US insurance company projects billions in potential scams targeting churches by 2025

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Religious organisations, often known for their trustworthiness and openness, may inadvertently become vulnerable to fraudulent activities.

This risk may also extend beyond Christian churches and missions to include mosques, temples, and other religious establishments. Leaders and board members are being advised to take proactive steps to protect their organisation from financial losses.

Prevalence of church fraud

Fraud within the church, which entails the diversion of funds or assets for personal gain, raises a pressing concern. Projections in the USA alone indicate that annual losses from such scams could exceed a staggering $80 billion by 2025, as reported by the insurers at Brotherhood Mutual. However, this figure may underestimate the true extent of the problem due to the underreporting of this type of crime.

Identifying fraud

Identifying fraud within a religious organisation can be challenging, as individuals in positions of authority are often highly trusted. Nevertheless, there are indicators to be aware of:

- Persistent refusal to allow others to count offerings.

- Sudden unexplained expenditures by an individual with account access.

- Unaccounted-for credit card transactions.

- Inconsistencies in financial records.

Preventive measures

Implementing sound accounting practices can act as a deterrent against internal fraud. Consider the following policies and procedures:

- Have two individuals count offerings on a rotating basis.

- Separate those responsible for counting offerings from those handling deposits.

- Enforce verification of bank statements and credit card invoices by individuals without cheque-writing authority.

- Require dual signatures for larger cheques and board approval for significant expenses.

- Conduct internal audits of financial accounts and credit card usage.

- Engage an external certified public accountant (CPA) or auditing firm for an annual analysis.

Dealing with fraud

Upon suspecting fraud, promptly consult with legal counsel to guide the organisation's response. Maintain discretion to prevent the perpetrator from further concealing or diverting funds. Establish a clear church policy for addressing potential fraud, and consider employing certified experts or private investigators to substantiate the claims.

Consider prosecution

While apprehension about involving law enforcement is common, it's crucial to weigh the consequences. Reporting fraud to authorities can help recover lost assets and deter the offender from victimising other organisations. Failure to prosecute may inadvertently signal a lack of consequences for theft within the community.

Be moneywise and be watchful

Religious organisations must be vigilant against the potential for fraud, even within their own ranks. By implementing preventive measures, recognising red flags, and having clear procedures in place, these organisations can safeguard their financial integrity and uphold the trust of their congregants. In cases of suspected fraud, consulting legal professionals and considering prosecution may ultimately serve the best interests of the community and its mission.