Church fraud indictment highlights need for accountability, coverage
The story of fraud and embezzlement against churches and nonprofits is sadly familiar.
From ABC News:
”A former bishop and lay leader of an historically African American church have been charged with defrauding California congregations by mortgaging their properties in order to obtain $14 million in loans they used for personal expenses, authorities said Tuesday.”
Read the U.S. Department of Justice’s indictment.
One out of three churches is defrauded.
What does that mean? Its simplest definition is stealing: Someone is taking money from your church or nonprofit. What makes defrauding and embezzlement different from outright burglary is the way the crime is committed. Instead of breaking down a door, an insider schemes to take money unnoticed.
ABC notes that the consequences, in this case, are severe:
“The congregations had little or no mortgage debt until the pair, without permission, used their real estate as collateral to obtain more than $14 million in high-interest loans, prosecutors said. Some congregations that had paid off mortgages years earlier ended up saddled with debt, prosecutors said.”
Because churches tend to think the best of everyone, they can be hands-off when it comes to finances. Yet one unaccountable person can cause millions in losses.
How churches and nonprofits can prevent fraud
Churches can begin with basic measures that are equally applied to everyone:
Requiring multiple signatures on checks.
Splitting financial responsibilities so no single person has total control.
Reviewing credit and debit card billing. What is being purchased and why? Someone must mind the store.
Finally, if possible, engage an outside accountant to help manage and oversee the integrity of your finances.
Financial Bonding Insurance protects your church in the event of fraud-related losses
Creating a culture of transparency and accountability is the first line of defense. But ministries may also want a backup plan. If someone steals large sums from your organization, you may not get it back.
Financial bonding insurance can help churches and nonprofits recoup financial losses that result from criminal activity. An insurance payment won’t erase the memory or restore mistrust, but it can take the sting out of the financial and operating losses. That way you can focus on one problem at a time.
Contact us
Want to learn more about financial bonding insurance or financial controls? Contact us today: service@ministrypacific.com or 1.866.870.2700.