Financial fraud in the church - it would never happen here

By Stephen Matthews | 28 September 2013

We want to believe that the relationships and trust that are central tenants of church life mean that financial fraud would never take place. Sadly, and often all too late, we can come to realise that this is not always the case. Recent statistics from the National Fraud Office showed that charities remained vulnerable to fraud (with 25% of those reported involving those within the organisation) supporting the view from the Charities Commission that many charities have weaknesses within their fraud prevention policies and that their trustees have gaps in their financial understanding.

 

Two recent incidents that have come to our attention, highlighting the potential for financial and reputational damage to churches if they do not (even from the best motives) operate simple controls over their finances.

 

In the first case, a church trustee responsible for putting on conference and other church events requested these to be operated within a personal bank account so that he could deal more efficiently with the numerous suppliers required for these types of events. Some of the money was diverted for personal use with the church hearing of it when the suppliers pressed them for unpaid bills. This cost the church over £10,000 with some difficult pastoral issues thrown in for good measure.

 

In the second case a church was in the midst of a building project and to ease the administrative burden of getting joint signatures to cheques etc. money was transferred into the personal bank accounts of a church member who was responsible for overseeing the project. Unbeknown to anyone within the church that individual had financial difficulties and used some of the money to relieve them, leaving the church out of pocket to the extent of more than £20,000.

 

It is important that churches maintain financial controls over funds recognising that it almost never the most appropriate course of action to transfer management from a church bank account to that of an individual simply to ease an administrative burden, however well trusted and regardless of the position that person might hold within the church. If the administration and controls have been designed correctly at the outset, to try and avoid them, inherently removes the very protection that they were intended to provide.

 

Our briefing paper financial controls in churches and small charities  sets out some of the more basic controls that all churches should try to adhere to.  In addition, the Charity Commission’s paper CC8 internal financial controls for charities  provides further insight.  Making good use of the controls in both papers will serve to prevent many situations similar to those set out above from becoming an issue in your church.

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