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6 Steps to Prevent Fraud

Protect your church from fraudulent activities.

Keep the following six steps in mind to help prevent fraud from occurring at your church:

  1. Conduct independent, extensive reviews of bank account reconciliations. This is the best way to prevent fraudulent activity.
  2. Use a formal vendor application process to clear conflicts of interest and avoid disreputable businesses for ongoing business activity. For one-time deals (such as short-term missions trips), set up processes with good record-keeping and documentation requirements.
  3. Maintain regular communication with vendors. This helps verify whether abnormal activity is legitimate.
  4. Perform periodic payroll audits.
  5. Conduct occasional confirmations of charitable contributions. This can be sensitive, since it involves approaching donors to verify a gift and its amount. If you need a reason that helps manage such sensitivities, use your auditing firm, since it will reinforce the ongoing efforts to track and monitor activity.
  6. Make exhaustive reviews of budget reports. Look at the budget and do the following:

• A budget-to-actual analysis

• On a test basis, a comparison of general ledger detail to budget line items

• An independent review of journal entries

• A periodic review of cash disbursement activity

The bottom line: Make sure expenses in each account are legitimate.

This article is excerpted from " High Stakes with High-Tech " by Verne Hargrave. For more on this topic, see these downloadable resources: Preventing High-Tech Fraud and Internal Controls for Church Finances.

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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  • October 23, 2014

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