Trap #3 Operating with little or no accounting controls (Part 2)

Many churches fail to implement a well defined purchase approval and payment system

There is a great difference in attitude in the church environment between receipts and disbursements.  While churches exercise extreme vigilance over the “inflow” of funds into the church, many have a rather cavalier attitude towards the “outflow”.

Churches also tend to rely on a few “fraud prevention” methods which in my opinion provide little more protection than a security blanket.  They may give a warm and fuzzy feeling, but are no help in a real crisis.  The two I hear most often are the requirement of dual signatures for checks over a predetermined amount and the requirement that a check request form be filled out before anyone gets paid.  It is not uncommon for these to be the only two “fraud prevention” controls exercised over cash disbursements.

KEY: Churches that rely on methods this simple are unaware of two basic facts.  First, dual signatures and homemade check requests are absolutely no match for an ethically challenged employee with the courage to forge.  Second, and this may be the most surprising, many of the larger and more spectacular embezzlements involve tampering with the church’s cash outflow, not the inflow.

An important element of proper stewardship is to develop, implement and live by a well defined, written bill approval and payment process.  Some key ingredients of such a plan:

 A clear description of who will:

           Approve bills

            Receive goods

            Validate invoice with purchase order and receiving documents

            Prepare checks for payment

            Sign checks

            Mail bills

            Record transactions in the general ledger

Use of pre-printed, sequentially numbered purchase orders, not check request forms that anyone can duplicate on a copy machine.  

A vendor application and approval process culminating in an approved vendor list

Write checks and/or make drafts only to vendors on the list

Consider using a Positive Pay program in partnership with your bank.

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