The administrative assistant in charge of financial matters was a long term employee and completely trusted. She was also a brazen thief and by the time the organization started paying attention to her spending she had stolen at least $1.3 million over a period of years. The theft finally came to light when a check was needed to pay an obligation and there were no funds in the account.
After the matter was investigated it was found that the trusted employee would ask one or the other of her supervisors to sign blank checks. Sometimes the requests were verbal, other times she left sticky notes with the request. The supervisors would dutifully hand over the signed, blank checks. The employee would then fill in her name and cash the check. She had a bank card as well and could make cash withdrawals. The number of fraudulent checks and card transactions totaled 748 for the period audited. That comes to one or two checks or transactions per week for a decade.
The thieving employee was found to have spent considerable organization funds on lottery tickets (including 51 winning tickets totalling over $100k) along with various personal expenses and travel. She owned seven vehicles.
How could such fraud and theft occur?
Simple. No one ever checked. No audit was ever done. Supervisors never looked at bank statements or debit card transaction records. A casual glance would have revealed dozens and dozens of withdrawals of cash at the maximum amount possible and a multitude of checks where the employee had written her own name.
This was a church, right? A church where Miss Sally had been the church secretary/financial assistant as long as anyone could remember. Who wouldn’t trust her?
No. Not a church but a public university. One that has a business school and all kinds of faculty who teach accounting, auditing and such things. Go figure.
How could people be so stupid and aloof? They never looked, never checked, never asked questions.
Happens. All. The. Time.
The median Southern Baptist church has less than 100 in attendance and likely has only a single full time employee, the pastor. There’s probably a part time secretary or a volunteer treasurer who handles the check writing. The pastor, like it or not, is the administrative leader of the church as well as the spiritual leader. It is up to him to lead the church to see to it that the church has at least rudimentary financial policies and procedures in place to avoid a catastrophe like the one described above.
Here are five simple suggestions for keeping your church safe in this area:
- Pastor, pay attention. Look at the financial reports. Ask questions. Firm up policies for handling the church’s money. This may not be something you think worthy of your time and it can be a delicate task but it should be done.
- See to it that an annual financial review is done. There are some people in the church who have an understanding of finance. Make up a team or add this responsibility to an existing team or committee. The review is simple and straightforward. It can be done in-house by reviewing bank statements and other third-party documents like credit card statements. Simple things can be reviewed such as the payee on checks and ATM cash withdrawals.
- Ask questions if you don’t understand a payment made or a charge that shows up on a statement.
- Be sure that the numbers on the reports given to the church match the numbers reported by the bank. That is, if the secretary or treasurer’s report says you have X dollars in a bank account, verify that the number is what the bank says.
- If a problem is found, get knowledgeable church leaders to address it with you. Serious issues may require the involvement of a CPA firm or law enforcement. Most churches are just sloppy, not criminal.
The pastor doesn’t have to do all this himself but it is critical that he demonstrates to the congregation and leadership that he has competence in this area.
All the state conventions have exhaustive resources for church administration, including church finances. My state does excellent work in this area.
What happened to the employee who stole the $1.3 million in the case above? She committed suicide when she was found out. Her two supervisors were removed from their jobs. The whole business was both tragic and inexcusable.
I suspect that if this was a church, the pastor would be seen as incompetent and forced from his position.
Need more information and suggestions. Check this for “Ten Ways to Prevent Embezzlement of Church Funds.”