her employer. Ms. Naukam’s plea agreement included 15 years in prison, 20 years
probation, restitution of over half a million dollars, and court fines. Sadly, this is not an isolated
incident.
The newspapers are full of stories of presidents, treasurers, or directors who have
embezzled thousands upon thousands of dollars from nonprofit organizations, specifically, youth
programs. In Chicago, Theresa Carlquist, the treasurer of Downers Grove youth football league,
was charged with embezzling over $100,000 from the youth sports association. In Los Alamitos,
California, Liza Fitzgerald, the executive assistant for the local CASA youth shelter was
convicted of embezzling $435,000 from the nonprofit youth shelter in December of 2009. In
February, 2011, Colleen Wiley, the former treasurer for three Federal Way youth sports leagues,
was sentenced for stealing nearly $34,000 from the children’s sports leagues.
Who is responsible to safeguard the finances of these organizations? In nearly every
instance, the embezzlement could have been caught much sooner or precluded altogether had the
board of directors taken an active role in the financial accounting of these organizations. In the
case of Gene and Anna Naukam, Ms. Naukam graciously offered to counsel organizations like
the one from whom she embezzled over half a million dollars, in order to help them prevent such
an occurrence from happening again. This type of arrogance is characteristic of the people who
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embezzle from nonprofit organizations. Many of the nonprofit youth organizations are run
solely by volunteers who have full-time jobs and careers in other lines of work. The
organization is seen as an easy target by opportunistic people like the criminals previously
mentioned. These people do not usually see themselves as criminals. They typically immerse
themselves into the organization; they take on duties and responsibilities that no one else wants.
They rationalize that somehow the organization owes them in some manner, and the fact that the
people in the organization sometimes do not act as though they appreciate the efforts of these
individuals only adds to the justification they make in their own minds.
When it comes to ethics, clearly the embezzlers are lacking. However, shouldn’t the
blame be shared by the organization itself? Is it ethical to accept the responsibility of running a
youth organization, to solicit donations from local merchants and families, to persuade parents to
volunteer time and energy to the upkeep of the fields and concessions, but not ensure that the
money generated by registration fees, tournament entry fees, advertisements, etc., is spent in the
best interest of the children?
The people who run the nonprofit organizations are entrusted with financial
responsibility. Individuals, corporations, and government agencies who have donated time and
money towards these nonprofit activities have the right to expect that the elected board of
directors will have safeguards in place to protect the best interest of the youth for whom they are
purported to be aiding and assisting.
I spent eleven years working as the only paid employee for a local nonprofit organization
dedicated to providing services for children, ages 4 to 18. The organization collected several
hundred thousand dollars each year to provide services to over 14,000 children in the greater
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Oklahoma City area. They also raised money to support a $50,000 college scholarship program.
The board of directors was made up entirely of a group of elected volunteers. Most of the people
involved had good hearts and were involved because they had children participating in the
activities. However, over the course of the eleven years, I did have the unfortunate experience of
interacting with a few individuals who did not have the best interest of the children at heart and
were looking for ways to make a profit from the organization.
In most cases, nonprofit organizations could put a stop to the embezzling by putting some
simple controls in place. One of the easiest ways to protect the organization is to hire more than
one accountant or, in a purely voluntary organization, to elect more than one treasurer.
However, this may not be feasible in a small organization due to financial constraints or simply a
lack of volunteers. Therefore, there are three basic steps that an organization may follow which
could help to prevent this unconscionable act.
First, the organization should practice some separation of responsibilities within the
organization. One person should not have access to all aspects of the financial bookkeeping of
the organization. Allowing one person to be responsible for writing, recording, depositing, and
cashing checks gives that one person the ability to change the information without anyone else
knowing what he/she has done. The responsibility of maintaining the checkbook should be split
between two people.
Second, the signature of at least two different people should be required on all outgoing
checks. The person writing the check should not be the same person signing the check. An
invoice for each payment should be required before payment is made. If ever a request is made
for payment without an invoice, a written, detailed explanation should be provided and kept on
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file. Accurate records along with voided and cancelled checks and bank statement should always
be maintained.
Third, having the organization’s financial records audited regularly is one of the best
ways to prevent embezzlement. Audits should be conducted randomly, rather than at a regularly
scheduled time since criminals usually find ways to cover up their acts in time for a scheduled
audit.
These are fairly simple steps to follow that will certainly decrease the threat of
embezzlement. However, unscrupulous people are always on the lookout for ways to take
advantage of the confidence with which they are entrusted by the nonprofit organizations. In the
youth sports organization for whom I previously worked, one individual was crafty enough to
find ways to profit from the organization no matter what the board of directors put in place to
stop him. However, he had served the organization for years and had many friends associated
with the group, and no one wanted to take action against him to put a stop to his activities once
and for all. The board of directors violated the trust of its members by allowing this individual to
continue to pursue his antics.
In a nonprofit organization, the board of directors and volunteers must stand up for the
children and the rights of the benefactors to the organization. It is absolutely unethical to
continue doing business in a manner that allows unprincipled individuals to take advantage of the
trusting nature that is characteristic in a nonprofit organization.
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References
The State of Oklahoma v. Anna Marie Naukam, Defendant, and Eugene M Naukam III,
Defendant. The Oklahoma State Courts Network. 03/15/2010. Retrieved from
<http://www.oscn.net/applications/oscn/GetCaseInformation.asp?submitted=true&viewty
pe=caseGeneral&casemasterID=2508780&db=Oklahoma>
Federal Way Youth Sports Treasurer Sentenced in Embezzlement. The News Tribune.
<http://blog.thenewstribune.com/crime/2011/02/04/federal-way-youth-sports-treasurersentenced-in-embezzlement/>
CORONA: Youth sports treasurer accused of embezzlement. The Press Enterprise. 11/10/2010.
Retrieved from
<http://www.pe.com/localnews/corona/stories/PE_News_Local_D_wcorona10.492bfa4.h
tml>
Police: Livonia soccer club officer stole $100K The Grand Haven Tribune. 10/7/2010. Retrieved
from <http://www.grandhaventribune.com/paid/298842147598038.bsp>
Gates, Garfield. How to Prevent Embezzlement. 31 Mar 11. Retrieved from
<http://hubpages.com/hub/How-to-Prevent-Embezzlement>
Tips for Preventing Embezzlement. 29 Jan 07. Retrieved from
<http://www.associatedcontent.com/article/123463/tips_for_preventing_embezzlement.ht
ml?cat=3>