Are You Being Used?

On September 9, 2010, St. Petersburg Times reported the following story:

Pastor Pleads Guilty in Embezzlement Case

Gregory S, 38, was an accountant for a staffing company when he was not busy preaching from the pulpit. During his employment with the staffing agency, he was able to write checks totaling $813,142 to his church without the staffing company’s or the church’s knowledge. Earlier this month, he pleaded guilty to theft from an employee benefit plan, he managed. The stolen funds received by his church were then used for personal and other expenses.

All churches are protective of the outflow of funds as most frauds occur during this process. However; the same level of attention, if not more, should be paid to the inflow of funds as well.
It appears that his church did not have a formal gift acceptance policy or if it did, the policy was not being followed. A proper gift acceptance policy and adequate contributions procedures, if followed, would have acted as a safety net and would have caught the fraudulent remittances by the retirement plan from being deposited in the church’s bank accounts.

Every ministry should adopt a policy regarding accepting gifts and contributions as not all gifts and contributions are necessarily beneficial to the organization. An effective gift-acceptance policy should be formalized, in writing, and must achieve the following primary objectives:
First, it should identify the types of assets your ministry will accept (e.g., cash, real estate). Next, it should provide guidelines as to the forms of gifts that are acceptable. Finally, it should define your ministry’s role in administering the gifts.

But that’s not enough. To meet the needs of your ministry and to help protect your resources and reputation, your gift acceptance policy should also:

I. State that your ministry will obtain legal input and advice when appropriate.
II. Specify limits your ministry may want to impose, such as maximums or minimums in regards to charitable gift annuities.
III. Detail any restrictions that donors will be permitted to place on gifts.
IV. Outline the responsibilities that donors have with respect to obtaining appraisals for their own tax purposes.
V. Identify the specific circumstances under which your ministry will obtain an independent appraisal.
VI. Outline how your ministry plans to acknowledge gifts.
VII. Note the time frame for communicating with donors.
VIII. Specify the procedures for amending the gift acceptance policy.

The pastor’s scheme would have been caught instantly, had the church communicated with the donor upon receipt of the first check.

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.

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, 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.

Security Blanket #3- The Loyal Bookkeeper

“Our bookkeeper has been a member and served our church for many years.  We trust him/her completely…”

Church’s Secretary accused of embezzling $1.5 million

Former pastor guilty of stealing from church

Church’s former secretary jailed on fraud charges

Priests get jail for stealing from church

Church secretary accused of stealing thousands

Woman accused of stealing from church

Baptist church secretary was arrested and charged with 17 counts of credit-card fraud…

Church financial secretary steals $216,000—asks for forgiveness

Church secretary admits to stealing $274,000 from congregation

These are all actual headlines from articles about church theft.  I think we’d all agree…this is NOT the publicity that anyone wants, particularly a church.  In most of the church embezzlement cases I have read about, the crime is not perpetrated by a thief who has sought out a soft target.  More often churches are embezzled from by a long-time, dedicated and trusted employee who has been given total access to the church’s financial operations.  In short, it is usually not bad people who steal from churches.  Rather, church embezzlement is committed by good people who find themselves (or their close relatives) in bad situations.

Churches victimized in this way have often not taken into account the first leg of the “fraud triangle” – Pressure. (Rationalization and opportunity are the other two.)  Pressure can be defined as any outside force or set of circumstances that creates a need for cash.  Pressure comes in many forms, including large unexpected medical costs, business reversals, and in far too many cases, addictions.  When faced with these issues, many people of otherwise unquestioned integrity are tempted to “borrow” from their employer to alleviate the pressure.

Churches have limited control over the pressures their employees and volunteers face.  However, they have almost total control over one leg of the triangle – OPPORTUNITY.  By establishing strong financial controls and processes churches can go a long way in removing temptation from its employees. 

If you’d like to hear more about our Internal Control Assessments or one of the many other services we provide, please contact us at (817)664-3000 or email us using our contact form.

When to Say No

Every week ministries across the country get several hundred thousand requests for assistance. Some are valid, while others are not. Here are some real life examples of benevolence requests that I have encountered recently in my experience with ministries:

  • A church member requests the business office to help with the monthly payments on his vacation home in Colorado
  • An employee had a major surgery and the ministry decides to assist with overwhelming medical bills
  • A local resident calls the business office and requests helps with the utility payments
  • A stranger walks in the door and asks for help because her car ran out of gas
  • A local resident requests the ministry to buy him a $2000 suit for an interview so he can land his dream job
  • A church member requests assistance with expenses for her daughter’s semester in Spain

Most churches and ministries are sympathetic and want to help and most requests are compelling, especially in this economy. But unfortunately, there are scammers out there that prey upon ministries’ willingness to help and are not afraid to take advantage. For instance, on May 18, 2010, the Columbia Missourian reported the following story:

Columbia Church Reports Possible Money-Wiring Scam

It is relatively easier to tell the difference between a need and want, but not always easy to discern between legitimate and fraudulent requests. So how can a ministry respond to all requests in a compassionate yet tactful manner?

Adopt a written benevolence policy. A well written policy will lay out the foundation for ministry’s benevolence activities and should:

  • Specify who is to receive and approve the requests for assistance
  • Specify the situations in which assistance may be provided, the type of assistance that will be provided and how it is to be provided
  • Eliminate any inappropriate requests for assistance
  • Keep the ministry within guidelines set forth in the Internal Revenue Code
  • Establish confidence within the ministry and amongst its benefactors that benevolence funds are being administered properly
  • Enable the ministry from developing a reputation of an easy target amongst scammers

Security Blanket #2 – Dual Check Signing

“We require all checks to be signed by two officers of the church”. 

Dual controls, or separation of the accounting duties, are an important brick in the wall of fraud protection.  Requiring dual signatures is often one of the ingredients in providing proper segregation of duties.  But, if this practice is not combined with a few other protective measures it will be no more effective as a lion with no fangs or claws.

True, the knowledge that all checks must be signed by two people will deter most people from taking a chance.  But, if this is the only control in place, it will not be enough to scare off a bold predator.

Let me set a scenario.  Imagine a bookkeeper who has been given the responsibilities to write checks, prepare the general ledger and reconcile the bank account.  If this individual has courage, handwriting skills, and lack of integrity the protection provided by dual signatures will be paper thin.  Ask yourself, how much more difficult would it be to forge two signatures than one?

My point?  Do not rely on dual signatures as your only wall of defense.  Dual signature requirements, standing alone, are no match for a check forger.

Security Blanket #1- It Could Never Happen Here

Churches continue to play a dangerous game.  While the number and magnitude of fraud incidents rapidly accelerate, few churches are taking the time or spending the money to develop a wall of fraud protection.  Many different reasons are offered in defense of this inactivity.  But, this one leads the parade: “It could never happen here.”  Nothing could be further from the truth and proof of this contention is easy to find.  I offer two.

First, current events scream that something is wrong.  All that is necessary to make this point is to perform a Google © search for “church embezzlement” or “church fraud”.  I do this weekly and each and every week I am provided a fresh batch of news stories where yes indeed, “It did happen here”.  These headlines clearly communicate that fraud in the church house is prevalent.  In fact, the case can be made that it is epidemic.

Another proof not only teaches that it can happen in any church, but that church embezzlement is not a new phenomenon. The fact is, fraud in the congregation has been taking place since the very beginning.  Take a look at the Gospel of John, Chapter 12, Verse 6.  The apostle makes it crystal clear that Judas Iscariot was an embezzler before he became a betrayer.  Jesus had an embezzler within His inner circle who stole from the first congregation. 

My conclusion?  If it can happen there, it can happen anywhere.

Security Blankets

Mar 17, 10 • Blog, Fraud PreventionNo Comments

In recent years there has been an alarming upward spike in the number of church fraud and embezzlement incidents.  But surprisingly, given this epidemic, few churches are taking proactive steps to ward off predators.  The reasons given are many and varied but most offer no more protection than the Peanuts character Linus’ security blanket. 

Each week, this blog will be updated with a description of another “security blanket” churches wrap themselves in thinking they are protected from fraud.  Be looking for Security Blanket #1 – “It could never happen here…”

What does Botox have to do with fraud?

This article ( reminded me of a fraud prevention principle – Most church embezzlements are probably not committed by crooks.  Sinister looking guys usually don’t hang around churches with cigarettes hanging out of their mouths looking for the right opportunity to jump.  Instead, I think more financial attacks on churches are committed by people who are basically good but, for one reason or another, find themselves in bad circumstances such as addictions (gambling being the most frequent), business reversals, and health issues.

Unfortunately, many churches operate under the belief that you have to be a crook to be a church embezzler, and convince themselves that since “We have no crooks here we have nothing to worry about.”  What they forget is this:  they do have hurting people.  Probably more than they realize.   In fact, every church has plenty of wounded members and employees with all sorts of “issues”.  And unfortunately, many of their wounds can be eliminated, or at least, soothed with money.

I don’t know if the need for plastic surgery and Botox constitutes an “issue”.  But it did for this particular priest.  And his church is $85,000 the poorer for it…

PSK LLP has provided this article as a resource to help churches prevent fraud.
We can help you with your specific needs by calling us at 817.664-3000 (Toll Free: 800.424.5790)
or email Verne at

The Real Cost Of Church Embezzlement

The severity of a fraud incident is usually measured in one way – How much money was lost?  When presenting fraud case studies to church groups I have noticed a common reaction: the larger the dollar loss, the louder the gasps from the audience.  While it cannot be denied that in some cases the economic impact of embezzlement can cripple, or in some cases, result in the death of a congregation, the dollar loss is often the least of the church’s problems.

In the church environment, the real cost of economic fraud has little to do with lost funds.  In fact, most churches can replace stolen money with insurance claims. (Or perhaps a great sermon series!)  The real cost of an incident comes in the aftermath, when the church body learns they have been betrayed.  Loss of trust can, and often does, outweigh the dollars lost to an embezzler.


10 Ingredients of Effective Fraud Prevention

Financial “bad behavior” is becoming rampant in the church.  You would have to be living in a cave to not recognize this.  There is not a week that goes by without another headline appearing that tells the sad story of a “trusted” church employee “gone bad”.

The good part of this, if there is a good part, is that the news is getting to be so nerve-wracking that churches and church administrators are finally beginning to recognize that a problem exists.  The two most common questions suddenly being asked are, “What can we do?” and “Where do we start”?  Unfortunately, financial misbehavior in the church is very pervasive and the variety of methods of abuse seemingly unlimited, causing answers to these questions to be quite elusive to the average church administrator.


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