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Who’s watching the funds?

By Eric Spacek

Embezzlement happens far too often, as churches are naturally trusting.

While a church’s ministry often refers to its worship services, activities and community outreach programs, protecting your financial resources also is an important part of the organization’s mission.  Financial collections are vital to keeping the various programs running. Unfortunately, it is all too common to have a trusted church member admit to embezzling from the funds they were asked to safeguard.

Recently, the treasurer for a church in Connecticut was charged with embezzling nearly $300,000 over a five-year period. This church member had access to all of the church’s accounts and engaged in more than 100 thefts of church funds during this time period.

Sadly, this type of theft happens far too often, as churches are naturally trusting. However, every church has the stewardship responsibility of protecting the money that is given by its members. The best way to ensure your finances are secure is to have a financial policy in place. The policy should address procedures for handling funds from the time collections are taken until the money is disbursed. Having such a policy is likely to help deter individuals from embezzling.

Handling the collection
The weekly collection is a large part of the church’s financial resources. Often, ushers play a key role in this process, and they should be trained on how to safeguard the money during and after it’s taken. It cannot be stressed enough that the two unrelated person rule should always be followed when handling funds. This means from the time it is collected to the time it is deposited, at least two people who are unrelated should be in the presence of the collection to help deter any temptations.

Some churches choose to count collections the same day, while others count the following day. Either way, collections should remain in a locked room and/or safe until it’s time for counting. When transferring funds to the bank, a nondescript bag should be used, and taking varying routes to the bank is suggested.

A team of people should count the collection, and these teams should rotate weekly or monthly to help hold everyone accountable. Figures should be double-checked, and a deposit slip completed. Never allow collections to be taken home.

Before anyone is allowed to handle funds for your congregation, they should undergo a background and financial reference check. At a minimum, those with high integrity should be selected. All persons privy to contributions should have the ability to be discreet with this sensitive information.

Keeping accountability
In order to maintain a checks and balance system, and hold everyone handling funds accountable, it is important to utilize internal financial controls.

Consider separating duties between the counting team, treasurer, and financial secretary so that no one person has control over the church’s financial processes.

Such controls could include making sure that the person who prepares the checks does not have the authority to sign them as well. Those with check-signing authority should not have access to blank checks. A person uninvolved in counting and depositing the monies should review unopened bank statements. Also, consider requiring dual signatures for all checks over a specified dollar amount.

Many churches utilize a pastor’s discretionary or benevolent fund, which allows the minister to address cases of special financial need within the congregation. However, if not set up correctly, there can be income tax implications to the pastor with this type of account, so consult your tax advisor on how to do this properly. These funds also should be monitored by establishing a monetary account limit, requiring documentation of all expenses, prohibiting cash gifts, requiring bank account reconciliation, and performing a periodic audit.

With all of the activities that take place in a church, outside of the regular Sunday service, there are often special funds and accounts held by different groups. This includes ongoing programs, as well as one-time events. Every effort should be made to safeguard these funds and accounts as well.

Monies should never be taken directly from a collection and given to an individual or ministry group. They should be counted, deposited and disbursed according to the church’s regular financial procedures. These special accounts should be audited periodically on an unannounced basis.

Regular auditing and reporting
Regular audits should be performed on your accounts by a certified public accountant (CPA).  While annual audits are recommended, some churches opt to have a formal audit undertaken every two to three years, with a lesser financial review conducted by a person uninvolved with the church’s finances in the intervening years. A church member who is a CPA or who has a strong financial background is a good candidate for such financial reviews.

Financial reporting also is necessary. As part of their responsibilities, church board or finance committee members should regularly review the church’s financial reports. It also is recommended that, at a minimum, summary financial reports be regularly provided or made available to the congregation.

While you hope it never happens, if an accusation or suspicion of embezzlement is reported, it is important to act promptly and with care. Consultation with the church’s legal advisor and insurance company is recommended. They will likely suggest an immediate investigation with the assistance of a forensic accountant to quantify the loss and make sure that records are preserved.

If the suspected embezzler remains involved in church finances, a suspension of their duties while the investigation is ongoing is advisable. With information in hand and in consultation with the church’s legal advisor, in most cases the suspected embezzler should be asked for a full account of the situation.

If investigation or a confession point to guilt, church leaders must then decide on a course of action – whether to turn the matter over to the police or handle it internally. There are important considerations for either course of action, so church leaders should proceed with the guidance of their expert advisors, always bearing in mind their stewardship responsibility on behalf of the congregation.

By ensuring the above elements are in place, the chances of robbery or embezzlement can be reduced. Not only have church leaders been called to take care of and lead the people of their congregations, but they also are responsible as stewards for the finances that keep the church’s various ministries alive.

Eric Spacek is senior risk manager at GuideOne Insurance, West Des Moines, IA, and has been a liability litigation trial attorney. www.GuideOne.com

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Why churches need financial controls

  • The Atlanta Journal-Constitution reported in October that an Adairsville couple were jailed for allegedly stealing more than $88,000 from Noonday Baptist Church. The woman opened a joint account with the man, funded by 51 checks written by the woman on the church’s account.
  • A Visalia, CA woman pleaded guilty to 13 counts of felony embezzlement and money laundering with special allegations in connection with the ongoing theft of more than $2 million from Visalia First Assembly of God Church, where the woman was employed as a bookkeeper. The thefts occurred over the course of seven years.
  • A former Rogersville, AR, church treasurer was sentenced to eight years of house arrest and ordered to pay $75,000 in restitution for embezzling funds over a three year period from Bridge Baptist Church. She was the treasurer and secretary for the church, and cashed about 100 church checks for herself and stole from the offerings.
  • A man convicted of conspiring with his mother to steal $1.5 million from First Baptist Church in Morristown, TN, was sentenced in October to just over four years in prison. His mother was financial secretary at the church for 46 years, and confessed to writing more than 1,600 checks to herself from the church’s general checking account
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