December 19, 2023
Nonprofit Technology & Fundraising Blog
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I have the privilege of helping a number of organizations, large and small, serving on nonprofit boards in various capacities. Recently, I made the jump to the executive board in one of them, and a result, was partially responsible for the group’s finances. Since our treasurer was also new, it was determined we would meet at the bank and change the signatories on the account. We met at the bank several months ago, signed some papers, and just like that, I had access to the bank account- or so I thought.
Like the vast majority of nonprofits, we require dual signatures on all checks from our account. There’s also an approval process that takes care of all levels of expenses. I’ve been used to this system for quite some time, having served on the board for years previous to joining the executive board.
Recently, our treasurer asked me to investigate a deposited check (the details were not available online), so I had to visit the bank. Imagine my surprise when I was told that not only was I NOT on the account, our treasurer (who has been writing dozens of checks) had no authority either! Our account still contained the names of the previous office holders, and in fact the address on record was from a treasurer who left the organization several years ago.
Not only that, in the process of trying to locate my record, the bank asked for our Federal Tax ID number. I had that readily available, and the search uncovered an additional account with a meaningful amount of funds that we did not know existed.
How does this happen? How can people who do not have access to an account make deposits and withdrawals without even being listed with the bank? How can checks with the wrong signature be cashed? And finally, how do additional accounts go unnoticed?
While I already knew the answer, I was still surprised that no one at the bank had stopped the activity or alerted us about the extra account i.e. It’s a well-known ‘secret’ that banks do not check the validity of a signature on a check. My cat could scratch some marks on the signature line and as long as something was there, the check would be cashed. Not only that, though the check says that two signatures are required, our bank made it crystal clear that they don’t check for that either.
What’s a nonprofit to do? Here are my suggestions:
Every year, some $2 BILLION dollars is left unclaimed. Make sure it’s not yours, and make sure that people who have fiscal responsibility are the ones actually listed with the bank.
Jon Biedermann, Vice President of Fundraising Solutions for DonorPerfect, serves on the board of multiple nonprofits and foundations.