Put Faith in a System, Not a Person

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 the local community.

To avoid this from happening at your church we have created FACT, a web-based test which will identify the cracks in your current system and help you prevent fraud in the future.

Give us a call at (817) 664-3000.

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