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How to keep your church from getting fleeced

Over the years, I’ve heard many, many sermons on tithing. It’s a difficult topic for pastors, priests and rabbis. I’ve heard great sermons on the topic, and I’ve heard some that were not great.

Churches are businesses, in a way. Their missions are not about money, but their missions can’t be carried out without money. So, every couple years, usually at the urging of the Finance Committee, tithing is the subject of a sermon.

The worst thing that could happen in a church is for the congregation to discover that the tithes they have given for the mission of the church have been embezzled. That disclosure will destroy trust and erode giving.

We might think that fraud occurs less often in churches than in other organizations. Church management and volunteers are good people. The “tone at the top” is based in religious belief.

In fact, the opposite is true. Churches are among the most vulnerable of all entities. As a fraud examiner, I often hear statements such as, “everyone here is like family, I trust my bookkeeper, fraud would never happen here, no one here would steal from us.” In a church, those statements and thoughts are even more prolific.

No one believes it could happen, so internal controls are largely non-existent. When controls aren’t good, it’s more difficult to find embezzlement. When controls are really bad, it’s usually impossible to quantify the fraud even when you know it happened.

It’s prosecuted less often than in other entities because it’s felt that keeping it quiet lessens the impact on future giving. Those factors mean there is more opportunity, while there is less of a deterrent in the form of consequences.

Church staff members, including pastors, often receive small salaries for long hours. That can create resentment and rationalization of being “owed.” Church staff members have the same financial difficulties that the rest of society faces.

Medical bills, a spouse without a job, addictions and gambling problems can all pressure a fraudster into “borrowing” some money from the church. It almost always starts that way. It’s so easy, no one catches it and the “borrower” borrows more instead of repaying the first loan. Soon it’s a regular occurrence.

Methods of taking money vary. If one person has control of cash, they can write themselves checks, pay themselves extra through payroll, open credit cards in the church’s name, steal cash or checks, or pay their own bills with the church checkbook.

In some congregations, it’s common to drop checks and cash off at the church office during the week for special funds like a teen group mission trip. Some people mail checks to the church if they will miss the service that week.

Those are risky practices, unless there are good controls in place.

Fraud risk can be greatly reduced in a church in the same way you would reduce it in any other entity. A few very simple internal controls will make a big difference:

* Background checks and credit reports should be obtained on potential employees.

* Church expenditures should require two signatures. Even an online payment can have two signatures on a paper print-out.

* At least two unrelated people should count the church offering, and there should be periodic rotations of money counters.

* The church treasurer should not count or deposit offerings.

* A finance committee member who is independent of counting, depositing, disbursing or reconciling cash should receive and review the bank statement.

* Use some ratio analysis on financial data. It can show variances that aren’t obvious by reviewing the raw data.

* Track giving patterns, especially currency. Consider sending marked bills through the system to see if they make it through.

* An annual internal audit by someone qualified to do it well is a great control in terms of deterrence in addition to any actual findings and recommendations.

As an accounting professional, I feel obligated to raise awareness of these issues in my own church. It’s not easy. No one wants to hear about fraud risk at church.

Most churches have someone with financial expertise in the congregation. That expertise should be used to help safeguard the church’s finances. Stewardship is very important, and this is just another facet of it.

Gina Bliss, CPA, CFE, is a senior manager at EFP Rotenberg LLP, Certified Public Accountants and Business Consultants, who specializes in internal audit, fraud audit and forensic accounting. She may be reached at (585) 295-0536 or by email at gbliss@efprotenberg.com.

About Gina Bliss