The Top Three Reasons Fraud Happens at Church
And what you can do to prevent it

Embezzlement in churches is on the rise. Regardless of a church's size, three factors can make it more vulnerable to fraud.

1. Lack of segregation of duties. Churches often fall victim to embezzlement when they rely on one person to handle too many tasks related to handling the cash. For instance, even if Jane, the church bookkeeper, is able to sign checks, if she also has access to the check stock and the general ledger, she is in a prime position to steal money from the church. Her duties are not sufficiently segregated. A better practice would be to have Bill, the treasurer, sign the checks. By dividing the duties, there's a greater degree of accountability and oversight.

2. Trust. Churches need to trust their employees, but trust itself can't stand in the way of making good decisions regarding internal controls. Almost every church I have worked with that has experienced fraud said, "We trusted her." Trust is not a sufficient strategy for protecting the church's assets. Churches owe it to their congregation–and to their employees–to implement financial safeguards that help prevent fraud from occurring.

3. Change. Churches that experience fast growth are especially vulnerable to fraud. New personnel may not be trained properly or understand the importance of the procedures that are in place. If the church is growing quickly, leaders may not provide enough oversight of new employees to immediately recognize when certain practices are not being followed as assumed. Slow-growing churches are at risk too. Like a frog in a pot of simmering water, if your church is growing gradually, you may continue doing things the way you've always done them without recognizing that some of your internal controls have fallen by the wayside or are no longer effective given your new, larger size. You may also be at risk because of changes such as new technology. If people aren't properly trained on the necessary controls in software, there can be breakdowns there as well.

Is lack of segregation of duties, trust, or change putting your church at risk for embezzlement? What steps are you taking to prevent it? Please comment below so we can learn from each other.

Vonna Laue is a CPA and partner with Capin Crouse, a national accounting firm for non-profits and churches. She co-authored the book Essential Guide to Church Finances (Christianity Today, 2009), which includes a comprehensive list of internal controls for churches. Vonna will be leading a basic and advanced accounting forum at the National Association of Church Business Administration's (NACBA) annual conference in Washington, D.C., July 1-5, 2011.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Recent Posts
Subscribe to Church, Law & Tax
Check-In & Check-Out Procedures

Check-In & Check-Out Procedures

How to establish check-in procedures that keep children safe.
Draw the Line: Relational Boundaries for Safe Youth Ministry

Draw the Line: Relational Boundaries for Safe Youth Ministry

Proactively protect the students, leaders, and pastors at your church.