Hi Tara -- I'm sorry to hear you're going through that situation. When embezzlement happens, it's hard on the whole group -- and especially people like you who are stuck cleaning up the mess. First of all, the money was taken from the PTO so it's your decision whether to report it or not. If you decide to do that, your call wouldn't be to the school lawyer, it would be to the police.
My question is how much was stolen? If it was a few hundred dollars and a small percentage of your total treasury, you might consider trying to work things out. But if it was a few thousand dollars and it occurred over a period of time, then in my opinion you should report it to the police. If you don't report it, then there's a chance that this person could do the same thing to another nonprofit group. You might think it's unlikely, but you probably thought it was unlikely she would steal in the first place.
The principal is concerned that the school and your group will suffer when this becomes public. He's right, especially if a lot of money has been stolen. You will need to work to regain the trust of parents again. The first thing that you need to do is demonstrate that you've put financial controls in place to make sure this never happens again. Start by making sure someone who is not a signer on the checking account reviews the bank statements every month.
The article
5 Smart Financial Controls
details some of the other steps you should take.
Best wishes, and please let us know how things go.
Craig
