Many Churches Don't See Financial Irregularities Until It's Too Late
Controls, specific procedures such as stamping checks “for deposit only,” safeguard financial integrity and deter potential wrongdoers. If your church doesn’t have detailed, written policies that outline what procedures must be followed from the time a dollar hits the offering plate until it makes it to the bank, a red flag is already waving. Here are three other red flags to look for.
Red Flag No. 1: A Person Who Does it All
“If you have the same person counting the money, recording it and depositing it—you’ve got a problem,” said Denise Phillips, a certified public accountant and vice president of Michiana Accounting Solutions, Inc., a consulting firm for not-for-profit organizations.
Provide Checks & Balances. The person who opens the mail should differ from the one who makes bank deposits. The person making payments from a fund shouldn’t balance that fund.
Split Duties. Reduce the temptation for a single individual who handles all the funds.
(Even a small church can implement these controls.)
Red Flag No. 2: An Opportunity for Temptation
What greater temptation is there than a pile of money passing in front of your face? Being left alone in a room to count it.
Follow the Rule of Twos. For church offerings, experts recommend that you follow the rule of twos: At least two people should always collect and count the offering. The same two people should carry the offering from the collection point to the counting room. This not only protects the church from theft, but it protects the counters from the appearance of impropriety.
Select Counters Carefully. Enlist money counters who aren't related and don't work at the same place during the week. Also, avoid selecting someone experiencing a financial crisis.
Secure Counting Area. Only members of the count team should be allowed into the counting area. Do not allow them to bring in coats, purses, or briefcases.
Red Flag No. 3: Inadequate Oversight
Tales of embezzlement often share common elements: a charismatic person in a position of trust who convinces the governing board that all is well; the board assumes the person speaks truthfully and performs his duties honestly; then regular checks are not performed. As a consequence the crime goes unnoticed.
Reconcile Bank Statements. The treasurer or another high-level person should compare each month’s bank statement with the church’s records on tithing, deposits, etc. The person should be unrelated to those processing deposits or recording transaction.
Hold Monthly Financial Meetings. Church leaders should meet monthly to examine financial statements. Financial irregularities are easier to spot the more informed leaders are.
Schedule Audits. Larger churches should hire an outside auditor to examine their books every year or two. If your church has a sizeable endowment fund, an outside audit is worth the expense.