When a Thief Strikes from Inside

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Retired police investigator Jim Brauch blames himself for the troubles that helped force the South Everett Youth and Community Center to go out of business.

“It’s still on my conscience,” the former board chairman says.

Brauch believes he should have seen trouble coming for the small youth center in Everett, Wash., 25 miles north of Seattle. The center featured an indoor basketball court, a game room and a $130,000 annual budget. Its long-established boxing club had produced national amateur contenders and some modestly successful pros.

But when Brauch suggested in 2003 that something seemed amiss in the center’s finances, fellow board members looked at him askance. “They asked me how I could think this way about our wonderful executive director,” he recalls.

In January, that executive director was charged with felony theft. Snohomish County prosecutors say Pamela Ann Bracy used center credit cards to buy a new washer, dryer, refrigerator and various building supplies for her home, while making other apparently unauthorized withdrawals from center accounts, according to papers filed in state Superior Court.

Brauch says those charges should offer a cautionary tale for all youth agencies.

It’s impossible to tell how often youth programs are victimized by their own employees and volunteers. Internet searches produce such stories as these:

• A 52-year-old coordinator of youth traffic-offender programs in the Kansas City area pleaded guilty in 2004 to stealing close to $100,000 to feed her gambling addiction. She was sentenced to one year in prison.

• A 48-year-old soccer coach pleaded guilty in 2002 to stealing from the Azalea Youth Soccer League in St. Petersburg, Fla., after $11,500 was discovered missing. He was ordered to repay the money.

• The 38-year-old wife of the president of the Chippewa Falls (Wis.) Youth Football League was sentenced in 2001 to six months in jail and ordered to pay back $11,506 for league checks that she issued to herself. She killed herself before going to jail.

• Last month, the 53-year-old director of the Johnny Gray Jones Youth Shelter in Bossier City, La., was arrested for allegedly using credit cards of Bossier Parish’s Office of Community Service for $5,000 worth of personal purchases, including trips and shopping on the Internet.

Many thefts from youth programs might seem small-time when compared with corporate scandals such as Enron Corp.’s, or the more than $1 million allegedly embezzled in the 1990s from a Red Cross chapter in New Jersey by its CEO and his bookkeeper. But the consequences, especially for small organizations, can be devastating.

How it Happens

Youth-serving agencies that have been victimized by internal financial crimes tend to share some operational patterns that make them vulnerable: too much authority given to one employee; easy access to cash or credit cards; few oversight procedures to keep track of financial activities; and too much confidence that such a thing won’t happen in a place where people are helping kids.

In the St. Petersburg soccer league case, the coach had helped to build the league, had a daughter in the league and always seemed eager to pitch in. He and his wife also ran a concessions stand for the league.

At South Everett, the finances were slowly, quietly getting worse for over a year, until the center ran out of cash in January 2004 and shut down.

Brauch and others wondered: How could Everett’s oldest youth center, built in the 1920s, go from having $32,000 in the bank in December 2002 to being $34,000 in debt about a year later?

Brauch spent days and nights poring over records, trying to discern what happened. He eventually took a 3-inch-thick file to the Everett Police Department, where he used to work. Brauch says the file held evidence of about $15,000 in transactions that he suspected were illegal. Some involved a center credit card that Bracy was able to use with little or no oversight.

Even if the theft is proven, it’s not certain that was the main reason for the center’s collapse. Bracy’s case is pending. Her attorney did not return calls seeking comment.

What to Do

For victimized agencies, the financial loss can be just the start of the headache.

Some agencies resist reporting thefts to police, fearing that publicity could damage their reputations with funders, says Melanie Herman, executive director of the Nonprofit Risk Management Center in Washington, D.C.

Some try to recoup losses though debt collection agencies, she says, although insurance companies often insist that the organizations press charges against those who steal.

When a mother and daughter from Springfield, Va., disappeared last August with $4,483 in proceeds from cookie sales, the Girl Scout Council of the Nation’s Capital did not call police, even though the amount involved could constitute a felony. As is its policy, the scouts pursued the loss as a bad debt, which can eventually be turned over to a collection agency.

“Generally, most [Girl Scout councils] do that,” says Laura Bassett, product sales specialist for the council. “We don’t let them get away with it, but we don’t use the courts.”

Herman says organizations need a consistent policy to press charges or demand reimbursement, no matter who did it or why, because stealing must have a price.

Brauch says he pushed for prosecution in the South Everett case in large part so that the former director, if convicted, will have a criminal record that other organizations can find out about if they consider hiring her.

As for protection, most risk management experts agree that segregation of financial duties is the best way to prevent such theft or find out about it quickly. “Segregate duties so one person cannot manage every stage of a financial transaction,” the Risk Management Resource Center advises on its website.

That generally means that no employee should handle a financial transaction from beginning to end, and employees who handle cash should not have access to the accounting books. For example, in many agencies, the person who cuts checks is not the same person who signs them.

Marshall Davies, acting executive director of the Public Risk Management Association, advises administrators to “talk to an accountant. They’re the ones who advise on how to set up a good system against theft and fraud.”

Brauch offers several lessons from the alleged theft at the South Everett center. For starters, take care in hiring. “Look more deeply,” he says. Risk management experts advise criminal background checks for all new hires.

Pay more attention if someone in the operation suspects that something is going wrong, even if the idea seems farfetched, Brauch insists.

Establish policies for systematically reviewing financial transactions, so new employees expect such oversight. Brauch notes that those looking to steal might start testing the system early to see if anyone is watching closely.

The South Everett center’s board of directors turned the center and its debts over to the Boys & Girls Clubs of Snohomish County. The facility now runs as the Cascade Extension Site of the South Everett/Mukilteo Boys & Girls Club.

Brauch doesn’t talk about the center without mentioning the youngsters who knocked at the door during the dark hours he was inside alone trying to figure out where the money went. He says they were the same type of troubled kids he had seen as a young police officer – especially the 15- to 17-year-olds who seemed to have no place to go.

“We filled a niche,” he says sadly.

Contact: Nonprofit Risk Management Center (202) 785-3891, www.nonprofitrisk.org; Risk Management Resource Center (703) 528-7701, www.eriskcenter.org.