Fraud Prevention Programs

Our Fraud Awareness in the Church series continues with a two-part series on Fraud Prevention ProgramsPSK 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 these statements:

“Our church has established a formal program for managing fraud risk.”

“Our church has developed an anti-fraud team consisting of members from the leadership team, ministerial staff, congregation and professionals such as CPAs, CFEs, or attorneys.            “

“Our fraud risk program includes a routine assessment (at least annually) of the vulnerability of the church to fraudulent activity.”

“Our church has created “ownership” of fraud risk management by assigning the responsibility of managing fraud risks to a member of senior ministerial staff or the leadership team.”

Survey Results: Approximately 40% of respondents stated that they had a formal fraud prevention program in place.  Although I wished the number would be higher, it settled in about where I expected.  What I didn’t expect were the low compliance rates for the next three questions.

These responses indicated a very low compliance rate in three elements that SHOULD be included in a fraud prevention program.  The low numbers also indicated that the formal fraud prevention programs in place are probably not very thorough and as a result, not a very strong defense against fraud occurring in the church.

Only 10% reported having an anti-fraud team in place.  This begs the question, “Is the Administrator having to do this all alone?”

Only 25% reported conducting an annual assessment of their church’s fraud preparedness.  This begs the question, “How do you know your prevention measures are effective, if you really don’t know what they are to begin with?”

Finally, only 25% of the churches reported had actually assigned responsibility of fraud management to an accountable staff member.  This begs the question, “Who’s in charge here?”

KEY: Fraud prevention does not happen by accident!

Cash – 3 Musts for Your Ministry

Segregation

One of the most important measures your ministry can take to protect cash and YOU is implement segregation of duties, i.e. no single person should have control of the cash process.

Ensure that the function of counting contributions and receipts is segregated from the depositing, general ledger and reconciliation functions.

Accountability

Accountability means that ALL cash is accounted for, properly documented, secured and traceable. When accountability is implemented properly, the ministry is able to answer the 4 W’s at any given time:

  • Who has access to cash
  • Why they have access to cash
  • Where is cash at all times
  • What has occurred from the transaction’s beginning to the end

Reconciliation

The monthly bank reconciliation is the single most important control that ties everything together. It allows the ministry to ensure that all cash transactions are accounted for and properly recorded. Once the reconciliation is complete, it should also be reviewed by someone other than the preparer for accuracy, i.e. the business administrator, member of finance committee, your CPA etc.

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