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."


Displaying 1–10 of 11 comments

Agnes Maske

July 23, 2011  10:03pm

How often should a church have books audited? When Quartly financial reports are given, the reports are passed out to members present. Then there is a question and answer period of the same report. Then a motion is made and seconded to received the report. I am of the opinion that the the previous quartly reports should be the report for questions and the present report would be examined and the next meeting. I also disagree with the moderator carrying the report through a motion instead of receiving the report as information.

Report Abuse


July 19, 2011  10:31am

I've been told that 85% of people will steal if given the opportunity; you can argue with the statistic, but it does make a point that reasonable safeguards need to be in place. I handle many of the financial duties as a member of staff at our church and I, to protect myself, insist on a minimum segregation of duties. I write checks but don't sign and I have a volunteer who does the bank reconciliation. I'm regularly surprised by folks who say "don't they trust you?" I guess

Report Abuse


June 30, 2011  6:02am

Another control tip is to have someone other than the financial secretary (e.g., a pastor) open and review the bank statement before it goes to the one who reconciles it with accounts. They can look for inconsistencies in the check copies (odd signatures, checks written to unfamiliar parties).

Report Abuse


June 28, 2011  12:46pm

Those are three key issues, with separation of duties the most important in my view. That said, having two independent signatures on all checks and having someone review and sign off on reconciled bank statements who did NOT do the reconciliation are crucial. Those are two very simple ways to minimize the risk of fraud.

Report Abuse

George Till

June 24, 2011  7:34pm

Selecting a trustworthy person to handle the church's money or records is where fraud prevention starts. As a pastor, I was privy to confidential insights into church members' past behavior and their character traits that could signal caution in entrusting them to sensitive responsibilities. Some of our church leaders felt that the laity should have all of the governance over the business aspects of the church. Consequently, I yielded to their wishes that the pastor not be elected to membership on any committees. When the finance committee appointed our church treasurer, I had serious misgivings, knowing some private information about the person they had appointed in my absence. However, I was willing to give him the chance to prove himself trustworthy. Going through the daily mail one day, I noticed something suspicious with the financial secretaries' signature on them (we required both signatures on all church checks as a safety measure). The name was so difficult to spell that only he could write it. After the church board called him on the carpet, he wouldn't outright admit what he had done. But his mother repaid the church for the money he had embezzled

Report Abuse


June 24, 2011  4:45pm

The most important thing to consider when looking at internal controls is that one person should not have each of the following abilities: custody of the assets, approval, and record keeping. Plain English for that means that one person should not have access to the check stock, check signing authority, and ability to enter into the accounting system. There should be a second person that has one of those responsibilities. Keep in mind the issue is not who does each of those, but who has the ability. Just because I don't normally sign checks, doesn't mean that I can't. The same principle of segregating custody, approval, and record keeping is necessary for payroll and cash receipts as well. One person should not process the payroll, approve it, and enter it into the accounting system. With cash receipts, there should be some segregation between who counts and who enters amounts into the donor system. This is just a very brief overview, but it gives you some insight as to what pieces are important to segregate.

Report Abuse


June 24, 2011  2:14pm

In our church myself(the treasurer)and the Financail secretary count the money and make a note in a ledger of the amount each Sunday. I do the data entry in the computer, write the checks, drop off the deposit and reconcile the check book. The financial secretary helps me if I get stuck and do the reports at the end of the month. It has been brought to our attention that we should divide the labor up to protect ourselves but I'm not sure what is the best way to do that. I wonder if I had the financial secretary do the bank reaconciliation would that act as a cheack/balance kind of thing?

Report Abuse


June 21, 2011  12:14pm

We have two different people count the offering each week, no one does it more often than every two months. They sign off on how much was collected, both on the envelopes they put it in, and in a ledger book. I keep all the material, envelopes, ledger, tapes adding up amounts and a printout from the software what was deposited. The bank receipt is added to this package. These are filed with a bank statement each month that shows the deposits. We do not give the Pastor authority over the financial practices, two committees, the monthly Finance Committee meets each month and the Financial Review committee meets yearly for audits.

Report Abuse

Church Secretary

June 21, 2011  11:18am

I continue to try to get my pastor to put more safeguards in place for the churches finances. I know that I have too much control and responsibility for one person. We have a treasurer in name only. He says he checks the weekly reports I send him, but he may not pick them up for a month or so. I used to mail them to him, but the Pastor wants him to pick them up, so as to save money on postage. The treasurer does have his name on the checks, but it is a printed signature and then I add mine to it. If I were to die today, there would be no one who would be able to know anything about the finances. We did have good accountability methods before the new pastor got here, but since then it has all fallen in my lap. I always take extra measures to ensure that I will never be caught being deceptive with the church finances. I keep copies of all reports that I send the treasurer, I make notes on everything, even if it has to do with a penny difference. I don't know what else I can do to get him to do something different. Please just pray for me that things will change. Thank you.

Report Abuse

b skillestad

June 21, 2011  11:12am

we recently added another signature to check signing and have one of the counters drop the offering in the night depository.

Report Abuse
Recent Posts
Subscribe to Church, Law & Tax
Essential Guide to Copyright Law for Churches

Essential Guide to Copyright Law for Churches

Richard Hammar explains how to avoid copyright infringement.
Making Your Church Playground Safe

Making Your Church Playground Safe

Use this playground safety checklist and learn how to minimize injuries.