Southern Baptist churches are independent – the association is one of shared beliefs rather than shared accountants and auditors. That means that the churches run the gamut from well-run to, shall we say, “informal.”
This church appears to have been on the “informal” side. And one day they had a fire which destroyed the building. It was a suspicious fire, though, and during the investigation the authorities found more than they expected. One of the deacons, who had served for 23 years as their volunteer treasurer, had embezzled more than $320,000 from the church. He wrote checks to himself, and initiated wire transfers as well. His duties included making deposits of the offering, which usually consisted only of checks. And he appears to have been the only one reconciling the bank statements. A member of the church’s Finance and Budget Committee suggested that he could have embezzled as much as $750,000 over 23 years, but the FBI investigation only traced back 11 years.
Fraud in churches ALWAYS involves these three elements: financial pressure, opportunity, and rationalization. In this case, we don’t know what financial pressure the treasurer was under. Other cases have involved gambling addiction, substance abuse, a girlfriend on the side, crushing debt, pending bankruptcy, medical bills, or a lavish lifestyle. The rationalization part is easy to see: “I’ve been devoting myself to the church as a volunteer treasurer – they should be paying me! All I’m doing is righting this wrong!” Certainly some volunteer treasurers think this – as do underpaid or unpaid pastors. By telling themselves this, they can quiet their conscience. This allows them to consider themselves as still being good people, rather than facing the fact that they are indeed lawbreakers.
We know from Scripture that the heart is deceitful. So we should EXPECT folks to get into financial trouble, and expect them to be very good at rationalization. The way to keep them from falling, then, is to work on the third side of the Fraud Triangle: opportunity. Here, the church made the classic mistake of letting an unsupervised person handle the cash and keep the books. In 2016, according to the writeup, the church appointed a collection counting group and a bank reconciliation clerk, who discovered the problem.
How To Prevent This From Happening At Your Church
- Don’t let one person have access to the assets (cash, checkbook, wire transfer) AND keep the books.
- Have two (or more) people count the collection, and send copies of their tally sheets and the deposit slip to the treasurer and the audit committee immediately. One can use a cell phone to send a snapshot. By doing this, the numbers go several places and will be checked later against what the bank received.
- Have the bank statements sent to the pastor or other senior staffer first, for a smell-check. Then they go to the bookkeeper for reconciliation. Here, the church added a clerk who ONLY did the reconciliations – a great idea. (They added her having only a suspicion of the problem: she was the one who uncovered the case.)
- Establish an audit committee to verify everything. Here, nobody but the treasurer ever saw the bank statements. And when demanded of him, the treasurer presented forged bank statements to the board.