Preventing Employee Theft and Embezzlement

While it may be difficult to imagine, employee theft and embezzlement can happen at worship centers and facilities of all sizes, denominations, and locations across the country. Unfortunately, not all employees mirror the integrity of the religious organizations they work for, exploiting employers’ trust and taking advantage of their position. In fact, religious organizations are particularly susceptible to theft and embezzlement for a number of reasons:

• Financial control is often given to a single person
• There is little oversight over this financial manager, as they are seen as trustworthy
• A large amount of cash is handled

As Ronald Reagan advised, “Trust, but verify.” Read on for a number of tips that reduce the likelihood that your organization will be victimized by employee theft or embezzlement.

1. Keep your guard up

In all likelihood, you trust your employees; after all, your employees are fellow faith practitioners. However, no matter how altruistic your employees may seem, they might be harboring more nefarious intentions.

Below are a few examples of theft at religious institutions:

• A church administrator in Pennsylvania stole nearly $100,000 in church funds over a 14-year period by falsifying vouchers and payments and forging pastors’ signatures
• The former pastor of an independent congregation in Missouri pleaded guilty to felony fraud when he absconded with upwards of $30,000 in church funds
• A Florida minister pocketed $6 million in church funds after the church authorized him to withdraw funds using his signature only

Recognizing that theft or embezzlement could happen in your organization is the first step to taking precautions to prevent it.

2. Develop a simple and clear loss prevention program

One of the best ways to reduce the risk of theft and embezzlement at your religious organization involves the careful development of a loss prevention program, which is a set of policies, procedures, and business practices designed to protect an organization’s finances.

The below steps lay the groundwork for an effective loss prevention program:

• Simplify financial processes: establish simple bookkeeping processes that reduce the chance of error and confusion, and require that bank statements and accounting records be balanced every month
• Limit access to bank accounts: cap the number of bank accounts your organization maintains, the number of people authorized to sign checks, and the number of people who have access to check-printing programs
• Track your assets: maintain records on assets, equipment, and supplies, require original invoices and receipts for cash withdrawal, and encourage that checks be stamped “for deposit only”
• Divide responsibilities: establish divisions between employees who collect funds, bookkeep, write checks, and manage bank accounts; also, prohibit pre-signed, blank, or partially completed checks
• Create accountability: require documentation for all expenditures, two signatures for checks over a predetermined amount, and the written consent of two persons for transfers of large sums of money into or out of bank accounts

3. Establish business practices that include risk management procedures

Beyond establishing a strict loss prevention program, developing business practices and procedures that include risk management steps can mitigate the threat of theft and embezzlement. The following can help to safeguard your organization’s financial future:

• When hiring prospective employees or reviewing potential volunteers whose job function will include the handling of funds and accounts, check references carefully and conduct a credit check and criminal background check
• Create a policy that establishes conduct standards and outlines employee responsibilities; review the policy with employees and ask them to sign a copy
• At least once per year, audit your financial systems and practices to identify areas of weakness and areas that could invite deception; for example, track the flow of assets in and out of your organization to determine control points
• At the end of each fiscal year, review a random sampling of the year’s transactions; if there are any discrepancies, conduct a complete review
• If you suspect an employee is committing fraud or embezzlement, hire an accountant, a fraud examiner, or an attorney to review your records

The information contained in these materials is intended solely to provide general guidance on topics that may be of interest to you. While we have made reasonable efforts to present accurate and reliable information, Church Mutual Insurance Company, S.I. disclaims all liability for any errors or omissions, or for any actions you take or fail to take based on these materials. The information provided may not apply to your particular facts or circumstances; therefore, you should seek professional advice prior to relying on any information that may be found in these materials.