I ended the telephone conversation with, “Yes officer, I’ll be right there.”

My wife, seeing the shocked look on my face, asked me what happened. I responded, “That was the police; they just arrested _____.”

In this particular case, the police had arrested a beloved volunteer who was caught red-handed, stealing from the church. But, while the names and locations are different, this scenario is taking place in churches more often than you might think.  

Someone we admire and respect — someone who works tirelessly for the church — has betrayed our trust, betrayed their church and, more importantly, betrayed God.  Another leader has embezzled money from the church. 

Why Accountability Matters

Financial fraud is a growing problem in the church. Research from the Association of Certified Fraud Examiners suggests that all organizations, including churches, lose five percent of their revenue to fraud and abuse each year. Another study conducted by the Center for the Study of Global Christianity shows that financial fraud in religious organizations outpaces donations for worldwide missions.

What can our churches do to reduce this risk? Embrace accountability.

The principle of accountability runs throughout the Bible and is a common word within our churches. The Parable of the Talents is an example of how God holds us accountable for how well we steward the gifts and resources He gives us (Matthew 25:14–30). We talk about being accountable to one another in our discipleship classes. We create small groups and encourage church members to bear one another’s burdens. Pastors and board members understand that they are accountable to one another and their donors for the business decisions they make.

But within our financial processes, the term “accountability” has a nebulous meaning. While we embrace the concept of financial accountability, we find it difficult to implement in practical terms. We believe accountability will require additional cost and more employees — which are not in the current budget. And we believe accountability will cause delays because it means waiting to make a purchase until a board member has time to review and approve the purchase request. However, the Book of Proverbs reminds us, “in the multitude of counsellors there is safety” (Proverbs 11:14, KJV).

Without accountability, human nature tends to drive us to the dividing line between right and wrong, which can leave us vulnerable. Too many church leaders have succumbed to temptation because they failed to embrace accountability.  

Too many church leaders have succumbed to temptation because they failed to embrace accountability.

Fraud Statistics in the Church

If a typical church loses five percent of revenue each year to fraud, that’s the equivalent of about three weeks of offerings. Can your church afford to lose three weeks of funds?Unfortunately, churches and nonprofits are not immune to fraud, and the risk of fraud in our churches is alarming. Consider these statistics from a recent study of actual fraud cases by the Association of Certified Fraud Examiners:

• Religious and charitable organizations experienced a median fraud loss of $80,000, and other types of non-profit organizations suffered a median loss of $108,000.

• Smaller organizations, like churches, often suffered larger losses because they had the least amount of controls, making them more vulnerable to fraud.

• Fraud schemes lasted a median of 18 months before detection. 

• In 95 percent of all fraud cases reviewed, the perpetrator was a first-time offender with no prior criminal conviction.

Fraud schemes are often difficult to detect and usually involve people you’d least suspect. However, strong internal controls and other accountability measures can help detect fraud sooner.

Key Controls to Reduce Fraud

Here are 10 practical steps to strengthening controls and reducing the risk of fraud in your ministry. The first four are general principles leadership must adopt. The remaining six are specific controls that cover most of the financial processes within a church.

1. Embrace accountability and transparency. Make them part of your organization’s DNA.

2. Document policies and procedures. Put them in writing to clarify expectations.

3. Minimize exceptions. Everyone should play by the same rules and be held to the same standard.

4. Segregate key duties. No person should have complete control over all financial processes.

5. Cash: Two or more people should count offerings and prepare the deposits.

6. Disbursements: Require a three-way match before paying a bill. Document purchase approval; verify receipt of the product or service; and obtain a valid invoice.

7. Credit cards: Require receipts for all credit card transactions.

8. Wire transfers: Wire transfers and other electronic fund transfers should involve at least two people.

9. Payroll: Segregate the payroll and reconciling functions.

10. Fixed assets: Conduct annual audits of fixed assets.

Accountability and transparency in financial operations don’t constrain leaders. Rather, they help protect leaders and the reputations of their organizations. Don’t become a statistic. Implement these internal controls to help defend against the risk of fraud in your church.

This article originally appeared in the June/July issue of Influence. For more print content, subscribe here.