From WBro Damien of Devotion
It’s audit season for many organizations from Lodges to Australian Public Companies. Audits are often not taken as seriously in community organizations as they should be, often reduced to a “tick and flick” status. One Masonic Centre in the State of Washington USA has recently been lost to poor audit practices… and it’s not the first. Audits are done not just to improve reporting, they’re also done to catch thieves, when done correctly they do.
In recent years, in 2007 a 76-year old "model citizen" of Portland, Maine USA was sentenced to nine months in jail for embezzling at least $430,000 from his Masonic lodge. In 2008, $1.5 million was embezzled from the Grand Lodge of Massachusetts. In 2011 a Maine man pleaded not guilty to embezzling more than $1.25 million from two Boston-based groups of Freemasons and we understand he was convicted. In June 2015 Fredrick McWilliams of the United Supreme Council 33, a Masonic group in Memphis Tennessee, was charged with stealing over $1 million from organisation. These crimes were all committed by Freemasons. The amounts are significant and the phenomenon is not new, indeed Freemasons came to Australia not only as immigrants, but also as convicts convicted of crimes such as forgery, theft, kidnapping, bigamy, and murder and even duelling. Not all “Brothers” deserve the title of Freemason.
In Victoria, I am aware of two significant instances of fraud in Masonic run organisations. While most of the significant amounts of fraud seem to happen in the States, probably by virtue of the large number of Freemasons there and their historic wealth, we too need to be ever vigilant, least we too one day see a For Sale sign on a Masonic Building due to losses affected by internal fraud.
Lodges are not immune to this. The Treasurer’s notes from our Grand Lodge specifically address the contra-entries so often used in lodges. This is when cash expenses are met from cash funds collected with a net entry being shown in the books, or a net amount being banked. Cash is always vulnerable to manipulation and theft. Contra-entries might be expedient, especially for catering costs where we collect cash from attendees and use it to pay the caterer, but this practise creates a very murky environment for auditors and are commonly used by our most impeccably honest of brethren, especially when a treasurer is absent and a cheque book not handy. It was the bane of my life when Treasurer of a local community organisation where honest volunteers would use cash collected to pay for items needed. It was the bane of being a lodge auditor – even when vigilant treasurers kept excellent records of collections and cost. However, contra-entries are a great way for dishonest volunteers and employees to steal cash; no sound from a Corporate Governance System should use them.
In my professional life I’ve seen a lot of anti-fraud notices. In the banking world, managers generally have two weeks compulsory leave; fraud often takes quite a bit of administration and attention and their absence often exposes them. The helpful staff member or volunteer who offers to take control of the finances and “tells you not to worry”, becomes defensive or evasive of any oversight or simply never delivers the material which would allow you to check their work is worth a second look. Ironically, Freemasonry is full of dedicated people who’s honour we trust and who do a large amount of volunteer work, ironically that can leave us exposed to the unscrupulousness, especially where corporate governance is lax and we rely upon people rather than systems. In one of the examples given above, the theft occurred to fund a sick wife’s medical bills; desperate people sometimes do stupid and out of character things and we need systems, not trust, to protect us all against such situations. Professional con-men exploit us because they put us at ease and appear honest and earn misplaced trust.
It is certainly buildings our which offer the greatest risk to fraud. Bogus suppliers, doctored accounts and untraceable cash are all points of failure. One fraudster simply removed funds equivalent to all taxes from their Masonic Organisation’s account and the first the Board heard of it was a notice of forced sale; the money gone, the building was sold to pay the back taxes. There’s lots of smarter ways to commit embezzlement and even large corporations of professionals fall victim to clever schemes or charming crooks. Board and Committee Members need to take an active involvement in audits and monthly accounts – in one recent audit of a public company - the expensive and professional auditor didn’t even notice the accounts did not add up ! The message is vigilance is required and you can delegate a task, but not responsibly.
There are lots of tools to evaluate Risk, but essentially they revolve around impact and probability and then ways to mitigate the risk. The probability of fraud in Masonic Groups might be very low, but the impact huge when a building fund is emptied - as our Brothers recently and disastrously discovered in Vancouver..
With recent changes to the Incorporated Associations Act, organisations like the Collingwood Masonic Centre no longer need to have their books audited. Despite the cost, we continue to do so in the interests of Corporate Governance, but it would be tempting to save the audit fee if cash strapped. Probably one of the best things we do is have three people with electronic access to the bank accounts, giving the oversight of three, and of course two to sign cheques and two to approve electronic transactions automatically give some form of protection. As manager, I have “view only” access to the account but cannot transact on it; good Corporate Governance puts restraints and checks and balances on people like me who are in positions where organizations are vulnerable to fraud. Ultimately, it is the choice of personnel which is critical, but good personnel understand the importance of robust procedures so when they pass the job along, they do so with a robust system of checks and balances in place.
It was not only being Audit Season but a recent blog post got me thinking on this – it was from Chris Hodaap’s Freemasonry for Dummies Blog. 12 August 2016.
The story was first reported in 2014
Here’s a summary of it and the consequence of not having good audit practices. Worth noting that in many of these cases the fraud takes place over 3 to 6 years during which audits are performed.
A Masonic center in Vancouver, Washington has lost its building and charity funds from internal theft by an unscrupulous treasurer, who has subsequently been sentenced to three years in prison. Over a six year period, Jay Garland stole over $800,000 from the temple association. The center was home to 13 lodges, youth groups, and other Masonic organizations and charities.
The lodges are now renting space in the lower level of the Vancouver Elks Lodge hall at 11605 SE McGillivary Blvd, and are making renovations to that space to make it suitable for Masonic activities. For information about how to help the Vancouver Masonic Temple, visit
And if your Masonic organization (or ANY volunteer organization) doesn't have a policy in place for annual audit committees, RIGHT NOW is the time to demand them. Has your lodge put you on an audit committee and you don't have the first clue how to go about it, here's a thumbnail guide from January's Masonic Service Association bulletin here http://www.msana.com/emjan16.asp
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