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?

Keeping Up with the Times

Posted in: Blog, Employee Embezzlement, Fraud Prevention, Internal Fraud, Online Fraud, Uncategorized by psk on December 13, 2010 | No Comments

Until the 1960s, perhaps into the 1970s, churches were rather slow to pick up on new ideas, particularly in regard to technology. (If you have a hard time believing this, think back to the first time someone wanted to bring an electric guitar into your sanctuary!)  But that is no longer the case, especially when it comes to information technology.

Churches have embraced the digital world and are becoming very proficient in the use of computers.  A vast array of applications has been made available to the church including sophisticated financial accounting and reporting, childcare security, online purchasing, online tithing, phone trees and coffee bars with free wireless internet.  Without a doubt, churches have become technologically savvy.

Unfortunately, there is a vast array of other things that most churches aren’t so savvy about: the numerous new portals computers provide through which fraudsters can gain entry into the church.  Key: Computer and online crime is drastically changing the face of fraud prevention. 

To stay abreast of the rapid change in technology and the risks this change brings churches should ask themselves the following questions on a regular basis:

• Does our church have a formal Information Technology security plan?
• Do any individuals at our church have access to all modules of the church’s software system?
• Does our church partition its computer applications so that employees and volunteers have access only to files necessary to perform their duties?
• Does computer access require passwords that are confidential and unique?
• Are our passwords changed periodically?
• Are passwords complex including alpha, numeric and case sensitive characters?
• Do we have backup procedures that are performed regularly that include off-campus storage?
• Do we have measures in place to protect the church from malware?
• Do we train our employees to avoid accepting email from unknown locations?
• Do we have a download policy?
• Do we maintain separate public and private wireless networks?

Security Blanket #4 – Rotating Count Teams Are Not Enough!

Posted in: Charitable Contributions Fraud, Check Forgery, Check Fraud, Check Tampering, Contributions and Offerings Fraud, Credit Card / Debit Card Abuse, Effects of Church Fraud, Employee Embezzlement, Online Fraud, Payroll Fraud by psk on October 11, 2010 | No Comments

“We have rotating count teams with clear rules that account for every penny we collect in offerings…”

While this statement is not inaccurate, it is short-sighted.  When churches think of fraud, Sunday offering protection is usually the first thing that comes to mind.  And as a result, most churches do a very good job in protecting Sunday receipts.  In fact, Fort Knox may be an easier target than some churches I have visited who have ratcheted down tightly their Sunday collection procedures!

But, if this is all a church does in protecting itself from fraud, they are at risk.  There are at least two significant reasons:

First, Sunday offerings are not the only time cash comes into the church.  Many churches with air-tight security over Sunday collections completely ignore what happens from Monday through Saturday.  And in many churches, the amounts can be substantial, including day care fees, special event fees such as banquets and conferences, food sales, book sales, fund raising revenues, etc., etc., etc.  Also, tithes and offerings that are dropped off during the week often circumvent the entire teller process and instead land directly on the bookkeeper’s desk.

Second, cash inflow is not the only place where embezzlement takes place.  In fact, a case can be made that the larger cases do not involve the cash inflow processes, but the outflow.  The Association of Certified Fraud Examiners backs this assertion with statistics showing that while skimming (taking money before it is recorded) makes up 20% of reported fraud cases; check tampering is even more prevalent, making up 25% of the cases.  In addition, fraudulent expense reports and payroll scams chip in another 29% for good measure.

So, churches with tight controls over Sunday cash receipts should be commended for their efforts, but also reminded that effective fraud prevention includes extending this vigilance to the other means of inflow, and the outflow side as well.

If you’d like to hear more about our Best Practices Review or one of the many other services we provide, please contact us at (817)664-3000 or email us using our contact form.