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One of the most difficult risks to access and address in a church is theft by the very people the church depends on to achieve its mission. No organization is exempt from this risk, regardless of size. Keeping your covenant requires that you take reasonable measures to protect the assets needed to serve. The first step in preventing employee dishonesty is to acknowledge that it can happen in your church. The second step is understanding why people steal and how they do it.

WHY?
Employee dishonesty motivations fit into one of four categories:

1. Greed - some simply commit dishonesty in order to buy things that they want.

2. Personal financial loss or pressure - employee dishonesty temptation may be increased by a personal financial loss or an unusual financial strain. Examples include loss of an investment or sudden medical bills.

3. Denial or entitlement - some employees commit dishonesty without believing they are doing so and others believe they are entitled to something because of the low pay they receive or volunteer status.

4. Revenge or thrill seeking - some employee dishonesty may be a way of getting revenge for actions the employer has taken that the employee believes to be unjust, discriminatory or corrupt. Others steal to see if they can get away with it. Once they do, the desire to steal may become an uncontrollable impulse.

HOW?
Some of the most common ways in which funds are misappropriated include the following:

*Fictitious vendors or consultants - any employee with authority to approve the payment of invoices can steal this way. The thief creates fraudulent vendors and deposits checks written to pay the false invoices in his/her personal accounts.

*Check theft - in a recent case involving a nonprofit, an employee used a blank check to create counterfeit copies, forged the signature of an authorized signatory, and attempted to pass the checks.

*Theft of Cash Receipts - The simplest form of insider theft is the pocketing of incoming cash receipts. Pilfering dollars from the collection plate, receipts from a special event or incoming checks made out to the church, a determined thief can easily appropriate funds intended for the church treasury.

*Credit Card Fraud - the misuse of credit cards is a common way to defraud an employer. A dishonest employee may believe that the church won't notice the use of the card for a personal, unauthorized purchase. In some cases the employee may view the use as a loan, and intend to pay the church back in the future.

PROTECT YOUR ASSETS FROM THEFT

To protect its assets from theft, churches should take steps to deter thieves from attempting to steal, make it extremely difficult or impossible to steal, and work to promptly detect thefts. The IB Loss Control Manual offers a range of strategies for implementing sound internal controls. Consult the manual for additional internal control techniques.

*Consider having someone observe the staff member who opens the daily mail to retrieve incoming funds. Many churches have one member of the congregation count the offering while another observes.

*The person opening incoming checks should immediately stamp all incoming receipts with the church's restrictive endorsement. Keep all incoming funds under lock and key until they are deposited.

*Require that staff members or volunteers who use the church credit care submit corresponding expense reimbursement forms within 30 days of any purchase, and reconcile the credit card statements monthly.

*Never, never sign blank checks, or permit staff or volunteers to do so.

*Keep blank check stock under lock and key. Designate a custodian of the check stock to issue blank checks to the person who prepares checks for payment. Require staff to sign out check stock in small quantities - only enough for the day's payables. A list of checks written should be submitted to the check-stock custodian at the end of the day, and maintained in the locked file.

*Consider requiring that all invoices (particularly those for consulting services) be approved by two persons before the invoice or purchase requisition is signed, to confirm that the goods or services were received.

*Require vendors to submit detailed invoices. Don't pay invoices that indicate for services rendered without a further explanation of what services were provided.

Employee Dishonesty Coverage is $1 Million with your Insurance Board Program. Put your mind at ease and call our Illinois and Wisconsin Regional Agents - Pat Stein at (815) 635-1139 or Mark Wilson at (309) 664-1800.

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