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Fraud in the Church – What the Survey Tells Us
Posted in: Affinity Fraud, Credit Card / Debit Card Abuse, Employee Embezzlement, Fraud Prevention, Red Flags by psk on May 17, 2012 | No Comments
Our church has implemented a written credit card policy to control credit card purchases.
Ok, I know I was a little harsh in the last post… I guess it’s because I have seen too many credit card train wrecks! The million dollar event I discussed in the last post was definitely the largest but I have seen many of its smaller brothers and sisters.
Although over 80% of the surveyed churches issue church-named credit cards, the results of the next query gives me some comfort. 70% of these churches have implemented a credit card policy to monitor credit purchases. Unfortunately, that leaves nearly a third with no documented policies to give oversight over credit card purchases. Based on the things I have seen, these 30 per centers are living on the edge…
It is imperative that any church issuing credit cards to employees and volunteers has a credit card policy to lay down usage guidelines. At a bare minimum a credit card policy should limit the dollar amounts of single purchases and restrict the use of the cards to certain businesses.
What would you add to these two?
Fraud in the Church – What the Survey Tells Us
Posted in: Affinity Fraud, Check Fraud, Credit Card / Debit Card Abuse, Employee Embezzlement, Fraud Prevention, Internal Fraud by psk on May 10, 2012 | No Comments
Our church issues credit cards (in the church’s name) to employees and/or volunteers.
At a response rate that came as no surprise to me, 86% of the church’s who took part in our survey issue credit cards to employees. It continues to amaze me how many churches follow this practice. Seldom do we see this in our work with commercial clients. Most businesses with accountable business expense reimbursement plans require employees to use their own cards. This is particularly true with smaller organizations. Some larger companies do issue corporate cards, but all of them I have seen keep the employee on the hook by including the employee on the account. The employee pays the bill AFTER being reimbursed by the company. Employees of businesses that do it this way tend to be more responsible credit card users because there is always the possibility that their employer may say “NO!”
Why do we consider the issuance of credit cards (in the church’s name) a fraud risk? I have a simple answer. The largest fraud investigation I have conducted resulted in more than one million dollars in losses. Illicit use of just two credit cards was responsible for 75% of the theft!
Without sufficient oversight, credit cards can turn the entire purchase approval system on its head. I’ve seen it happen…
Fraud in the Church – What the Survey Tells Us
Posted in: Affinity Fraud, Check Forgery, Check Fraud, Check Tampering, Expense Reimbursement Scheme, Fraud Prevention, Online Fraud by psk on May 3, 2012 | No Comments
Our church has established a “Positive Pay” arrangement with our bank.
Increasingly, due to technological change and advancement, the threat of fraud is no longer limited to dishonest employees. Hackers and other “online bandits” have become quite proficient in draining the bank accounts of the unsuspecting. One defense against this is the establishment of a Positive Pay arrangement with your bank.
Only 5% of our respondents have this type of program in place which is surprising because Positive Pay is a simple three-step process.
1 – During the check writing process a list is compiled of bills to be paid.
2 – The list is sent to the bank.
3 – The only checks or drafts cleared by the bank are those on the list.
I am very curious why so few take advantage of this. Any ideas?
Church Secretary Takes Her Church for $200k
Posted in: Affinity Fraud, Employee Embezzlement, Red Flags by psk on January 6, 2012 | No Comments
What went wrong at this Church? How could this one employee make off with $200k of funds raised for her congregation and parochial school? Read the full article here. Simple financial controls may have prevented this! Does your Church have adequate internal controls? We can help!
Source: Journal Sentinel Online – Milwaukee
Put Faith in a System, Not a Person
Posted in: Affinity Fraud, Blog, Breaking News, Check Forgery, Check Fraud, Fraud Prevention by psk on October 4, 2010 | No Comments
News stories about church funds being embezzled by an employee or clergy are common, but embezzlement by someone charged with oversight is rarely reported in the media. A Michigan based news site, www.mlive.com reported the following story on September 16, 2010:
Former Birch Run church leader charged with embezzling more than $100k from congregation
The former church president in Birch Run, Michigan, remains in jail on a $250,000 cash-only bond for allegedly embezzling over one hundred thousand from the ministry.
According to the perpetrator, he “got in deep” and “was trying to get his son out of trouble.” The former church president was able to withdraw funds from the various church bank accounts by writing checks and affidavits of loss and cashing them using his and the signature of the congregation treasurer, without her knowledge.
The church could have easily prevented this from happening.
First, the church president remained in that position for 12 years, allowing him to commit and conceal the fraud for an extended period of time. Positions of oversight i.e. president, treasurer, finance committee membership etc. should be rotated periodically. The term and rotation of the officers should also be documented within the church’s bylaws and constitution.
Second, it appears that the perpetrator had joint custody of the bank account along with the church treasurer but was also responsible for paying bills. Just because an individual serves as the president does not mean that his duties are exempt from oversight and the principle of segregation of duties. He was assigned to approve and sign checks, so the actual function of writing checks, recording disbursements in the general ledger and reconciling bank accounts should have been assigned to someone else. Every organization should put faith in a system, not a person.
And lastly, he had pressure to commit the fraud. In his own words, he was trying to get his son out of trouble. Given the circumstances, anyone in his position would have been tempted to commit the crime.
Obviously, he alone is responsible for the act; however, it was the responsibility of the church’s leaders to implement a system of checks and balances and ensure that authority is not concentrated in one individual’s hands, regardless of his status and reputation within the church and local community.