By implementing recommended internal controls and cash management procedures, you can greatly reduce your church's risk of fraud. Check your current procedures against the following guidelines to see what you're already doing right and how you may improve:
- Signers of checks must not be the person authorizing the expense.
- Require two individuals to sign checks of more than a predetermined amount, and ensure that the signature documentation (signature card) held by the bank shows this restriction.
- All disbursements should be made by pre-numbered checks and must be accounted for on a weekly basis.
- Require written consent of two individuals to approve the transfer of large sums into or out of accounts, including line-of-credit draws.
- Bank reconciliations should be approved by someone not authorized to sign checks or make deposits and should be done promptly. Look for checks out of sequence.
- Every check should have written documentation (check request/receipt/invoice) with the exception of payroll checks.
- Invoices and check requests must be marked paid with date and check number and filed.
- Do not sign blank checks in advance.
- Do not use signature stamps.
- Have a credit card policy and approval process for purchases.
- Require those responsible for the handling of money to take at least a one-week vacation from duty each year, and have someone else fulfill the duties during that time. Consider resistance to this vacation a red flag.
- Engage an independent auditor, such as a CPA, to perform a compilation or review of annual financials and controls.
- Require two unrelated cash counters every service, with each completing an Offering/Counter's Sheet. Have each counter verify the other's form.
- Rotate different individuals as money counters each week.
- Checks should be immediately stamped "For Deposit Only."
- Stow petty cash in a safe. Establish a procedure for its use and disbursement, minimizing access and treating it like a bank account with regular audits and reports.
If you're already doing most or all of these, we applaud you. Unfortunately, many churches do not realize the importance of financial controls until it is too late. For more information, click here to watch Rich Hammar and Jerry Sparks discuss the danger of church fraud and offer insight every church leader needs.
If you have questions or would like additional information, call 866.621.1787 or email firstname.lastname@example.org.
This article does not constitute legal advice and is not a substitute for obtaining professional legal counsel.