Payroll Fraud

Our Fraud Awareness in the Church series continues as we look at Payroll FraudPSK in cooperation with the National Association of Church Business Administration (NACBA) conducted a survey to determine the extent of fraud awareness in the church environment. We asked churches to respond to this statement:

“Each quarter we reconcile the total payroll amounts on the quarterly payroll reports (941s) to the total payroll amounts recorded in the payroll journal and general ledger.”

Survey Results – 75% of the churches reported performing this task.

I was surprised by the strength of these numbers.  In my experience, reconciling the quarterly 941 total wages with the salaries and wages reported in the church general ledger did not seem to be a common practice.  As a matter of fact, many times when our auditors would attempt to do this, the chore was almost impossible.

Why?  Because churches usually have a multitude of salary/wage general ledger accounts.  AND other expense items remotely connected to personnel issues are often “dumped” into the payroll line items.  I repeat, reconciling payroll is one of auditors’ most difficult tasks. Which makes my point.

KEY: Fraudsters prefer to hide in the tall weeds. (Big numbers)

Thieves try to hide their deeds in the big numbers, or accounts that have a great deal of activity.  The reason is simple: their actions will not stand out there.  The biggest of the big numbers for a church is PAYROLL.

KEY: You must know what is going on in your payroll accounts to avoid payroll fraud!

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