RSM Resources

Collectively, not-for-profits represent a significant portion of our gross national product and employ millions of people.

Approximately 50 percent of these organizations are in the human service sector. They help mentally challenged individuals live independently, provide housing and services to dependent seniors and offer services to the economically or socially disadvantaged. These activities and services may supply employees with access to clients’ financial assets such as assisting with managing checking accounts and bill paying. Longtime employees in these organizations sometimes develop close relationships with clients.

Your organization’s care and concern for clients, demonstrated in part through these close relationships, are important elements in organizational success. They can also represent a business risk that should be acknowledged and managed.

While the vast majority of employees will honor and respect professional boundaries, the dishonest employee may manipulate a relationship to defraud your client. The reputation impact may be even greater, and more lasting, than the immediate economic impact. To further complicate the issue, legally there are no bright lines defining when activities and relationships are within the scope of employment and when they are personal friendships. Employers have no legal right to regulate personal friendships.

Following are best practices that will define a framework for employees, provide for an annual affirmation from employees and outline policy violation outcomes. Your attorney should review policies for this key component of your employee handbook. 

Employee handbooks should include policies related to:

• Allowable and non-allowable access to client financial information, as well as periodic statements and account numbers
• Signature authority on client accounts
• Gifts from clients
• Ability to serve as Power of Attorney, trustee or be named as beneficiary for clients
• Policy violation outcomes

Annual reporting to management by employees should include the following:

• Statement describing existing relationships with clients
• Affirmation that they have read and understand the policies
• Affirmation that no unallowable relationships exist

While written policies and annual reporting to management by employees will not prevent every occurrence, they will define expectations, support client confidence and leave no doubt about management’s path should a violation occur. 

Susan Davis is a partner with RSM McGladrey. For further information contact her at susan.davis@rsmi.com.