Church embezzlement is on the rise. Setting up and establishing internal controls is imperative...especially for debit and credit cards! See tips for setting up credit and debit card policies below...
One such church embezzlement case that has been all over the news here in Oklahoma is the pastor who has been accused of defrauding approximately $933,000 from his church and community development center.
He is accused of fraudulently transferring funds from the community center bank accounts to church bank accounts and then transferring those funds into his own personal bank accounts.
He has also been accused of making large cash withdrawals from the church bank account that he used for his personal expenses which included a mink coat, a Rolex watch, hotels, restaurants, casinos, liquor, and automobiles.
Another high profile church embezzlement case involved the priest of a Canadian church charging over $200,000 in personal expenses with the church's credit card. Those expenses included trips to Las Vegas, massages, clothing, and a Netflix subscription.
My first thought with both of these cases is where was the person reconciling the bank and credit card statements???
One of the best internal controls a church can put in place is separation of duties!
Many times when a church first starts up, a pastor may have to wear all the hats, but to avoid even the l"appearance of evil" set up some internal controls right off the bat!
Set up one person to be the treasurer or the bookkeeper, but not both. Note: if someone has access to the money, he should not have access to the financial records! If possible, the person entering your accounting data should not be the person writing checks ... and you should have another individual (not related to the others) reconciling bank/credit card statements.
"Fraud, theft, and mistakes are as much of a concern with the money going out as they are with the money coming in as you have seen in living color in the church embezzlement cases described above. Procedures and controls need to be in place as it relates to the money paid out.
If your church uses a debit or credit card, appropriate procedures need to be documented so volunteers and employees understand how and when the card can be used". (excerpt from Church Accounting How-to Guide)
Every individual authorized to use the church debit or credit card should read those guidelines and then sign a statement acknowledging their agreement to adhere to the terms of that written debit/credit card policy.
The card policy should outline:
See an example of a Credit and Debit Card Policy. You can also do a web search for company credit and debit card policies and find some good templates that you can customize for your particular organization.
Let me emphasize again here...that it doesn't matter how small your organization is...we should avoid the very appearance of evil. An individual using the credit/debit card and writing checks SHOULD NOT be the one reconciling the bank/credit card statements!
1. Personal expenses should not be allowed to be charged to the church's card. Any personal charges that were inadvertently charged to the card should be repaid immediately.
2. Set limits!
3. Require receipts! Your credit card statements alone do not meet IRS requirements of record-keeping documents. Actual receipts should be provided to the appropriate person within 30 to 60 days of credit card charge. If they do not submit the receipt within your written policy stated time, the amount of the charge should be charged as taxable income to that individual.
4. Use the church credit card for church business expenses such as fuel for church-owned vehicles, church-related online orders, or office supplies. Fuel charges for personal vehicles used in church business should be handled through an accountable reimbursement plan. Out-of-pocket ministry expenses should be reimbursed with a church check through that plan as well.
5. Use preventative and protective measures to prevent credit card fraud and theft such as not giving the church's credit card number out over the phone unless you know the company to be reputable, keep your eye on the card the whole time a transaction takes place, etc. Another preventative measure is NOT allowing any online purchases while on a public wifi. Always include in your policy that the church's credit card company should be notified immediately if fraud or theft occurs!