by Mark Jones
“As hard as it may be to believe, embezzlement is a relatively common occurrence in churches.” — Richard Hammar, attorney and CPA
I recently did some research on fraud while preparing a presentation for ministry leaders about protecting their ministry assets. I expected to find some news articles but was surprised to find so many reports of fraud recently discovered in churches and nonprofits.
Like me, many in the ministry world probably think that embezzlement rarely happens. Unfortunately, we are wrong.
So why is fraud on the rise—and what can we do to prevent it?
We know that three things must exist for fraud to occur: pressure, opportunity, and rationalization. Certainly, the current economic environment has created financial pressure for some workers and volunteers who, given the opportunity, might rationalize this immoral behavior. While we can’t control the pressure workers or volunteers may experience, or even how they may rationalize stealing, we can control the opportunities for fraud or embezzlement within our ministries.
The first step is to conduct a risk assessment. This simply means sitting down with your team and talking about where losses might occur. As you begin to identify those risk areas, you can determine which ones pose the greatest risk for your organization, workers, and volunteers. Typical high-risk areas include inadequate separation of duties between related tasks and a lack of dual custody when handling valuable assets such as contributions.
Addressing these areas doesn’t mean you are creating an environment of distrust. On the contrary; you are building accountability and transparency—protecting both your ministry and the people who work or volunteer for it.
Guarding your ministry against fraud begins with an honest assessment of your vulnerability. Then, apply a sound system of internal controls such as separation of duties, dual custody, and transparency in financial reporting. (You may also want to revisit who has authority over your accounts.)
To learn more about preventing fraud, you might want to read our white paper Handling Cash: A Common Sense Approach to Securing Your Ministry’s Most Liquid Asset.
Has your ministry taken any other steps to reduce opportunities for fraud?