How Secure Are Your Donations?
- In 2015, a long-time pastor of Greater Cornerstone Baptist Church in Tulsa Oklahoma was sentenced to 37 months in prison due to embezzling $1 million from a community center he helped to establish. (Source:FBI)
- In 2015, a church Treasurer of a Nazarene church in Missouri was sentenced to 21 months in prison for embezzling $192,000. The scheme included unauthorized purchases with church checks at local Walmart stores. (Source: FBI)
- In 2015, a former Financial Manager of an Electric Cooperative and Church Treasurer pled guilty of stealing over $350,000 in both Cooperative and Church funds by in many cases forging checks drawn on both organizations’ bank accounts. (Source: FBI)
- In 2015, a woman pled guilty to stealing nearly $83,000 from a United Methodist Church in Florida. As a financial secretary and business manager, she manipulated the church payroll and benefits deductions. (Source: FBI)
- In 2014, a church secretary/bookkeeper of a church in South Carolina was sentenced to 24 months in prison for embezzling over $600,000 of church funds. (Source: FBI)
Embezzlement and fraud are happening more often than we would like to think in our churches today. A Forbes article stated that possibly as much as 95% of fraud within churches goes undetected or unreported. Some of you might be asking, “How does this happen?” This issue is of importance to you if you are a pastor, a staff member, or give to a church. You want to ensure the church is being a good steward of their funds. If any organization should know about money, it should be churches. A Greg Laurie article mentions that the Bible has more than 2,000 verses on money and that 15% of what Jesus taught was about money and possessions.
What should churches do to ensure that fraud and embezzlement do not happen? Many of these internal controls are applicable to any business or organization.
1. Separate the person handling cash and checks from the person entering them into the system.
The person that collects and counts the checks and cash should not have access to the giving database system. Why do I say this? It can be easy for cash or even checks to be embezzled because they never make it into the system and nobody knew about it. All contributions and receipts need to be attributed to a person, but the person making these entries should not be collecting cash or checks to allow for proper separation of duties.
2. Always have two people counting offerings.
There might be cases, especially in small churches, where it is hard to implement the first step. Always having two people count offerings from services and money boxes is the best procedure. The count totals should be signed and checks should be stamped “For Deposit Only” as soon as received. Cash that has not already been put in an envelope should be put in an envelope with the amount on the outside and signed by two people. It is best to have a separate person complete the deposit slip and take the checks and cash to the bank. I would not recommend allowing any cash or checks off-site except to be taken to the bank. Keep it all in a safe until it can be deposited on the next business day.
3. Have the right person do the bank reconciliations promptly each month.
The person who enters the bills into the accounting system should not be the one doing the bank reconciliations. This might be difficult in a smaller church, so in this case, make sure that all bank reconciliations are thoroughly reviewed by someone with accounting knowledge. Be sure to do these bank reconciliations promptly to get the most benefit and detect issues.
4. Proper review of checks runs
It is good to have two signatures on the checks, especially on those for larger amounts. But this might not be enough. One case mentioned above was embezzlement through forgery. It is best to run a report of all checks and disbursements each week and have another person review the bills, checks, and transactions disbursed. The person reviewing should look for checks in chronological order. The reviewer should recognize the vendors and purpose for payment. Finally, the reviewer should compare the bill to the check run list printed directly from the accounting system.
5. Payroll review and comparison to budget
One case mentioned above was a person who embezzled due to manipulation of payroll. A person other than the one processing payroll should review any payroll change reports and payroll registers for accuracy. Any changes in salary or deduction should be supported by an approved raise letter or change in deduction policy. Compare all expenses, especially payroll to the budget, or even better, the latest forecast for a better control.
It is easy to get lax on these controls. Sometimes they seem like more work and it is just easier to have the person with the most knowledge do it all. Everyone thinks it will never happen at their church. Many organizations have complete trust in the person taking care of these tasks. This is great. Why not protect this person from not only temptation but from someone accusing him or her of embezzlement. Good controls will also make contributors feel more comfortable that their money is safe and will be used for their ministry. One important factor that cannot be left out is the principle in Matthew 25:29. “For whoever has will be given more, and they will have in abundance. Whoever does not have, even what they have will be taken from them.” Jesus was talking about the parable in which the person who wisely used and invested the money given to them was given more. A church will be blessed by having good controls and processes to ensure the contributions are not going to embezzlement or fraud, but going to advance the ministry of Jesus Christ.
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