Monday, September 20, 2021

Shattered trust need not be fatal

| September 15, 2021 1:00 AM

Anybody wondering how in the world a local nonprofit could let more than a half million dollars go missing without any alarms going off might rephrase the question.

It would go like this: Why doesn’t it happen more often?

OK, most local nonprofits don’t deal with millions of dollars, a requisite for a huge chunk of cash to go missing undetected. But the cause, effect and, most importantly, the prevention can be understood.

Last week's Press story about the resurrection of Panhandle Affordable Housing Alliance — formerly the North Idaho Housing Coalition — offers something of a blueprint for avoiding the devastating effects of massive embezzlement.

In PAHA’s case, the organization hired a well-known and respected community member named Lori Isenberg as executive director. Nearly two decades ago, Isenberg’s credentials were so solid that The Press hired her to facilitate a newspaper-led effort to overhaul the region’s almost nonexistent child-care facility standards. She did a good job.

Little did anybody know that something inside her was rotten. Lori not only stole some $600,000 from the nonprofit, but she ended up murdering her husband when she thought he’d find out the truth. Sunday's front page interview with Dean Isenberg, the victim's son, was a poignant and pointed portrait of one of the lesser-known victims of Lori's hideous actions.

The Association of Certified Fraud Examiners recently issued a report on Occupational Fraud and Abuse — aka embezzlement — based on data compiled from a study of 2,504 cases that occurred in the workplace between January 2018 and September 2019.

Absorb these statistics and get a sense of how wide and deep this kind of theft runs:

• The median loss caused by occupational fraud was $125,000, with 21% of cases causing losses of over $1 million. Small businesses (those with fewer than 100 employees) had the highest median loss of $150,000.

• 70% of frauds occurred in for-profit organizations, with 44% of the victim organizations being private companies and 26% being public companies, each suffering a median loss of $150,000.

• Over half (54%) of the victim organizations do not recover any of the fraud-related losses.

Many nonprofits — that other 30 percent of victims — are run by volunteer boards. Board members are asked to give their time and, in some cases, financial support, but expertise in fraud prevention and detection isn’t a requirement. They have a passion for the nonprofit’s cause, and because of their innate compassion, they may trust others more than fiduciary responsibilities would dictate.

Well, that’s how someone like Lori Isenberg could steal so much money. It’s happened more times in Kootenai County over the years than anyone can count, primarily because many organizations never make embezzlements known for fear of eroding public trust in the organization.

While there’s no foolproof defense for theft, what interim executive director Maggie Lyons and the PAHA board are doing goes a long way in building barriers protecting the organization’s operations and assets. It’s a model deserving respect and perhaps, emulation.