My friend seemed very agitated. “V’amech kulam tzaddikim” he told me. We were discussing the topic of this article and he strongly feared the possibility of its leading to suspicion of those charged with the management and safekeeping of the assets of our local mosdos. So I am writing the following preamble to prevent this article from being used to generate suspicion or cast aspersions on any individual involved in the finances of community shuls and schools.
Based on my experience as a consultant working with lay people and professionals in day schools around the country, and the many I have come to know over the past 14 years in my position at Torah Institute of Baltimore, my sense is that the vast majority fulfill their tasks and responsibilities with complete honesty and integrity. I believe our mosdos are filled with people who have a high level of yiras Shamayim and go about their (often thankless) jobs with the utmost dedication, all the while being overworked and underpaid.
Indeed, as my friend mentioned, the passuk in Yeshayah seems to be stating categorically that every Jew is a tzaddik by the sole virtue of being born Jewish. If taken at face value, on what basis, then, are mosdos justified in implementing strong internal and financial control policies and enacting measures that can detect or prevent theft and fraud?
In Parashas Pikudei, we learn that Moshe Rabbeinu made a full accounting of all the contributions for the Mishkan that were under his and Betzalel’s supervision. He understood that leaders must take all possible steps to prevent a premise of suspicion, regardless of their high stature.
There is a Mishnah in Shekalim that says the officers in charge of withdrawing the donated funds entered the Lishkah in the Beis Hamikdash barefoot and wearing clothing that contained no hemmed parts, no wide sleeves and no pockets or cuffs, so that it would be impossible for them to hide any coins lest they be suspected of stealing. Chazal tell us it is not enough for one to know that one’s actions are proper in the “eyes of Hashem”; rather, one must act in a way that removes any suspicion in the eyes of people as well.
The Shulchan Aruch writes in Yoreh Deah (249:7) that tzedakah should only be given to those organizations whose management is reliable and has the necessary expertise to manage the funds properly. So aside from the greater confidence such policies inspire, they can also generate a greater willingness in donors to give more.
Anyone who follows current events is aware that fraud and abuse are continually on the rise. Non-profits are no exception. Actually, in many respects, it is easier to commit theft and fraud in non-profits than in commercial entities. The one who opens the mail and finds a non-pledged general donation could easily deposit the money into a fraudulent account and issue a tax receipt to the donor outside the system. Or even in the case of a pledged donation with a recorded balance already on the books, who is to stop the bookkeeper from keeping the check, issuing a receipt and just removing the balance from the books?
Experts in the field of fraud examination with whom I have spoken will tell you we are typically not dealing with evil people with bad intentions at the outset. For the vast majority of people who perpetrate theft, it usually never starts out with the intention of outright stealing. Years can go by during which they actually fulfill their tasks and responsibilities with complete honesty and integrity. Then one day they are faced with an overwhelming expense. Be it a wedding or a large, unexpected medical bill. The pressure can be enormous and the rationalization to “borrow” from the institution’s account is beyond enticing. They figure they will pay it back very soon and no one will ever know the difference. But then they don’t pay it back. And they “borrow” again and again until they are swept up and trapped in a current of theft and deception from which they cannot find their way out.
Aside from the perpetrator who must take ultimate responsibility, it is the board of directors which is guilty of negligence. In many local mosdos, the professional staff or lay people in charge of the finances are often people whom board members grew up with and have known for years. They share in each other’s simchos, their kids play together or they may sit side by side in shiur. Putting absolute trust in such a person is entirely understandable. But for those who sit on the board of a local institution and are charged with safeguarding the hard-earned mamon hekdesh, such blind trust is inexcusable. Everyone assumes bad things can never happen and will never happen — until they do.
Board members of our local mosdos have a sacred and fiduciary duty to take steps that would greatly reduce the risk of fraudulent activity. These steps are not difficult or expensive. Paying thousands annually to hire an outside auditor to conduct a yearly internal control or fraud detection review is not necessary. Rather, a finance oversight committee of two or three responsible laypeople investing one or two hours a month of their time at most is more than sufficient to reduce this risk to a minuscule level. The mere existence of such a committee alone would act as a very effective deterrent.
Rudimentary steps could include reviewing the monthly bank reconciliation and bank statement, reviewing the cash disbursement register, the monthly cash receipts report, and a report of all non-cash transactions recorded in the books. In addition, a system could be set up to inform the staff that donations in checks and cash from both anonymous donors and from community members will be sent in periodically and monitored to ensure complete and proper processing. For online accounts, automatic email notifications for ANY transaction or change should be sent to at least two members of the finance oversight committee. Purchasing a fidelity bond insurance policy should also be considered as a practical step.
In our own community, much ink has been spilled on the issue of living beyond our means. I don’t think anyone can argue that the temptation to build a humongous house, make grandiose chasunos and buy the fanciest cars and clothes is enormous. In America, where everything and everyone must be equal, the pressure to live a lifestyle of the rich and famous can be overwhelming for many. In my opinion, this just increases the risk of fraud and deceit. For the reality is, we all have flaws and weaknesses in some way. And we have not yet reached that future prophesized generation of v’amech kulam tzaddikim that my friend mentioned. At that time, Hashem will purify all the Jews that gather in Eretz Yisrael and the entire Jewish nation will in fact be righteous (May those days come soon!).
But we are not there yet.
So just how should those charged with implementing strong financial oversight and controls do so? They should do so with extreme sensitivity and with a sense of gratitude and goodwill towards the professional staff. And this actually may be the most important point of all. Choosing the members of such a committee (or any lay committee for that matter) is the single most important decision an institution can make. Choosing the wrong individual can have devastating consequences.
Personal wealth has the ability to cause a certain degree of arrogance in a person, either subtly or outright. Some who have “made it” lose awareness that this gift is just that, a gift, a Divine brachah that gives them no right to consider their wealth a result of their “greatness and brilliance,” their kochi v’otzem yadi. Thus, the net financial worth of a person, whether self-earned or by virtue of the family one is born into or married into, should be secondary at best and perhaps not even considered at all. Rather, the primary focus should be on individuals who are professionally accomplished, successful, and respected, yet unassuming and humble. We should appoint to our boards people who are discreet, constructive, who seek to build up, not tear down; and who shun gossip. Yes, they do exist, but they need to be sought out because, true to their nature, they don’t seek the spotlight.
I may be accused of being naïve, utopian, or both, and perhaps it is true. But I believe mosdos that are wise in their ways and zocheh to the proper leadership will end up with these leaders fulfilling this vital function and will reap the tremendous benefits and siyatta diShmaya that will surely follow.
Jake (Yaakov) Goldstein is a CPA and a consultant for day schools and non-profit organizations in finance and administration. He is also the Executive Vice President of Torah Institute of Baltimore. He can be reached at firstname.lastname@example.org.