About one in every three churches gets robbed. And it’s not just the megachurches that fall prey to thieving employees. Most church fraud happens in small, local churches that don’t have enough employees to easily provide accountability.
So says church fraud expert Keith Clark-Hoyos, owner of Church Procedures Audit, a company that helps ministries safeguard against embezzlement.
Recently, I spoke with Clark-Hoyos, following the sentencing of a former employee at Ed Young’s Fellowship Church. In that case, a business administrator embezzled more than $1 million over 11 years.
Though these big cases grab headlines, Clark-Hoyos says they’re not typical. The average amount lost in a church fraud case is $180,000 over 18 months, he said. Yet these cases add up to billions of dollars in fraud each year.
Thankfully, with good accountability, churches can usually detect fraud cases in two months or less, Clark-Hoyos said. Accountability systems also prevent mistakes and protect employees from false fraud accusations.
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Here are Clark-Hoyos’s top six tips for churches, even small ones, on how to prevent church theft on a budget.
1: It’s Your Job
The first misconception local church leaders make is to think fraud prevention isn’t their job, Clark-Hoyos said. Pastors or elders often believe that the church treasurer is supposed to deal with anything money-related. But that’s false.
Under U.S. law, all nonprofit organizations have a responsibility to make sure money gets used as promised, he said. That means everyone in an organization is responsible to prevent fraud.
“It’s all our problem. It’s all our responsibility,” Clark-Hoyos said. “And if we completely neglect that, there could be personal liability for the church.”
Churches should never trust individuals to manage money, he added. Instead, they should design accountability systems that involve multiple, unrelated people.
2: Plan a Procedure
Every church should have some policy in place to stop fraud, but startlingly few do, said Clark-Hoyos.
“I rarely find a church that actually has financial policies and procedures documented,” he said.
If churches can’t afford a team to count offering money, they can at least have two or three unrelated people do the job, he said. A simple measure like requiring two signatures on church checks makes fraud far harder.
“What the smaller church has to do is be acutely aware of where they’re struggling to meet best practices, and then looking for creative solutions that are cost effective,” Clark-Hoyos said. “The number one prevention of fraud is the fear of being caught.”
The difference between some policies and no policies against fraud is huge, he said. People don’t commit crimes as often when they know someone might notice.
“The number one prevention of fraud is the fear of being caught,” he said.
3: Follow the Money
Ideally, a separate person should handle a church’s financial authority, custody of money, bookkeeping, and bank reconciliation, Clark-Hoyos said. But small churches often can’t afford four accountants.
At minimum, churches should always have two people looking at their entire financial system, he said.
“A lot of small churches say, ‘Old Joe’s been the treasurer, and he just does it all and we just trust Joe,’” said Clark-Hoyos. “The death of a financial system is when we choose to place our trust in an individual.”
If money gets spent, someone unrelated to the bookkeeper should look over the transaction, said Clark-Hoyos. Just a half hour of time spent reviewing a church’s bank statements and bank reconciliations can go a long way in fraud prevention.
“What you’re doing is you’re investing a little bit more time by somebody else to double-check that work,” he said.
4: Vigilance on Vendors
Small churches often hire vendors who know church members, said Clark-Hoyos. Often, they don’t check if they’re getting a good price for work.
“What happens in the small church is, ‘We need a plumber. Oh, My cousin’s a plumber.’ And that opens up all kinds of possibilities for bad things to happen,” he said.
Churches should have some policy to check for fraud before they hire a contractor, he said. One good protection is asking for at least three bids from businesses before buying a service.
By doing so, churches can ensure that they aren’t getting overcharged or tricked, he said.
5: Be Careful with Cards
Fraud often relies on credit or debit cards, but churches do especially badly at catching these cases, said Clark-Hoyos.
Sometimes, credit cards can be the chink in a church’s armor. One church Clark-Hoyos audited had excellent accountability systems in place on checks, but none on credit cards. Staff could easily steal money, as long as they used a card.
“Churches are notorious for not monitoring or managing that at all,” he said. “Notoriously bad at monitoring credit card and debit cards. Debit cards are even worse as far as risk.”
Credit card purchases should have receipts so a church can know what they were for, said Clark-Hoyos.
6: Forgive, Don’t Forget
If church leaders find fraud, they should take action, said Clark-Hoyos. Often, church leaders want to keep things quiet because publicity will damage trust in the church. Other times, they want to be merciful.
However, mercy doesn’t mean protecting people from legal consequences. According to Clark-Hoyos, most fraud perpetrators say they were planning to pay back the money and apologize when caught, but they still have to face the consequences of their act.
“Bad decisions have consequences,” he said. “For those who truly are repentant, you might have the desire to encourage the district attorney to drop the charges. Don’t do that. Because you’re leaving somebody else vulnerable—the next church down the road.”
The church should always look for reconciliation with sinners, Clark-Hoyos added. But it should leave the decision on criminal punishment for fraud to the government.
Jackson Elliott is a Christian journalist trained at Northwestern University. He has worked at The Daily Signal, The Inlander, and The Christian Post, covering topics ranging from D.C. politics to prison ministry. His interests include the Bible, philosophy, theology, Russian literature, and Irish music.