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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Legal
Satisfied Customers: 41220
Experience:  Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
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I am the owner/director of a small nonprofit. Is it considered

Customer Question

I am the owner/director of a small nonprofit. Is it considered embezzlement if I charge personal expenses to my business checking account, assuming that I do not try to claim them as business expenses with the IRS?

Clearly this isn't the best accounting practice, however I already made charges and am now being accused by a volunteer who didn't like the fact that funds given to the company were used in this manner. Also pertinent, I submitted a memo to our records showing the amount of personal charges, and designating a requirement that all personal expenses be reimbursed, which they have been.
Submitted: 3 years ago.
Category: Legal
Expert:  Dimitry K., Esq. replied 3 years ago.

Thank you for your question. Please permit me to assist you with your concerns.

Using a business checking account of a non-profit for personal expenses is most definitely a violation, and depending on the amount of funds removed, can be considered embezzlement. The issue is not claiming the expenses as business or personal, you simply cannot use a non-profit's account as your personal account. the volunteer here is perfectly correct because non-profits especially are rigidly controlled and supervised by the state and federal tax agencies to ensure compliance. This, at the least, can cost your entity's non-profit statues.

Good luck.

Customer: replied 3 years ago.

Is this true if our organization is not a 501c3 exempt organization? My concern here is that the decision was made to use these funds as compensation, however we failed to write a check, thinking the use a debit card and a memorandum on file would be sufficient.


 


Does it qualify as embezzlement if there was no demonstrable malice or attempt to defraud?

Expert:  Dimitry K., Esq. replied 3 years ago.

Thank you for your follow-up.

Malice or attempt to defraud are not factors of embezzlement. All is required is an unauthorized taking of funds with the intent of not returning those funds to the entity. According to "Black's" law dictionary, embezzlement is defined as: "The fraudulent appropriation of property by one lawfully entrusted with its possession. To “embezzle” means willfully to take, or convert to one’s own use, another’s money or property, of which the wrongdoer acquired possession lawfully, by reason of some office or employment or position of trust." Notice nowhere in that definition is malice or attempt to defraud listed as a factor.

If you have any type of entity, non-profit or for-profit, this behavior is not permitted. But for non-profits, a greater scrutiny is owed to the IRS, and if you are non-profit regardless of statute the IRS can use such irregularities as a means of removing the non-profit status.

Good luck.

Expert:  Dimitry K., Esq. replied 3 years ago.
I appreciate your negative rating. Obviously since I wrote the law, or committed the offense, I am the underlying violator here and caused your situation. I wish you well with your further endeavors.