18 Oct 2018

Protecting Your Church from Fraud

Angie Lopez

Ministry life comes with many unforeseen challenges, but the one thing that always catches pastors by surprise is being faced with fraud in the church.

As much as we’d like to not have to deal with this, the unfortunately reality is that this scenario is more common than you might imagine. There are four common types of scams or fraud that can take place within the church.

  1. Donation Scam - Imagine sitting in your office and getting a call from the finance department saying that someone accidentally made a donation of four thousand instead of four hundred dollars, so the finance department just requests a signature on a check issuing a reimbursement to the individual. However, a few days later once the refund has been issued, the treasurer comes back and says there was a check with insufficient funds processed, a check in the amount of $4,000. Not only has the amount been charged back and a refund of $3,600 has already been issued, but no one can get a hold of the donor any more. This scam known as kiting is unfortunately becoming a common occurrence.
  2. Embezzlement by Church Leaders - Another type of fraud comes from the inside. Unfortunately, there was a recent case where a church’s financial director had been caught transferring small amounts of money from the church’s account to his/her personal bank account over the 3-year period of the building fundraising campaign. The financial director was also responsible for depositing weekly donations and had been stealing portions of the cash donations from each deposit. These “small” transfers can add up and pretty soon you’re looking at thousands of missing dollars.
  3. Embezzlement by Bookkeepers -  Bookkeepers are responsible for overseeing the financial status of the organization. Sometimes, this trust and position of power within a church can lead to embezzlement of church funds. In recent headlines, a Georgia church’s bookkeeper was sentenced to two years in prison for embezzling $20,000.00. 
  4. Fraudulent Check Activity - In the last few years, there has been an increase in checks being written to false corporations and even false scholarships being issued by church leaders, even pastors. Checks are made out in the name of these fraudulent scholarships or fraudulent or non-existent corporations, dispersing funds of the church for personal interest.

All of those instances can make managing church finances and avoiding fraud to feel overwhelming and can leave you with nothing but questions and concerns. 

However, there is good news. While no one can promise a church that they will never encounter any fraud, there are best practices that can be put into place that will help a church ensure that they are doing their best to protect what God has given them to lead. 

Safeguarding your church from fraud

Below are a few instant improvements you can make to how your church handles tithes and offerings that can begin to safeguard your church from fraud. For a more extensive list, read this blog

  • Select multiple money counters, regardless of the size of your church. At StartCHURCH, we always suggest 3 as the magic number - 3 people, not related to each other if possible. This creates and environment of accountability. 
  • Select a safe room for the counters to do their job. Even if you are a portable church, find a secure area that has a locked door. It is not uncommon for churches to have the offerings counted in an unsecured environment. These are places without locks on the doors or common throughways for people. Look at your location and consider where is the most secure place the counters can focus on the job at hand without distractions. 
  • Have the proper counting polices in place. Every dollar and every coin should be counted and have the signatures of all 3 counters. Consider using a count sheet that shows exactly how much came in and in what form - cash, coins, cards, or checks. Make sure that the deposit slip is returned and stapled to the actual count sheet that reflects the exact amount counted by the counters. This will ensure that no monies were removed or lost in transition. 
  • Have the proper policies in place in order to properly handle reimbursements. Section 62a of the Internal Revenue Code spells out the requirements for reimbursements. In addition to adopting an accountable reimbursement policy, have in writing the procedures for reimbursements. For example, do not reimburse anyone for an offering given until the said check has cleared the bank account. These kinds of simple rules can help you avoid scams such as kiting. 
  • Do a quarterly review of the church’s income and expense statements. Have a skilled financial person review the books to ensure that the offering count sheets, deposit slips, and donor records are consistent. Doing this regularly will both create an environment of accountability and will also shorten the time that someone can get away with something unscrupulous, mitigating the overall damage. 
  • Have a financial audit of the church’s records annually by a third party to verify accuracy of data and to catch any accounting mistakes. The church’s name and reputation, not to mention the actual impact the donations can make for the kingdom, are worth protecting. Taking these steps will decrease the likelihood of fraud and other financial scams. 

Build Your Protection

Ministry is not easy. The Apostle Paul speaks of the burden he felt for the churches he was caring for. This is the burden that many pastors and ministry leaders feel everyday. And while the enemy would like to create havoc and disruption, the above steps can help you build a level of protection in your ministry again theft, fraud, and scams.

At StartCHURCH, it is our desire to make complex things simple for the church. To that end, call us today at 877-494-4655 , and ask for our FREE Offering Count Sheet. This sheet, which you can edit to fit your ministry, is a great place to start in creating the proper environment to protect your ministry.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera

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