Estimated reading time: 7 minutes
We know that it requires a lot of resources (people, time, and money) to operate a ministry. Each of these resources is valuable and needs to be protected. Particularly, a church needs to safeguard its financial resources against embezzlement.
I was saddened to read about a neighborhood church, where my kids used to attend youth events, being yet another victim of church embezzlement.
All you have to do is go to your search bar and type in ‘church embezzlement,’ and you will find many headlines:
- Paso Robles CA church employee allegedly embezzled $200,000;
- Cupertino man convicted of embezzling over $7.5 million from church;
- Former pastor indicted, accused of embezzling from church;
- Butte pastor to plead guilty to embezzling nearly $300,000;
- Former Roanoke church secretary, accused of embezzling $200,000;
- Woman pleads guilty to embezzling $300 from Church.
And the list goes on and on.
According to Brotherhood Mutual:
“Church crime continues to grow – estimated at $100 million each day. Increasing at an annual rate of nearly six percent, researchers expect church financial fraud to reach the $60 billion mark by 2025.”
With about 80 percent of all cases of church fraud being unreported, this is staggering!
Frightening Fraud Statistics
(courtesy Church Mutual)
- Most frauds last 18 months before being caught;
- The average tenure of the perpetrator is over eight years;
- 87% have never been charged with fraud or theft before;
- More frauds are caught by a tip (40%) than any other means;
- 30% of all workers will steal;
- 12% of nonprofits fall victim every year;
- One-third of all congregations experience theft each year;
- $120,000 per loss and growing every year.
“The only people who can steal
from you are the people you trust.”
So what the heck is going on? Are churches really this mismanaged?
The concept of a trusted bookkeeper, treasurer, or money counter, stealing from the church is simply counter-intuitive for those of us who embrace Christian principles.
We are the church. We trust people, we love people, and we give people the benefit of the doubt. That’s what we do.
The reality check, for those in church leadership, is the realization that easy access, no controls, and personal need (or justification) are all stepping stones to church fraud.
We all want to believe that the sweet lady who diligently keeps the books would never steal, but the reality is if the conditions are right, embezzlement is inevitable and once it begins it becomes a slippery slope.
It starts small; maybe one of the counters slips a ten-dollar bill into his pocket, no one finds out and then it becomes a little easier to muster up the nerve to do it again. No one finds out so they try again.
These examples are merely holes in the armor and demonstrate a lack of management and control.
10 Practices that Safeguard Against Church Embezzlement
1. Policy and Procedures
The first step in any effort of control is to write policies and procedures. Spend some time thinking through how your organization would like to control the handling of, and access to, church funds.
There should be clearly stated policies for things like cash handling, two-person accountability, rotation of counters, and a commitment to auditing – just to name a few.
The more eyes on the books, the more likely it will be for someone to notice irregularities.
Employees and volunteers who help with counting the offering, or assisting in the church office, should be trained (at least annually) on the policies and procedures that relate to church funds.
Included in this training should be the measures that the ministry takes to safeguard its financial resources.
This simple step will make would-be perpetrators think twice because they will see that the organization is diligent in its efforts to protect its resources.
Church audits are expensive, there is no question, but it is critical that the church takes steps to conduct thorough church audits on a regular basis.
These audits should be done by an independent outside auditor. This is another step that alerts someone that the books will be reviewed and that misappropriation of funds will be discovered.
Volunteers and employees who help with counting the offering should be rotated on a regular basis.
No one should stay in the role indefinitely, and the use of multiple, unrelated people will make it more difficult to skim dollars from the offering.
Cash and checks should be kept securely in a locked safe until it is delivered to the bank.
Get a safe with a drop slot so that it doesn’t require someone to open it to make a deposit into it.
Have a policy that the safe is only opened by two people and the combination is limited to a few people who do not have a key to the room the safe is kept.
These simple security measures will help to control your risk.
6. Two-Person Rule
The cash handling policy should have a strict two-person rule, stating that there will always be a minimum of two people when cash is handled, counted, or transported.
The two people should not be related and should not have personal financial issues.
7. Background/Credit Checks
In today’s society, it is only wise to perform a background check on all church employees and volunteers.
In addition, people who have access to church funds should also be subjected to a credit check.
While this practice may seem a little invasive, this simple step can provide information that can ultimately protect the church. As with all sensitive information, strict confidentiality practices should be used.
8. Watch for Warning Signs
There are many signs you can watch for, but a few to think about are:
- Only one person has access to offering, cash, checks, and check logs.
- A person with access doesn’t take vacations and guards against someone else doing their job.
- A person with access is living beyond their means.
- A person with access has personal financial issues.
- It is difficult to get a financial summary from the responsible person.
- There is inadequate supervision of person(s) handling cash.
Management, supervision, and inspection is a crucial aspect of financial controls.
Church leaders are responsible for managing operational practices within the church. Whether that oversight is of employees or volunteers, it is critical to have good supervision of those who deal with church funds.
Our natural leadership tendency is to empower people with the freedom to work independently. However, when it comes to church finances, that leadership principle should be thrown out the window.
Enforce the practice of keeping church financial records in the church office. Make your presence known, ask questions, and insist on timely financial reporting.
10. Act on Suspicion
If you have a gut feeling, take the time to investigate and act on your instincts. Solicit help from a trained fraud examiner to help you sort through your suspicions.
Churches could not exist without the generous support of its members. Those who embrace the Christian principle of giving, trust that church leadership will be good stewards of their money.
These countless cases of church fraud and embezzlement speak to the critical need for church boards and leadership to wake up, do their job, and safeguard God’s money.
I challenge you today to call a meeting and discuss this critical issue with your leadership team.
What practices does your church use to safeguard against embezzlement?
If you want to learn more about preventing fraud, there is a great book, Preventing and Detecting Employee Theft and Embezzlement: A Practical Guide.