Little do they know, he’s going to pocket that money.
A common problem for churches and not-for-profit organizations is embezzlement, which occurs because decision makers are often times too trusting, internal controls are lacking, and even the simplest checks and balances are not in place. Because these organizations want to welcome and trust everyone, fraudsters can easily take advantage of their goodwill. Most fraudsters place themselves in multiple groups in a church and gain the “trust” of fellow members.
Once the trust is there, fraudulent activity is easier to pull off. I have worked with several churches and not-for-profits that have had the same answer as to why they were defrauded: “I never thought he/she would steal from us”, “we trusted him/her”, “She is a good person”, “outstanding Christian”.
Be sure to not give church group members too much access to money and other valuables without church staff present.
Employees working for not-for-profits and church organizations have also been known to commit fraud. According to the Association of Certified Fraud Examiners, in 2012 the median loss for not-for-profits from fraudulent activity was $100,000. There are many factors that drive people to commit fraud. Red flags include:
- Extraordinary medical expenses of the employee or a family member
- Loss of spouse’s employment
- Financial struggles of children
- Divorce Gambling problems
It’s important to know what may be going on in the lives of personnel that have the potential to appropriate assets of your business for their personal use. Remember the importance of internal controls! Things like segregating job duties, rotating job duties, and instituting a system of checks and balances can all help deter fraud. Overall donations and contributions have been down the past couple years, the last thing a not-for-profit organization needs is embezzlement to occur.
If you are concerned about fraud in your not-for-profit, contact Kit Powell
Certified Fraud Examiner