Fraud Prevention Quiz

Test Your Knowledge Against Real-World Scenarios

The following scenarios are actual cases of church fraud and embezzlement. Read each one and decide what you believe should have happened to help prevent the wrongdoing that took place in these situations.

You also may want to listen to the free webinar, Church Fraud: Keeping Thieves and Embezzlers Out of Church Finances, in which Matthew Hirschy, vice president and treasurer at Brotherhood Mutual, and Tom Lichtenberger, senior manager of property claims, discuss how church leaders can protect their churches with policies and procedures that can help prevent church crimes. You will find links to the webinar and other resources below. The correct answers to the quiz are printed below.

Scenario #1: Pastor in charge of finances

The church board put the pastor and his secretary in charge of church finances. Originally, the board also assigned a trustee as a signatory on the church bank account, which he occasionally reviewed.

After the trustee began to question the pastor’s practices, the pastor had the trustee removed from the account, giving the pastor total control over the church’s bank account and credit cards. Subsequently, the pastor gave himself a $5,000 raise and a $15,000 bonus, followed the next year by a $22,000 bonus.

By the time the board confronted the pastor, he had managed to spend more than $200,000 on clothing, meals, vacations, and a number of other purchases at some impressive stores and restaurants.

What risk management step(s) could the church have followed to keep this from occurring?

A.  Do not allow the Pastor to also be in charge of finances.
B.  Regularly audit bank statements.
C.  Regularly audit credit card statements.
D.  All of the above.

See below for answers to all scenarios  

Scenario #2: The overworked employee

Although the employee really wasn't overworked, her submitted hours suggested she was. This woman was a daycare director and her husband was the bookkeeper. He was responsible for approving the employees’ payroll.

A number of embezzlement activities were in progress: purchasing numerous personal items, such as makeup and hairspray, gift cards, doctor visits, clothing. They even made college loan payments. In addition, her husband approved her timesheet, so she submitted and was paid for hours that she had not worked and personal leave time she had not accrued.

Allowing immediate family members to oversee other members:

A.  Is highly recommended.
B.  Should be strongly discouraged.
C.  Is OK, but should be closely monitored.
D.  Is dependent upon the people involved.

Scenario #3: Missionary support

These two scenarios involve missionary support:

Mission Case #1. This case involves three individuals. At least one of them was part of the church. The trio set up a new mission ministry. This was NOT a legitimate mission entity, but was posing as one. One person posed as a missionary under this false ministry. Then the three of them worked to get the church to send donations to support this "missionary." The church responded by sending $12,000 one year and $15,000 the next.

Mission Case #2. The church treasurer took funds that had been designated for missions. He was found out when the missionaries began to call the church, asking why they were no longer being supported.

These scenarios confirm:

A.  Never support missionaries or other ministries.
B.  Support only ministries/missionaries you know.
C.  If you aren't familiar with a ministry/mission, do your homework.
D.  Both B and C

Scenario #4: The Certificate of Deposit

When this church had some additional cash, they decided to put the funds into a Certificate of Deposit (CD) at the local bank. When the CD was set to mature, the secretary advised the pastor that rates were so good she simply renewed the $61,000 certificate.

In reality, she had already cashed it in and was using the money for her own personal use. In addition, she was regularly withdrawing money from other accounts and reporting a much higher account balance of $40,000 to the board than what was actually available as opposed to the accurate number of $9,000.

This scenario shows:

A.  Never purchase Certificates of Deposit from a bank.
B.  Never let the secretary be in charge of finances.
C.  Why you need multiple unrelated individuals participating in financial oversight.
D.  Never trust a bank.

Scenario #5: Two men in charge of all finances

Shortly after a new pastor came to the church, the treasurer and the chairman of the trustees got into a series of disputes with the new pastor. Both men and their families were very critical of the pastor and encouraged others to leave the church. Occasionally, they disrupted the Sunday morning services with loud conversations.

After a short time, the treasurer was able to have the pastor dismissed. After the denomination’s district office reinstated the pastor, the treasurer stopped making housing allowance payments to the pastor.

The chairman got the trustees to change the threshold spending from $300 to $3,000. This allowed the chairman to spend more money without oversight. Shortly after that, both men left the church.

The church ran into issues immediately because the men were the only ones authorized on the bank account. In addition, the pastor discovered that all passwords to other financial accounts were changed. 

Based on this information, ministries should:

A.  Have more than one person authorized to access bank statements.
B.  Revoke authorization to access bank accounts from anyone who has been removed from a position that has access.
C.  Have clear spending procedures in place.
D.  All of the above.

How did you do? You can check your answers, below. Brotherhood Mutual offers free resources to help ministries take control, and keep control, of their finances. Click on the resources below to learn more.

Webinar:

Articles:

Checklists:

 

Answers to the Quiz: #1: D; #2: B; #3: D; #4: C; #5: D