ECCU Blog

 I was saddened to read some stats recently showing that fraud in the church costs more each year than what is given to missions. The numbers were $35 billion in fraud in 2012 and $23 billion given to global foreign missions. How can this be true and what can we do to combat fraud?

 According to the Center for the Study of Global Christianity at Gordon-Conwell Theological Seminary who published the 2012 Status of Global Mission, financial crime at churches is estimated to hit $60 billion in 2025 if the same trends continue.

  Here are two key things those of us who have been entrusted to steward ministry funds can do each day to combat fraud:

1.  Create an environment of “Trust, but Verify”.  We first heard this phrase from the President Ronald Reagan, who used it often when discussing U.S. relations with the Soviet Union. It suggests that we maintain an environment of trust while also verifying that information is accurate and procedures are followed. This involves accountability, dual custody, and separation of duties in the financial area of your ministry. By doing these things, you can literally eliminate opportunities to commit fraud.
2. Stay connected with your staff and volunteers.  The precursor to fraud is a motive that causes an individual to have an intense need for money. It could be a financial hardship, a gambling problem, a family financial crisis, or negative work-related feelings. Once there is a motive, the individual then just needs to rationalize that what they are contemplating is okay given the circumstances. Staying connected with your staff and volunteers and knowing what is going on in there lives will provide you not only with an opportunity to minister but also an indication of the need to monitor actions and behaviors more carefully.

 These two steps will help keep your ministry from becoming the next bad news story.

 What have you found to be helpful for combating fraud at your ministry?

An area often overlooked at ministries is the review and approval of senior leaders’ expenses. While we tend to trust our leaders’ integrity, small mistakes or outright abuse can lead to questions and mistrust by donors and diminish the reputation of your ministry.

 While it is more common for staff within the organization to have their supervisor review and approve expenses, this is not often true of the most senior leader. Who should review his or her expenses? The business administrator, CFO, or accountant? Or should it be the chair of the board or corporate treasurer?

 Here are some steps you can take to be sure your organization has sound practices to protect both your senior leader and your ministry.

1. Make sure your organization has a clear set of guidelines that specify appropriate expenses for your most senior leader. These guidelines should clearly distinguish between organizational and personal expenses, even addressing expenses that are appropriate for spouses. This is an important document for your board chair and senior leader to discuss, then present to your entire board for approval. These guidelines help avoid misunderstandings and prevent reimbursement of questionable expenses.
2. As a part of the annual budgeting process, be sure the board is aware of and approves the expense budget for your senior leader. This should be in addition to the overall annual budget of the organization.
3. Create a process for the board chair or corporate treasurer to review and approve all expenses incurred by the senior leader each month. This process should be easy and consistent, and it should enable the board chair or corporate treasurer to immediately address any questions.

Taking these steps will help to ensure that your board has taken adequate responsibility and oversight to protect the organization and senior leader from scandal.

As you steward the financial resources entrusted to your ministry, one way to deter fraud is to establish internal controls around your checking account activities. Here are some best practices you should consider adopting:

Examine your bank statements quickly: When you opened your checking account with your bank, you entered an agreement (usually communicated through your account disclosures) that requires you to review your bank statements promptly and report losses as soon as possible. If you delay this review, fraudulent activity can go undetected. Even worse, it may escalate and you may become liable for the loss or future losses. Be sure you understand the requirements in your account agreement for timely statement review.

Use online banking features: Most online banking systems have a feature that allows you to set up account alerts that can be configured to inform you when checks clear and if balances fall below specific thresholds. Alerts are a strong tool in your early fraud detection arsenal.

Instill segregation of duties for check responsibilities: “Opportunity” is a common risk factor for internal fraud or embezzlement. You can minimize opportunities to commit fraud by implementing an internal control known as segregation of duties. An example would be assigning different people in your organization to prepare and reconcile checks. This way no transaction is handled by only one person from beginning to end.

Perform spot checks: Performing occasional surprise checks of the processes you have put in place shows you if those processes are performing as they should and that duties are indeed segregated.

Keep your check stock secure: You can keep check stock secure by restricting access to it. One good option is a locking cabinet that is accessible only to those individuals who are responsible for issuing checks. A cabinet with two locks is even better. The check reorder form should also be stored securely. Otherwise, a forger could easily reorder checks with the form and have them shipped to another location. It’s also a good idea to do occasional surprise inspections of your check inventory.

What internal controls do you have in place to protect the funds in your checking account?

Today’s changing world brings increased risks to churches and nonprofits in the areas of finance, tax, legal, and operations. Responding well to change begins with a fuller understanding of these risks. CapinCrouse LLP and ECCU have teamed up to offer a series of financial seminars to help churches and nonprofits better steward the resources and people entrusted to their care.

These daylong seminars will be offered in three locations in October:

• October 2 at Denver Seminary in Littleton, Colorado (This seminar is for churches only.)
• October 3 at Southwestern Baptist Theological Seminary in Fort Worth, Texas
• October 4 at The Hope Center in Plano, Texas

Come learn from experts like Frank Sommerville, noted ministry legal and accounting expert, and David Lee, ministry development officer for ECCU.¹

Learning objectives for these seminars include:¹

• Better comprehend your ministry’s exposure to legal risk through an examination of timely and relevant court cases and learn how to address any risks that are identified
• Become aware of the latest tax changes and regulatory developments that impact tax exempt organizations and churches, including how to identify potential unrelated business activities
• Understand areas of your ministry that may be susceptible to fraud and how to prevent, identify, and respond to fraud if it does occur
• Learn the differences between financial audits, compilations, reviews, and consulting engagements and how to make your ministry’s next financial audit go more quickly and smoothly
• Increase your knowledge of how to use ratios, benchmarking, and dashboard reports to better monitor and measure your ministry’s financial health
• Learn how the Affordable Care Act applies to churches

The registration fee for each seminar is $59; lunch and materials are included. This program allows you to earn up to 5 CPE credits² and 0.5 NACBA CEUs³.

For more information, visit www.eccu.org/resource/events. If you have questions, please contact Carina Hill at 678.518.5301, ext. 100, or by email at chill@capincrouse.com.

_{¹ Presenters and topics covered will vary by location.}

_{² CapinCrouse LLP is registered with the National Association of State Boards of Accountancy (NASBA), as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors through its website: http://www.learningmarket.org/.}

_{³ CapinCrouse LLP is a National Registered Continuing Education Provider (NRCEP) with the National Association of Church Business Administration (NACBA). This program is a premier comprehensive continuing education program related to administration in the local church. It is designed to enhance the ongoing professional development of NACBA members and other ministry professionals, through the offering of quality learning experiences. 0.1 Continuing Education Units (CEUs) will be granted to persons who properly register and attend one contact hour of a minimum of 50 minutes of lecture, presentation, or discussion on approved topics.}

Hackers never seem to tire of devising ingenious ways to inflict mayhem. An alarming new threat has emerged known as “Spear Phishing.” This phishing technique uses a personalized email message that’s designed to pique your interest. It might be a conference invite, an invoice, or a missions support plea.

Spear phishing messages, which appear genuine and often convey a sense of urgency, are ruses to get you to provide sensitive information (such as your login and password) or entice you to click on a link that contains an infectious virus. Often, these email “spears” pass through SPAM filters because they appear to be legitimate.

RSA, a security software firm, reported that about one in every 300 emails in 2011 was a phish. A growing number are being received at work email boxes as personalized “spear” messages addressed to specific employees, sometimes including details mined from social networks to make them appear valid.

Keeping your anitvirus software and spam filtering up to date will help weed out these nefarious emails. However, hackers are adept at getting them to pass through undetected. This is where employee training helps. Microsoft lists the following components of scam emails:

• Alarmist messages and threats of account closures
• Promises of money for little or no effort
• Deals that sound too good to be true
• Requests to donate to a charitable organization after a disaster that has been in the news
• Bad grammar and misspellings

A best practice is to only open email from trusted sources.

What is your ministry doing to guard against spear phishing attempts?