Oh, THAT bank account!

The Case

The members of The Church Down The Way were a wonderful bunch. The showed up to Wednesday meetings, and two services on Sunday. Pastor Jones was a gifted speaker, and he often told stories of missionaries and the good they did. The members often contributed to further the good works they heard about. The gave their checks to the pastor, or they mailed them in. The pastor opened the mail, and when checks for this ministry arrived he deposited them at the bank. He also deposited some of the other church money into this ministry account.
 
Problem is, the other church leaders had no idea the church was associated with such a ministry. They also didn’t know about the bank account the pastor created…
Over the course of eight years he deposited church checks and church cash into his own ‘ministry’ account – to the tune of over $178,000. He then wrote ministry checks to himself. And he used a debit card from this account at such places as leather goods stores and lingerie shops. Hmm.
 
After an investigation which included the FBI, the (then) ex-pastor pled guilty. He is now serving 28 months in a federal prison. He also has to pay back the $178,000 that he stole.

Analysis

Most folks consider checks to be more secure than cash, but it’s not as safe a mechanism as one might think. It’s easy to open a bank account. But fraudsters can form a fake business with a name like that of their church. When a member writes a check to “Redeemer Church” he wants it to got to the real church. Here, the proper name might be “Redeemer Associated Reformed Presbyterian Church”. But the check could ‘somehow’ wind up at a different bank in an account for “Redeemer Ministries”. Bank folks often accept plausible checks, in the same way they’ll deposit a check to Tim Stephenson into the official “Timothy G. Stephenson” account. 
 
The problem arises when one person opens the mail without supervision. This person could steal any check they wanted. They could even use church letterhead to thank the parishioner for the donation.
 
Also, the pastor had the combination to the safe, and the money was not counted until evening. An easy solution to this is to use a two-key safe. Or one could have a safe in a locked room. In either case, one would want to ensure that nobody had both keys. And a husband and wife pair or brothers, for instance, could hold one key, but not both!
 
A further protection would be to use tamper-evident plastic bags. The church could use a bag for the morning service. They would note the serial number on the bag, and fill it with the collection. After the evening service, they could add the contents of the bag to the evening collection and count it all. All would be well if the bag was not damaged and the serial number in the evening was the same. The pastor might still be able to get to the bag, but it would be obvious if he got into the cash itself.

How to prevent something like this at your church

for deposit onlyAlways have two people opening the mail. When checks arrive, immediately stamp them with a restrictive endorsement. This is the stamp that says, “FOR DEPOSIT ONLY” in big letters. It also includes the church name, bank name, and bank account number. Better – see if your bank will let you scan the check for immediate deposit. Some banks will even let you use your cell phone for this.
 
Get a two-key or a two-combination safe, or put the safe in a locked room or cabinet. Make sure that the keys go to unrelated individuals. In our church one family is heavily represented among our church staff: all of them could hold Key A, and we would reserve Key B for others.
Use tamper evident plastic bags if you don’t have a two-key safe. Keep a log of the bag serial numbers. Make sure the  bag you open for counting is undamaged – and is the bag you sealed earlier in the day.
Also, in the case above, the pastor accepted donations himself. A more secure way to do this (and one which would protect your pastor’s reputation) would be for him to direct members to use a drop-safe. But you knew that from the last two posts!
 
This week’s case is based on a true case which resulted in federal jail time (link). I added a bit of local color – and a bogus church sign.