Wednesday, September 4, 2013

Is your church secretary stealing from the church?

Two things are true about that question:
  1. She is almost certainly not.
  2. For someone who reads this blog, she is.
And here's what is happening in your church, with the Lord's money and you don't know about it:

She handles all the books, pays the bills, writes the checks, gets the bank statements. What is happening is that she is writing checks to a dummy vendor, perhaps with a name that sounds 'right' if someone looked at it, and deposits it in an account that she controls. She then writes checks out of that to herself. Or, she is writing checks to herself or a family member but changing the payee when the check is entered into the accounting software so that when statements are run everything looks normal. And she knows that no one besides herself ever looks at the bank statements. Or, she has a private supply of checks and she tosses out the ones that are legitimately signed by one or two church officials and rewrites her own and forges the signatures.

She can get away with this until some bill goes unpaid or until someone smells something foul and takes minimal initiative to ask questions and look at actual records. 

But you, Spurgeon are too busy with your nose in some dusty commentary to educate yourself on church finances. Besides that, you don't want to soil your dainty hands with tedious administrative duties. 

OK, genius, just wait around until you've had tens of thousands of dollars stolen from the church. You can always be the white knight in offering support and forgiveness to the thief while the church has to figure out a way to get back to solvency. 

If you are going to pastor a church with a budget of $100,000, $200,000 and upward, and you are the only full time staff, and you are the one who sees to it that policies are in place, you better educate yourself.

I have relatives who are CPAs and one was an internal auditor for a Baptist university. While he did not run across anything more than sloppy accounting and money handling practices at that job, he has sufficient experience to have quite a view of honesty in the workplace, including churches and religiously based institutions. 

Here's his rule of thumb for workplace theft:
  • 10% of employees will always steal from you.
  • 10% of employees will never steal from you.
  • 80% of employees will steal if the circumstances are right.
I think he is a bit low. I read where 30% are already stealing from their employer and another 60% would if the situation was right.

"Aha," sayeth my clergy colleagues, "Christians are more honest and those with church jobs are certainly more honest in dealing with the Lord's money."

Uh, no, brethren. You must presume not. If your thinking as a pastor is that you trust the folks who handle the money and write the checks, probably folks for whom you are their shepherd and pastor, that is good. If your practice is that you trust these folks, that is bad and you are as dumb as a stump. 

At some point in a 30 or 40 year pastoral career, you will have folks stealing from the church. Sadly, you probably will not even know it.

There are simple solutions to most of this that doesn't involve outside auditors, CPAs, or finance experts.

  • Have a committee look over the bank statements once a year. 
  • Divide up responsibilities for collecting, counting, and depositing the money. 
  • Don't let one guy count the money and make the deposit.
  • Don't let one guy have access to the deposit where he can take out cash and then remake the deposit slip which is not duplicated.
  • Pastor, either you or someone or some committee ought to look at every check written occasionally. You can easily generate a report with this. 
  • Go to the bank and get a list of accounts linked to the church and see if there are any you are unaware of.
  • Physically reconcile the balances on the church financial statements, the one your bookeeper generates with what is actually in the bank.
You will save yourself some grief down the road.

Here is the latest: Woman steals $130,000 from Baptist Association

There's even a CPA who has a blog called Church and School Embezzlement. Read all about it.


Tim G said...

Great post with great information. This is a growing problem and will only get worse as fewer people engage in the day to day of church operations. Our ministry has uncovered several of these issues in churches and schools over the past 10 years. And churches still do not listen!

Noce job!

Anonymous said...

There should be no excuse for a pastor in Ga to not have some idea of this problem and set up standards to prevent such problems in their own church. The GBC does a wonderful job of providing meetings, materials, and other help to pastors and churches to prevent these types of issues. Sadly, I sat in a meeting where these very things were spoken of only to hear some people say that they wouldn't make any changes because it might hurt someone's feelings.

With a previous background in retail I can attest to the percentages that you quoted from your family member in finance. We were consistently told - and it proved true - that 95% of retail loss was internal, and that anywhere from 60% - 90% of our employees would steal, in some form or fashion, if the right moment presented itself. Good stuff.

Peter Reilly CPA said...

One control which can be good for small not for profits is to have an officer who is not involved in signing checks or initiating disbursements to get the bank statements unopened.