How To Stop Financial Mismanagement

EMS leaders often have enough financial and budgetary matters at their respective agencies to worry about without the prospect of theft by one of their own. But as numerous news stories from just about every state in the U.S. can attest, some employees are stealing from their public safety agencies—and the amounts can be devastating for agencies already forced to “do more with less.”

The National Volunteer Fire Council (NVFC), in partnership with VFIS, recently hosted a webinar on Financial Systems Management for Fire and EMS Agencies. The webinar was recorded and is now available on demand.

As detailed in the webinar, EMS managers need to be concerned about and proactively deal with financial management issues. The results from a financial problem can do more than just harm the agency’s balance sheet; agencies will suffer reputational damage within their communities and leaders will often receive negative publicity as well. To say nothing of potential for lengthy legal proceedings, lawsuits and possible jail time that can result from financial mismanagement.

It’s important for EMS leaders and agencies to take the necessary steps to eliminate the opportunity, means and motive for members to even want to commit a financial wrong against the organization. Step one is acknowledging that it’s a possibility at any agency. Initially, a member may intend to borrow a small amount of money he or she expects to repay. When such an act goes undetected, repeated theft may not be far behind. Without oversight this type of loss can go undetected for months, or even years. Fortunately, there are steps EMS agencies can take to protect department funds and the people who handle them.

So, how do you prevent problems?

• Verify officers know their responsibilities.
• Establish a checks and balances procedure for vital functions, including:
  1. Paying of bills.
  2. Auditing your financials.
  3. Monitoring all required functions and duties.
• Keep insurance up-to-date, including:
  1. Bond insurance. (Often bond insurance is obtained on the individuals who are responsible for managing funds; however, the bonds are in small amounts and do not cover all of the funds the organization has that these individuals have access to.)
  2. Management liability insurance.
• Provide guidelines/policies on:
  1. Conflict of interest.
  2. Whistleblowers.
  3. Disposition of records.

Additionally, the following steps should be taken to prevent the misuse agency credit cards:

• Governing boards should authorize who gets a credit card.
• Issue cards in names of specific individuals to maintain accountability.
• Require expense accounts to be submitted and reviewed.
• Perform periodic analysis of individual card users.
• Prohibit the use of department cards for personal expenses.
• Do not use cards that allow cash advances.
• Establish “reasonable” credit limits.
• Establish guidelines for phone or Internet purchases.
• Review bills and watch for red flags.
• Have a reconciliation process and time table.
• Never allow anyone to review and approve their own transactions.
• All transactions should be reviewed by more than one person.
• Be sure to verify that items purchased were actually received.

Finally, here are 10 basic ways to manage theft and loss of agency finances:

1. Have financial policies in writing.
2. Have two members present anytime cash is changing hands, a central location for collecting cash and have two members present when preparing bank deposits involving cash.
3. Have a credit card accountability procedure in place.
4. Require two signatures for checks and only sign after written in full. NO “pre-signing” checks or using signature stamps.
5. Assign a team/committee investment responsibility, not one person.
6. Review bank statements on a monthly basis.
7. Conduct background checks for personnel with fiduciary duties—i.e., treasurer. Placing persons with prior dishonest acts in such positions may result in the voiding of such insurance coverage.
8. If possible, prohibit family members or people with close personal ties from simultaneously holding positions with financial responsibilities—i.e., president and treasurer.
9. Obtain adequate insurance to cover risks associated with various aspects for the organization’s finances.
10. Conduct “audits” of all accounts—regularly by a company audit committee, as well as an independent auditor.

VFIS has a number of additional downloadable resources available on this subject and more.