A friend invited me to her church’s Wednesday night program to hear a local celebrity speak. Dinner was a delicious buffet prepared by young man hired to be the church’s chef, custodian, and handyman.
Suggested payment for the evening was on the honor system: $5 per person with a $20 max per family. The sign compassionately explained that families with hardships were not expected to pay this much, or even anything at all. As I searched my purse for a five-dollar bill, I commented to my friend that the church must be doing well on these Wednesday night dinners. After a quick look around the room and some head math (yes, I really am a numbers nerd) I said, “You must be making around $1,000 per week or north of $50,000 per year on just the basket proceeds alone.” “Oh no, not that much,” she said. “On a good night, we may make about half that.”
I didn’t argue. Perhaps there were more families with hardships than I realized. I mean, I wasn’t there to do an audit. I was merely impressed with the revenue potential of this weekly event. (Did I mention I’m a numbers nerd?)
About a week later, I got a call from my friend. “I think I need to hire you,” she said. “For what?” I asked. “Well, I’ve been thinking about what you said. And, you’re right, we should be making about $1,000 per week.”
It didn’t take us long to get to the bottom of the missing money. I met with my friend and her pastor, at the church office the next week. I asked about cash controls for the event and, as it turns out, there were none. The chef placed the donation basket when he set up the room and, at the end of the night, took the basket, with its contents, back into the kitchen. He counted the money and put it into a deposit bag which he then locked and dropped off in the bookkeeper’s office. “These are procedures,” I explained, “but not controls.”
When I pointed out that the chef had complete control over the intake of the money, the pastor’s face turned white. He had simply never thought of it before. He so wanted to trust the young man and see him succeed, that he had forgotten to put some basic guidelines in place.
Turns out, the pastor had hired the young chef/handyman/custodian because he needed a hand up after he had finished his jail sentence. What had he been incarcerated for you ask?
Wait for it….
Embezzlement.
Internal fraud is so much more common than we want to believe. The Association of Fraud Examiners reports that an average of 5% of gross revenue is lost to fraud annually. That’s an AVERAGE. And, religious organizations are particularly vulnerable. Often, church leadership does not want to enforce fundamental accounting rules because they don’t want to suggest that their staff is less than 100% honest. However, even if you believe in your people and want them to succeed, you still have to abide by the most basic of rules to ensure you are a good steward of the monies entrusted to you.
It may be helpful to look at it this way. Guidelines around church finances actually serve your staff by protecting them. Let’s say your bookkeeper is 100% ethical and would never even steal a paper clip. What if she ever WERE accused of stealing? Without the proper protocols in place, you can never prove that she DIDN’T steal. Cash controls and accounting procedures support your staff and ensure that they are shielded from petty accusations.
What happened at the church? Well, I volunteered to be the bad guy, the “temperamental cash control consultant” who insisted on two people counting and locking up the cash after each Wednesday night dinner. The results? Proceeds from the event increased to about, well, $1,000 per week.
