Churches are one of the most trusting organizations, which can open the doors to fraud. Christian churches aren’t the only religious organizations that can experience scams. Mosques, temples and other religious establishments can be targets of fraud, not only from outside the organization but also by employees or congregants. If you’re on the board or hold a leadership position in a religious organization, it’s important to think about protecting the organization against a loss of money.
How Common Is Church Fraud?
Fraud is defined as “wrongful or criminal deception intended to result in financial or personal gain.” In a church, fraud occurs when a person diverts money or other assets for the church to himself or herself for personal use. One insurance company estimates that church scams will reach over $70 billion annually by 2025, but that figure may only be a fraction of the true crime. Many times, fraud in the church goes unreported to the authorities.
How Can a Church Recognize Fraud?
Recognizing fraud within a church can be complicated. People in authority in a church are often very trusted. Even the implication of fraud could be damaging to their reputation. In a religious organization, no one wants to hurt their brother or sister. Still, there are some red flags to watch for:
- One person refuses to allow anyone else to count the offering plate week after week.
- A person with access to church accounts suddenly starts spending a lot of money without any explanation.
- Unexplained credit card purchases.
- Irregularities in accounts.
Policies and Procedures That Can Prevent Fraud
Although many churches are wary of strangers who ask for help, it’s often the people inside the church who commit the biggest frauds against the church. These leaders have the trust of the people, which gives them the opportunity to commit scams. Having good accounting principles in place for dealing with money can help prevent fraud.
- Two people count the offering each Sunday, with a schedule of different people.
- Cash and checks are deposited quickly each week, preferably after services. The same people who count the offering do not make the deposit.
- Bank statements and credit card invoices are verified by people who do not have check-writing permissions.
- Checks of larger amounts should be signed by two people. Any expenditure over a certain amount should be decided by the board.
- Perform internal audits of bank accounts and credit card use.
- Engage an outside CPA or auditing firm to analyze the accounts on an annual basis.
How To Deal With Fraud?
If your organization suspects fraud, the best thing to do is to contact your church lawyer. You want your lawyer to control how things are dealt with to avoid being sued for libel or slander. You may need to be discreet when it’s first discovered to prevent the fraudster from leaving or hiding more funds. Ideally, you should have a church policy on how to deal with potential fraud. Your church may need to hire certified experts to prove fraud or a private investigator to locate assets.
Should Your Church Prosecute Fraud?
Many churches don’t want to get the law involved in a church fraud case. It’s understandable, but people who commit fraud often use that to their benefit. The church fires them and doesn’t say anything, so the person can move on to another organization to commit the same crime. If you report the scams to the authorities, you may be able to recoup some of the lost assets and prevent another organization from going through the same thing. It’s not a decision that should be made lightly, but fraudsters don’t usually change their stripes, nor do they restore what was lost. By not prosecuting, you’re actually letting other members know that there are no consequences for stealing.