Awareness of ALL Sources of Revenue

Any discussion of church tithes and offerings practices usually includes both a pat on the back and a criticism.  First, in regard to the normal Sunday offerings I can say to most churches, “Way to go!”  In fact, when I ask a client if they have taken any fraud prevention steps, the first thing usually mentioned is how much the church has done to protect the offering plate.  Seldom do I encounter a church that does not have multi-member count teams, rotating terms of service, locking bank bags, dual-access safes and in an increasing number, the use of an armored car service.  I would venture an educated guess that the majority of churches have more than adequate controls over Sunday receipts.  For some, Fort Knox would be an easier target.

But in regard to the rest of the money, the funds that come in during the rest of the week, I often have to say, “What were you thinking?”  While being diligent to a fault on Sunday morning, almost anything and everything goes the rest of the week.  Here are two in my hall of fame:

  • Offerings, fees and other receipts arriving in the mail or dropped off by members are simply dumped on the financial secretary’s desk.  I have entered offices with large piles of unguarded cash on the accountant’s desk more times than I can remember.
  • Special events funds sometimes are “managed” by a volunteer.  The funds are kept off campus and are not turned over to the business office until the event is over.  No accounting or reconciliation of goods sold is required.

Needless to say, some of our more interesting and sometimes humorous fraud stories occur in these two areas.

However, this is no laughing matter, because a significant “event” could cause irreparable damage.  That being the case, definite steps should be taken.

  • First, a brainstorming session could be held, the purpose of which is to determine all sources of income. 
  • Once identified, all sources should be included in the church’s normal collection policies and procedures. For example,
    • For weekday drop-offs and mail-ins, a lock box could be kept in the church’s safe in which all of these receipts would be placed unopened. 
    • A separate log or register should be maintained to keep a record that the amounts were received. 
    • On Sunday, the box could then be opened and counted by the teller team on duty.

Security Blanket #5 – We Set Up Separate Bank Accounts for Special Funds

We set up a separate bank account for each special fund to make sure the money goes where it is supposed to go…”

Over the years, we have seen many churches take this approach.  Rather than using their church accounting software to take care of measuring and tracking the restricted funds, they either open separate bank accounts or worse, divide one bank account among several different general ledger accounts.  I have detected two main reasons some churches take this approach:

1 – They have been burned in the past by funds designated for a specific purpose being spent for something completely different.  When it came time to accomplish the designated purpose, funds were no longer available to accomplish the task. 

2 – They simply don’t trust themselves.  The temptation to redirect the funds is too great.  So, the thinking goes, “we will set up a separate account to keep these dollars safe”. 

Churches who choose this path seldom realize that by closing one door, they inadvertently open up a much more sinister portal:  they create an environment for a con artist to conduct a very expensive shell game.  With multiple bank accounts and limited controls, an embezzler can shuffle funds among the accounts to create a dense smokescreen, making detection extremely difficult. 

The best practice?  Have as few bank accounts as possible coupled with strong internal controls and recordkeeping.

Interested in finding out how your controls measure up?  Contact us today about our internal control assessment and other Best Practice Engagements at (817)664-3000 or email us using our contact form.

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