Establishing an organizational structure is the first step in combating fraud, however it is not enough. Key: In order to stay within reasonable boundaries, churches must take the time to carefully document their management structure and practices. Churches that fail to do this do so at great risk.
A written organizational plan serves several purposes.
- First, it serves as a compass providing direction for the church as it navigates through difficult decisions.
- Similarly, the organizational documents serve as a map, helping the church chart courses of action of a more long-range nature.
- Finally and directly related to fraud prevention, documentation serves as an anchor, keeping the church from drifting into dangerous waters.
For this discussion, I have grouped documentation into three categories.
- Corporate records of the church are the first consideration. All churches should have in place a practice of insuring that their articles of incorporation, by-laws and/or constitution are up-to-date and in compliance with federal, state, and local law. This is best accomplished by engaging legal counsel familiar with church and exempt organization law to perform periodic reviews of the corporate documents.
- An accounting and management policy and procedure manual is a must in the battle against fraud. Fraudsters do not like consistency because it forms a base-line upon which to make quick and simple comparisons. Having a central document, such as an accounting and management policy manual, provides a proper back drop for church operations. Without creating a massive “code of regulation” the policy should be comprehensive. At a minimum, typical topics included should be organizational structure, budget development, cash receipts and disbursement procedures, financial reporting and personnel administration.
Documents specifically aimed to reduce fraud should also be included in a church’s policy and procedure portfolio. Written policies should be created that address conflicts of interest, business expense reimbursements to employees and volunteers, credit card use, benevolence, and building and property use.