Many of the tzedakah collections for the poor in Eretz Yisrael and America come with a list of endorsements from many well known Rabbinic figures. The tzedakah organization also asks you to send you donation to the home address of one of those Rabbis. You can send your Rabbi S of Lakewood or Rabbi B of Brooklyn. Or you can send it to Rabbi E or Rabbi S in Eretz Yisrael.
Since these are not the organizations I tend to donate too, I haven't paid much attention to this practice, but always thought it odd that known Rabbis with very busy schedules are being asked to actually handle funds, and presumably some accounting. Additionally, friends of mine who donate to such causes complain that their checks do not get cashed for many months, if at all which leads me to believe that the system is an organizational mess.
Internal controls is an area I'm very familiar with having documented procedures and lead audit teams and follow-up visits to ensure tight internal controls, so allow me to outline some basic proper procedures. The more money an organization deals with, the more internal controls are necessary, especially if workers are dealing with a lot of cash such as in a casino, for example. But these are some sound procedures for small businesses or non-profits.
- Checks are received and opened in a central location.
- As soon as envelopes with checks are opened, they are 1. stamped with a 'for deposit only' endorsement, 2. copied, and 3. entered onto a check log which gives name of donor, designation/breakdown of funds (e.g. dues, Rabbi's discretionary, kiddush).
- All cash and checks should then be put into a locked cabinet or safe and the check log can be passed onto the book keeper. The heavier, more unwieldy the secured storage, the better. Whenever an employee/volunteer leaves the office, the checks and cash should be secured no matter how short the break. (Of course, the number of keys out there and available should be very limited).
- At the end of the day or anytime a certain amount of funds are on hand, money should be taken to the bank for deposit. A copy of the bank deposit slip should be copied and retained with the copies of checks. The computer record should be numbered, as should the paper record.
- These records should be placed into a locked file cabinet, as should any records with sensitive information on them. The organization collecting funds needs to protect sensitive donor information.
- Where a daily deposit is not possible, a policy should be in place regarding how much money can be kept on hand at any one time.
- The person who performs the bank reconciliation should not have access to cash, only the copies of deposits and checks if necessary. Preferably, the book keeper should use the cash log to enter receipts, but in small business and small non-profits there simply aren't enough people for ideal separation of controls. If money for deposits are being passed onto the book keeper with a cash log, a copy of the cash log should be made before passing on the funds.
The Five Towns Jewish Times is running a horrifying story of theft of tzedakah funds being housed in the home of Rabbi Aaron Leib Shteinman. The theft is reported to have taken place on a Thursday night when the Rabbi stepped out for a meeting. The amount stolen is HUGE: $50,000 in cash and much, much more in checks. Worse yet, the police believe it is an inside job by someone who had a key and knew the Rabbi's schedule. It isn't hard to know the schedules of many of the Rabbis entrusted to receive funds since shiurim, smachot, and other communal gatherings are basically public record.
I would add another worse yet: there are probably thousands of names and bank account numbers now floating around, to say nothing of checks that could be compromised. Donors should get advice from their bank on what to do if they have checks received by the Rabbi.
The article adds that from a halachic standpoint the Rabbi is not liable to repay the $100,000 plus stolen. But I hope that this issue won't end at a halachic pronouncement. The practice of having this type of money sitting around is simply bad practice, regardless of the liability under halacha. With an exception of a reasonable amount of cash given to the Rabbi to distribute, I don't think it great practice to burden Rabbonim with the ins and outs of legalities, accounting, and internal controls. I hope this story won't end here, but will spark a discussion of the wisdom of current practices.
Updated: The YWN report states "There is already an audible criticism from askanim, who wish to understand the wisdom of the decision to leave the Rosh Yeshiva’s home vacant with the realization that there was so much money inside. As per Matzav, "Various askanim have expressed criticism of those responsible for Rav Shteinman’s home for not properly guarding the home of the gadol, especially when he is not home."
The criticism shouldn't be that the home was left vacant, although that was a problem. The criticism should be regarding the severe lack of internal controls over cash *and* checks. The organization(s) that the Rabbi collects funds for should be ensuring that internal controls are strong. Money designated for a tzedakah fund really should not be sent to directly to a personal address. It should land either at the organization's headquarters, a locked PO box, or a locked mailbox. I have no doubt in my mind that most Rabbonim who collect funds are scrupulous in their dealings, but honesty doesn't translate into capacity or know-how. Know-how is teachable. But capacity is a different matter. A Rabbi who must attend to students, communal functions, and emergencies, likely doesn't have the capacity to deal with the ins and outs of proper procedure.
Furthermore, even if the Rabbi's gabbaim had stood guard (and were of impeccable character), a home is a completely inappropriate place to be storing this type of cash. Businesses transport less cash and checks in armed cars to banks that are armed with all sorts of security devices.
From the YWN article "On erev shabbos the Rosh Yeshiva was compelled to deliver the harsh news to those who came as they do monthly, expecting to receive monetary assistance, but compelled to leave empty-handed."
I don't know what the weekly distributions amount to, but if they amount to massive sums of money, there needs to be consideration on this side of the puzzle too. I think it always better to distribute checks rather than cash. However, perhaps there are banking considerations in Israel that I'm not familiar with. Either way, if distributes take place on a non-business day, as above, the money needs to stay secure from the time it leaves the bank until it is distributed. Cash is risky.
On both YWN and Matzav there are comments to the effect that people should be sending money to make up for this loss. These comments are simply out of touch. Where did the money come from? Donors. I keep my tzedakah funds mostly inside of my own community, but I can tell you that if massive amounts of money where stolen from a foundation or tzedakah organization because they were unsecured, I wouldn't be writing a check until I was pretty certain that this would not happen again. But I guess others have a different view of tzedakah, one that they should part with, rather than entrust/invest their funds.