If you serve on a house corporation, don’t buy into the notation that brothers don’t steal from brothers. It happens more often than you think. While fidelity insurance coverage can cover some of the loss, if the theft is large, the house corporation will be left holding the bag.

What are the common denominators in embezzlement?

• The embezzler has total control over the funds.
• The embezzlement is not discovered for months or years after it starts.
• The embezzler writes checks to himself
• The embezzler has a debit card for cash withdrawals.
• Once discovered, the board fails to prosecute the embezzler.

Even in fraternities founded on brotherhood and high values, if checks and balances are not in place, dishonesty will occur. Here are some safeguards every house corporation should have in place to deter embezzlement.

Require dual signatures on checks over a predetermined amount such as $500. Even though the bank will still cash these checks with only one signature, the house corporation board and particularly the treasurer will know that standard procedure is two signatures.

Appoint another director or officer to reconcile the bank account each month.

Have an account that prohibits debit card and ATM withdrawals.

Institute online banking so that several officers can review the bank account from time to time. When others are watching, embezzlement is less likely to happen. Have a CPA conduct a yearly review of the corporation’s financial practices.

While none of these measures will completely eliminate a house corporation’s exposure to embezzlement, they do provide major deterrents. They also help mitigate the magnitude of a loss by detecting suspicious transactions early on.

Originally published in the Spring 2014 issue of the Sig House newsletter.