Archive for the ‘Theft’ Category

Safeguarding Against Volunteer Theft

Protecting your funds and equipment

We have seen a growing number of theft occurrences in youth sports organizations by trusted directors, officers, and other volunteers.  Such theft can take the form of embezzlement or the taking of equipment.  Media accounts of such activity are backed up by the recent claims paid out by our insurance carriers.

The primary reasons for volunteer theft are dire financial circumstances often attributed to personal financial problems and gambling addictions.

Youth sports organizations present the perfect opportunity for theft because most aren’t run as a true business and limited or inadequate controls are put in place. These organizations are often run by a small group of volunteers who have build up a great deal of trust among one another.

Below are some common sense controls that can help to limit volunteer embezzlement and theft of equipment

  • Require a countersignature on all checks or checks over a certain amount.
  • If you allow the use of credit or debit cards, make sure that the monthly statements are reviewed by someone who is not authorized to use the card.
  • Collect checks instead of cash during fundraisers.
  • Keep detailed inventory records of all equipment and require a log to be kept when equipment is assigned or checked out.
  • Create an audit committee to review all financial records, account statements, and conduct an inventory of all equipment.

In addition to these safeguards, all sports organizations should carry a Crime Insurance policy that covers employee dishonesty, forgery and alteration, and theft of money and securities. Such a policy should be specially endorsed to cover theft by employees and officers.

Little League Fraud and Embezzlement

Insider crime leads to big league problems

Vice Sports recently published a story on embezzlement and fraud schemes and apparently lax financial management system in Little League across the country. In “Little Big Crime,” Vice Sports reports volunteer staff embezzled or stole close to $2 million from within 37 Little Leagues in 2009, with 19 of those cases taking place in the last two years.

Every parent, coach, administrator and officer of a youth sports organization should read the article. The point of the story isn’t to paint Little League as a corrupt youth sport organization. The fact of the matter is that embezzlement in volunteer-run organizations and the high dollar amount of funds that go missing aren’t uncommon. It could easily be happening in your organization right under your nose.

We’ve been posting articles on fraud and embezzlement within youth sports for quite some time and offering tips on how to prevent such crimes. If I’ve heard one, I’ve heard a hundred administrators of sports organizations say it could never happen to them. Well, the first few paragraphs of the Vice Sports article illustrates just how shockingly vulnerable every organization is. Over a six year period a trusted and well-respected man serving as a trusted Little League vice president for over 15 years stole more than $200,000 before the crime was discovered.  After accounting for the interest payments on unnecessary loans he took out in the league’s name, the ultimate cost to the league was in the range of $270,000.

Protecting your organization

Needless to say, without a Crime Insurance policy, there’s little hope of ever recovering that money. Crime Insurance protects organizations from employee dishonesty, forgery and alteration, and theft of money and securities. Such a policy should be specially endorsed to cover theft by employees and officers.

It can’t be stressed strongly enough how important it is to put safeguards in place to prevent theft of registrations fees, concession profits, fund raising money and abuse of credit cards and bank accounts. If you or someone other than the person handling the finances of your organization hasn’t checked the books and bank statements lately, do it today.

And if your organization doesn’t have a Crime Insurance policy, call us today to discuss your needs and get a quote at 800- 622-7370.

Source: Aaron Gordon, “Little Big Crime:The Multimillion Dollar Little League Fraud Crisis,” 06 Oct. 2014.

Crime Insurance for Sports & Recreation Organizations

Employee/volunteer theft are more prevalent than many realize

Sports and recreation organizations can have significant assets at risk from the traditional employee or volunteer embezzlement and the modern perils of electronic fraud. Most sports organizations are not properly insured for these exposures and don’t have adequate risk management controls in place.

The Commercial Crime policy form (ISO CR 00 20 05 06 and CR 00 21 05 06) offers the following coverage parts that may be individually purchased:

Employee Dishonesty Provides coverage for employee theft of money, securities, or other property such as equipment. Employees are defined as regular employees, temporary workers, leased workers, trustees of employee benefit plans, interns, managers, directors, or trustees.

If applicable, it is critical that sports and recreation organizations request special endorsements to extend coverage to theft from volunteers, non-compensated officers and members of specified committees, specified directors and trustees on committees, partners, LLC members, computer software contractors, agents, brokers, or independent contractors.

It is also important to purchase Employee Dishonesty coverage on a blanket basis that protects against theft from all employees or others in a designated class as opposed to specified employees or others who must be individually named on the policy. Sports and recreation organizations experience a high rate of personnel turnover. It’s not uncommon for an organization to fail to update the list of specified employees.

Forgery and Alternation Provides coverage for forgery or alteration of a check, draft, or promissory note drawn against the insured’s accounts.

Money and Securities Provides coverage for theft, disappearance, or destruction of money and securities from either inside the premises/banking premises or outside the premises. Coverage may also be extended to robbery or safe burglary of other property.

Computer Fraud Provides coverage for financial loss due hacker access effecting a fraudulent transaction. An example of computer fraud occurs when company A sells services to company B. An employee of company B hacks into the computer of company A and changes the bank routing and account numbers. The next time a payment is made foElectronic crimer services, the funds are fraudulently transferred to the employee instead of company A. According to a 2008 survey by Computer Security Institute, the average financial loss due to computer fraud was $289,000.

Electronic Funds Transfer Fraud Provides coverage for financial loss due to a hacker access to a financial institution, accessing an online account, and circumventing normal online authentication controls to affect a fraudulent wire transfer. An example of this type of fraud occurs when a hacker gains bank account and password information by planting a Trojan virus in an email attachment sent to a company bookkeeper. When the attachment is opened, a keyword logger is launched that secretly obtains account and password information. The hacker accesses the online banking system and completes a fraudulent electronic wire transfer. According to a 2008 survey by Computer Security Institute, the average financial loss due to funds transfer fraud was $500,000.

Money Orders and Counterfeiting Provides coverage due to loss by good faith acceptance of money orders that are not honored or counterfeit money.

Traditional Crime Risk Management Controls

Many smaller organizations are not run as serious businesses and as a result don’t have strong risk management controls to protect against employee and volunteer dishonesty. The key to preventing insider dishonesty is separation of duties so that no single person has total control over any one process or audit procedure. Below are recommended controls:

  • Require a countersignature on all checks or on checks over a certain amount.
  • The person who reconciles the bank account should not be authorized to deposit or withdraw funds.
  • If credit cards or debit cards are used, authorized users should not be tasked with reviewing the monthly statements.
  • Keep detailed inventory records of all equipment and require a log to be maintained when equipment is assigned or checked out.
  • Create an audit committee to review all financial records, account statements, and to take an inventory of all equipment.
  • Collect checks instead of cash during fundraisers.

Electronic Crime Risk Management Controls

Pfishing scams, Trojans, key loggers, and similar techniques allow hackers to gain access to online banking transactions and to circumvent standard online authentication controls. Internal controls such as antivirus software, firewalls, and employee training are critical but don’t offer 100 percent protection. Computer Fraud and Electronic Funds Transfer Fraud coverages are strongly recommended.

Get a Quote

Contact Sadler Sports & Recreation Insurance at 800-622-7370 for a Crime Insurance quote. We have an existing Crime Insurance program available for smaller, locally-based organizations for as little as $175, which includes coverage for Employee Dishonesty, Forgery and Alteration, and Theft of Money and Securities. Larger sanctioning and governing bodies will be asked to complete an application that outlines your financial risk management practices and we will be able to provide a proposal within several days in most cases.

League President Accused of Stealing $800,000

Preventing volunteer theft

A North Texas soccer league is reeling after news broke regarding inside theft of club funds. Parents of the Solar Soccer Club players are alleging that the trusted former club president  stole hundreds of thousands of dollars, leaving them in the lurch financially. David Ringer is accused of siphoning more than $800,000 from them over the last five years, and was apparently the last man many of them would suspect.

A sports organization must implement procedures to protect against volunteer theft such as counter signatures on checks, bank statement reconciliation by someone not authorized to deposit or withdraw, and an annual financial audit by the board. For more information on reducing the risk of volunteer theft, see our article Crime Insurance for Sports & Recreation Organizations.

Below is yet another example of volunteer theft in youth sports.

Source: Brett Shipp, WFAA, April 9, 2011.