Church Fraud: It Can’t Happen to Us, Can It?
By Rev. Keith E. Lawder
Sadly, church fraud can and does happen. I came into the office one morning, and my phone was ringing off the hook. A pastor friend was calling to ask what to do. His church was the victim of embezzlement!
Brotherhood Mutual Insurance Company estimates that two-thirds of all financial fraud in churches goes unreported; that the rate of church fraud is increasing at over six percent annually; and that by 2025 it is expected to reach $80 billion.
To put this in perspective, expected annual losses from churches and church-related organizations exceed total annual mission expenses! Numerous articles and alarming statistics may be found by simply googling “Church Frauds.”
So, what should you do?
1. LOOK FOR THE RED FLAGS.
These include less cash in the bank than you thought; differences between bank statements and what is on the church’s books; notices from the bank about insufficient funds or unfamiliar loan balances. Fraud happens in many ways. If one person opens the mail, makes payments, and approves expenses, fraud is easier to perpetrate. Sometimes money is siphoned off a little at a time. Sometimes there is the improper use of a church credit card. Sometimes someone takes a loan out in the name of the church and forges signatures. Thieves can be very creative.
2. WHEN YOU SUSPECT FRAUD IMMEDIATELY FOLLOW THE MONEY TRAIL.
Talk with your District Superintendent. Compare internally prepared financial statements with bank records. Verify who the signers on checks are and who can authorize payments. Work with your banker and put a hold on all accounts until you can sort things out. Put together a crisis team of trusted members. Failing to notify police in due course may invalidate any claim on insurance reimbursement.
3. IMMEDIATELY PUT IN PLACE COMMON-SENSE SAFEGUARDS.
No one individual should be responsible for all financial matters. No one should count money alone. And all financial statements and bank records should be independently reconciled regularly. A list of sound procedures can be found on your Conference website. Church fraud, although real and scary, can be prevented.