Chapters in Crisis: How to Recover From & Prevent Chapter Financial Mismanagement

We’ll cover all kinds of troublesome scenarios from chapter financial mismanagement and fraud to AWOL chapter officers and everything in between.
Chapters in Crisis: How to Recover From & Prevent Chapter Financial Mismanagement

Chapters in Crisis: How to Recover From & Prevent Chapter Financial Mismanagement

Sit back and enjoy this new series of posts about chapters in crisis. We’ll cover all kinds of troublesome scenarios from chapter financial mismanagement and fraud to AWOL chapter officers and everything in between.

If we’ve done our job well, you’ll either be reaching for your legal counsel’s phone number (and maybe a drink too) or basking in a glow of self-satisfaction because your chapters are all teacher’s pets—in which case, can we talk?

Your association’s approach to chapter crisis management and prevention depends on your relationship with your components—whether they’re subsidiary or independent. If your chapters are independent, think of them as adult children. You can’t control their life or force them to do anything, but their behavior affects your happiness and reputation. You can only provide advice and support—and hope they choose to receive it.

In this series, we assume chapters are subsidiaries, a situation that brings more risk to National, but also supposedly provides more control. Even if your components are independent, you (and your chapters) will benefit from this advice.

Let’s start with a nightmarish crisis: financial mismanagement. Staff and volunteer leaders with good intentions but limited competence can lead a chapter to ruin. Financial mismanagement—whether it’s caused innocently by incompetence or not so innocently by fraud—harms more than your bottom line. It damages the chapter and association’s brand, and results in a loss of trust that may be even more difficult to recover from than a loss of revenue.

Use Your Membership Portal to Drive Non-Dues Revenue

Chapter financial mismanagement (innocent)

In small staff organizations, staff wear many hats. This tremendous learning opportunity for employees may come at a cost to the chapter if employees don’t have the skills and knowledge needed to handle financial responsibilities.

In volunteer-managed chapters, additional factors increase the risk of financial mismanagement:

  • Insufficient training and orientation
  • Limited time to spend on chapter duties
  • Yearly turnover in volunteer leaders
  • Poorly designed financial policies and procedures


Dealing with chapter financial mismanagement

You just got a call from a newly installed chapter treasurer. The first words out of his mouth are: “I don’t want to get anyone in trouble, and I don’t know how this happened, but I need to fix it.” You find out the books haven’t been reconciled in several quarters and bills are overdue.

It’s hard to see the bright side right now, but think of this as an opportunity to strengthen your relationship with this chapter. How you respond sets the tone for that relationship from here on out. Don’t point blame or shame anyone. Work together towards a solution.

Get your internal finance team on board—you’ll need their expertise. To fully understand the situation, a few calls may suffice. Or, you may need to get someone on the ground who can talk with the people involved. But right now, you’re in triage mode. What does the chapter need to right the ship? A loan from National?

Like a family with serious credit card debt, you need an emergency financial plan. What would Dave Ramsey do? Most likely, give them a plan to limit expenses and grow revenue as quickly as possible.

Capitalize on the buzz around crowdfunding

How to prevent chapter financial mismanagement

Three words: communication, communication, communication. Regular formal and informal communication helps you gain the trust of chapter leaders. They’ll pay more attention to the training and resources you provide, and they’ll turn to you when they need help.



Each relationship between a chapter and National is different. The relationship is based on the strength of the individual relationships (or lack thereof) between volunteer leaders/staff at your association and volunteer leaders/staff at the chapter. Your contractual relationship makes a difference too.

Your relationship (and intel) will improve if you make it a habit to touch base with chapter officers and board members occasionally. You might be surprised by what they share with you. You could catch them on a bad day and they just want to vent. Or, they may want to provide insight into struggles that are occurring without your knowledge.


Training in financial skills

Since finances aren’t everyone’s idea of a good time, keep in mind the 3 E’s: educate, entertain, and engage. Arrange financial training for all incoming officers via a webinar, series of videos, or online learning program. Use your learning management system to track participation so you know who’s completed the training and who hasn’t. For treasurers and board members, provide training that focuses on their specific responsibilities.

Post an interactive guide online for their reference—not a 150 page PDF handbook, please. Provide monthly, quarterly, and yearly checklists.

When needed, provide one-on-one coaching or peer mentoring. Peer-to-peer learning works wonders. At your annual chapter leadership events, ask your most financially proficient chapters to give a presentation about financial management best practices.


In our next post, we share best practices for chapter financial policies and procedures as well as advice on handling and preventing chapter financial fraud.

Related Posts