7 Common Financial Control Problems

Address these common issues before trouble surfaces.

When it comes to maintaining financial integrity, churches of all sizes and settings often run into similar control issues. By addressing seven common problem areas now, leaders have a far greater chance of thwarting significant problems later:

1. Duties aren’t separated

Every church must make certain that at least two of the following three specific duties are split between at least two unrelated persons:

  • Authorizing transactions
  • Recording transactions
  • The custody of assets

Without separation, you’ve provided someone with access to the funds and access to the information systems. That person can manipulate information and cover up changes with little fear of detection.

2. Dated job descriptions and unmonitored workload

To keep job descriptions from becoming dated, review everyone’s duties and responsibilities regularly. Without this review, staff members may take on additional work that should be separated to unrelated persons, or they may take on more work than they can handle and properly oversee.

Also, a review of work-related duties can help make certain that someone isn’t overloaded to the point of potentially trying to justify or rationalize an act of embezzlement.

On a related note, churches often turn to volunteers. Make certain these volunteers are fully supervised and aren’t offended by close supervision and probing questions. Explain to them the importance of verifying their work to protect them and the church.

3. Unqualified personnel

Churches must steer clear of hiring or keeping unqualified individuals in finance-related roles. Sometimes a church hires out of pity because someone has been out of work a while; or a church might realize the person isn’t the right fit but doesn’t have the heart to let that person go. Neither scenario leads to good outcomes.

It’s also important to note the unique rules and laws that apply to church finances. It’s not the business world. It’s critical for churches to hire people familiar with church-specific rules and laws. You could also hire solid people not from a church finance background, but it’s essential to provide specific training that gets them up to speed about the ins and outs of church finance.

Speaking of training, churches may feel they simply don’t have the budget for such training. Thanks to the resources available online, many organizations offer free or low-cost webinars that can provide valuable training.*

Lastly, make certain to review the compensation of the personnel handling church finances. Low pay can serve as a trigger for rationalizing a fraudulent act, so it makes sense to periodically make certain the compensation for these leaders appears fair.

4. Accounting procedures manual

This should be comprehensive and regularly updated. If someone can’t come in and do the job after reading this manual, a problem exists. If only one person understands how everything works, that’s a potential vulnerability.

5. Limited time and staff

When a church staff feels overworked, there’s a temptation to cut corners on processes and procedures. When your church finds itself in this type of situation, it’s critical to emphasize to the staff the importance of maintaining the processes and procedures for the good of the ministry and their reputations.

6. Lack of monitoring

This is simply making certain your church has internal controls in place and follows them. It’s smart to periodically test the system to make sure it works like it should.

7. Trust

Church leaders often express their desire to extend “trust” on financial matters because it’s a church environment. As a ministry leader once expressed to me, trust isn’t an internal control. Of the three points that make up the “fraud triangle”—incentive, rationalization, and opportunity—churches can most control opportunity. That means leaders must trust, but verify.

This post is adapted from a presentation Laue gave to the Mile High Chapter of The Church Network (NACBA).

Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold 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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