Fraud in the Church: Lessons from ACFE Data

While preparing recently for a presentation to seminary students, I came across some interesting statistics from the Association of Certified Fraud Examiner's 2012 Report to the Nations. The information is particularly insightful for church leaders who are focused on minimizing the risks of fraud and embezzlement with church money.

ACFE releases its report every other year. Of note from the latest one:

Between January 2010 and December 2011, ACFE tracked 1,388 cases of "occupational fraud" worldwide:

  • Of the cases, 10.4 percent occurred within a not-for-profit organization, up from 9.6 percent in 2010, but down from 14.3 percent in 2008;
  • The median theft involved with the cases was $100,000, up from $90,000 in 2010, but down from $109,000 in 2008;
  • Of all the cases, 87 percent involved first-time offenders with no prior criminal records.

These details are interesting because they validate several things we consistently observe in the church world:

  • At least two to four media headlines nationwide each month involving an arrest or prosecution of a bookkeeper, accountant, or pastor suspected of embezzling from their church.
  • An average theft amount of at least $100,000, and usually between $200,000 and $400,000, all stolen over a period of several years.
  • A perpetrator who has no prior criminal record. Personal debt, a medical crisis, or the unexpected loss of a spouse's job creates unexpected pressure, with many rationalizing their acts as "temporary loans" that they intend to repay–but never do. Or, some believe they are underpaid and are "owed" the additional compensation.

This provides three important reminders to church leaders:

  1. Remember to consistently evaluate the pay structures of your pastors and staff, and watch for stressful events in their lives that could lead to heavier financial pressures. The ChurchSalary can help set fair ranges of pay and benefits.
  2. Use internal controls to segregate duties and involve multiple people in all of the various steps involving money–from collections to counting to accounting to bill-paying.
  3. Don't underestimate the value of internal and external audits. An external audit involving a qualified, independent outside firm requires time and money. Consider doing one about every three years because it helps ensure no gaps or loopholes have developed over time. Internal audits conducted by church staff and volunteers can be done on the years when an external audit isn't done; these can simply review policies and procedures in place to make sure everything works right and looks right. Marian Liautaud's article, "Surviving a Church Financial Audit," offers additional tips and insights.

For more help with preventing church fraud, check out Preventing High-Tech Fraud and Internal Controls for Churches (a training resource for church leaders and teams).

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."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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