Vendors and Payments – Fraud in the Church – Survey Results part 9

Part 9 of our ongoing Fraud in the Church series. PSK in cooperation with the National Association of Church Business Administration (NACBA) conducted a survey to determine the extent to which churches are attempting to address the problem of church fraud. We asked them to respond to this statement:

Our church has established an “approved vendor list”. All payments for goods or services are made only to vendors on the list.

A surprisingly high percentage of our respondents – 82% had not established an “approved vendor list”. A common misconception in the church environment is that, “If we are going to be hit, it will be directed towards our tithes and offerings.” While this does happen frequently, some of the largest dollar losses occur in the disbursement processes, not the receipts. Also, these types of frauds, because of their difficulty of detection, seem to go on for longer periods of time than thefts of cash receipts. From my observations, it seems that many more churches are hit after their revenues are safely in the church’s bank accounts, not on their way in.

The first line of defense against vendor disbursement fraud is the development of well-defined AND well-written bill approval and payment policies and processes.

In addition to purchase orders and check requests, such a system should include a formal vendor selection and retention process. After successfully screening potential donors, the church should develop a preferred vendor list. As part of the check signing process, payees should be compared to the approved vendor list.

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