10 Steps to Deal with Suspected Fraud or Theft in Your PTA

Theft and fraud are relatively rare in PTA, but it does happen. For PTAs that are using best practices when handling money, making deposits, and writing checks, they are even less likely to occur. By being proactive and examining your PTA’s processes and controls, your PTA can better avoid being a victim of theft or fraud. However, if you suspect your PTA has mishandled finances, here are ten steps to take.

  1. To protect from being accused of defamation or libel, do not make any premature accusations. Start with a discreet investigation of the facts, including an audit, documenting any funds that can’t be properly accounted for or that have been misused.
  2. Freeze bank accounts. Conduct no further activity until all facts can be gathered.
  3. Notify your insurance company of suspected theft or fraud. Provide them with the facts you have gathered.
  4. Do not make an offer to not report the theft or fraud if the money is paid back. Such an offer is extortion.
  5. Contact your police department and provide them with the information they request. Do not wait to do this, as PTAs are accountable for reporting theft or fraud. A delay on reporting could be construed as being complicit with the fraudulent activity.
  6. Now let the insurance company and police department do their work and report to you on their findings.
  7. If your PTA is currently required to file an Annual AG-990 Report to the Illinois Attorney General’s Office, you must report any theft or fraud on Item 10 of that report and file an attachment describing the details of the case. Item 10 on that report appears as follows:

10. WAS THERE OR DO YOU HAVE ANY KNOWLEDGE OF ANY KICKBACK, BRIBE, OR ANY THEFT, DEFALCATION, MISAPPROPRIATION, COMMINGLING OR MISUSE OF ORGANIZATIONAL FUNDS?

  1. In the case of findings of theft or fraud, your PTA must use Form 990 or 990 EZ to disclose the dollar amount involved and your corrective actions. You may not use 990N in any year your PTA is a victim of theft or fraud.
  2. During the time an investigation of theft or fraud is being conducted for your PTA, please be careful to manage all communications to protect your PTA image. Use positive messaging such as:

The situation is being handled in a lawful manner. Anytown PTA has already made changes in procedure to reduce the risk of anything like this happening again in the future.

  1. Be extremely discreet about any information naming the suspect(s) to protect any of their children from suffering any negativity or bullying from other kids at school.

Also remember that your Illinois PTA District or Region Director is there to help you through this process, so don’t hesitate to reach out to them.