"Cooking the Books" - The Widespread Embezzlement of Local Theatres
Running a theatre company can present a number of challenges. Most importantly, no one can truly do it by themselves, they need help from others to not only handle what's going on stage but behind the scenes as well. This means bringing others into the fold, often placing an incredible amount of trust in certain people to handle major tasks within the theatre, including its finances.
While the vast majority of individuals serve these roles honorably and honestly, there are some who take advantage of the access they have and their actions could result in dire circumstances for the theatre company. Especially when certain people are stealing funds directly from the theatre itself.
In 2010, Mary Strand was named the Executive Director of the Fort Peck Fine Arts Council(FPFAC) in Fort Peck, MT. The non-profit group ran the Fort Peck Summer Theatre. While the FPFAC thought they were getting a model employee, Strand was eyeing the FPFAC as her own personal piggy-bank.
Soon after her hiring, Strand began to illegally use FPFAC's First Security Bank of Malta credit card for $50,579 worth of purchases from December 2011 to November 2013, court documents state. She then used FPFAC's second First Community Bank of Glasgow credit card from February 2011 to November 2013 for $6,814 worth of purchases.
Strand was also accused of laundering $3,000 through money orders purchased at the Glasgow Post Office made payable to others but deposited into her bank account. Strand also stole $8,037 from FPFAC from November 2010 to September 2013 through cashed and deposited checks, cash withdrawals and electronic payments from Valley Bank in Glasgow, according to documents. Strand was also accused of stealing $14,830 worth of cash from FPFAC and depositing it into her Independence Bank of Glasgow personal checking account.
The earliest credit card charge of the nearly 400 listed was $60 to a Super 8 Motel in Hamilton in January 2011. The final payments of $39.99 and $29.99 at a Best Buy in Missoula were recorded Nov. 25, 2013.
When Strand was finally done raiding FPFAC's finances, it totaled over $83,000.
Among the vast amount of purchases, Strand seemed to have spent FPFAC's money on pretty much everything she could. The list includes:
- Roughly $5,000 in payments to “UM Registration.”
- More than $3,000 in payments to Dish Network.
- $105 at a Missoula PetSmart.
- More than $5,000 in payments to Allstate.
- Multiple payments to Albertsons(Grocery Store)
- $2,457 to Valley County Tax.
- More than $2,500 to Wal-Mart stores in Havre, Missoula and elsewhere.
- $1,300 to exercise equipment retailer Global Fitness.
- Hundreds of dollars in Verizon Wireless payments.
- $690 to a Havre Radio Shack.
- $110 to Florida restaurant Rusty Bellies Waterfront Grill.
- $823 at Glasgow Eye Care.
- $790 at the Glasgow Auto Safety Center.
- $228 to the San Diego Zoo.
Cornered with the overwhelming evidence of a two year investigation, Strand was arrested and charged with multiple counts of theft of property by embezzlement and one count of money laundering. She faced up to 15-20 years in prison for her crimes. However, after pleading guilty and paying back nearly $60,000, Strand was sentenced to a 5 year suspended sentence and only spent 30 days in jail this past summer.
During the trial, it was pointed out how much control of the finances Strand had and how little oversight there was from the FPFAC. The popular comment was that they will now have protocols set up to prevent this in the future. But given how blatant and easy Strand's spending was, it's quite shocking how this wasn't noticed for two years. They don't call it "taking candy from a baby" for nothing.
As shocking as Strand's thievery is, unfortunately, it's not uncommon. There are countless incidents of embezzlement of theatre programs all over the country.
- In August 2014, Former Moon River Theatre controller, Dawn Cleveringa, admitted to embezzling more than $678,000 from the theater. She admitted she made unauthorized payments to herself, and unauthorized payments of her personal expenses, from funds of the Andy Williams Moon River Theatre in 2007 and 2008. To disguise her theft, Cleveringa manipulated the accounting system of the Andy Williams Moon River Theatre.
- In January 2015, former New Jersey City University theatre production manager, Kathleen Peet, plead guilty to stealing more than $87,000 from the university between 2004 and 2013. The university initially discovered that deposits made to the school's bursar didn't match box office receipts.
- In June 2015, the Colonial Theatre’s former finance director, Gale Saleski, admitted to stealing more than $100,000 from the nonprofit between January 2010 and January 2014. Saleski forged executive director Alec Doyle's signature on six checks totaling $4,696. One of these checks, in the amount of $2,500 was issued to Subaru of Keene as a down payment on a 2014 car. Three other checks were issued to “Cash Gale Saleski.”
- In May of 2016, the former director of finance and administration at the Landmark Theatre in Syracuse, NY, was charged with embezzling roughly $16,000 from the theatre. According to police, Steve DiMarzo used the Landmark credit card between April 2015 and December 2015 and spent the money on on clothes, restaurant meals and gas for his car.
- Last year, the managing director of the theatre program at Rhode Island College was arrested for embezzlement. James L. Taylor was accused of stealing more than $60,000 from the school. Over a three-year span, according to State Police, Taylor requested multiple checks from the RIC accounting department to pay businesses on the theater's behalf. None of the checks was written out to him. However, the State Police allege 38 checks were deposited into his personal bank account "and used for his own personal gain." The total came to $60,397,17.
As you can see, the number of situations like these are numerous. Just Google "theatre embezzlement" and you'll see plenty more. So why is this happening so often?
Well the first answer is, especially with smaller companies, lack of oversight and control. With everyone scrambling to put together shows, attention can easily be diverted from overseeing the back end finances. And when you have a leadership team not knowledgeable in accounting, someone with experience can easily take advantage and cover their tracks. So how can theatres protect themselves from fraud like this?
First of all, keep your eyes open for these warning signs of fraud or embezzlement:
- There is an unusual drop in your profits.
- Your records are disorganized.
- There are unexplained changes in your accounting records.
- There are unusually large or numerous credits to a particular customer.
- An employee's standard of living changes to a degree that is inexplicable based on her salary.
- Documents are missing.
- Bank deposits delayed.
- Customers are complaining about having already paid a bill.
- There are too many increases in past due accounts receivable.
- Check amounts are altered.
- Duplicate payments are made.
- Bank reconciliations have too many outstanding checks.
- Too many payments are being made to individuals with the same name or address.
- Vendors' addresses are the same as an employee's address.
- Bank reconciliations are late.
- Accounts receivable and payable don't balance.
- The petty cash fund is disappearing.
How can you prevent embezzlement from happening? Well a good start includes:
- Deposit daily and reconcile monthly. Leaving cash sitting around is too tempting for some employees, and reconciling the bank statement each month helps you catch irregularities sooner rather than later.
- Separate financial duties of employees. For example, the employee who writes the checks should not be the employee who reconciles the bank statement.
- Keep track of petty cash. The money in a cash drawer can prove too tempting for some employees. Require that all petty cash transactions have a petty cash slip or log to support them, and require two signatures on petty cash refill checks.
- Periodically, have an unrelated third party review your books and accounts. This doesn’t have to be a comprehensive audit of every transaction -- spot checks will do. The cost is minimal and the deterrent can save you thousands.
When only a couple thousand dollars can be the difference between whether or not the lights stay on, theatre companies need to be cautious and thorough when it comes to deciding who handles their finances. Because as guilty and despicable as these people are, if they were able to do this because of lazy practices within the theatre company, then in some ways, the theatre companies have only themselves to blame.