Larceny and Skimming: 4 Tips to Prevent Fraud at Faith-Based Organizations

Faith-based organizations rely on their congregations and members to financially support them. Donations are often paid weekly, bi-weekly, or monthly to help pay towards the upkeep of the organization as well as to pay its’ employees. Members graciously donate a part of their income in hopes that it is going to help their organization or others in need. However, too often these donations get into the hands of the wrong people.

According to an article written by the AICPA, there are two types of theft that happen in faith-based organizations, larceny, and skimming. Larceny happens after donations have been counted and recorded by the organization. Skimming, on the other hand, occurs before the donations have been logged, skimming is often the most undetectable. Since thefts within faith-based organizations are so undetectable, it is more important that organizations work towards preventing the theft rather than taking action after a possible crime has been committed. The following are four tips to prevent donation fraud:

1. Have at least two people with the money at all times

Having two people with the donation plate at all times will help deter faith-based fraud. This rule must be followed strictly as money can disappear within seconds. Having one-person copy checks while another counts the bills, provides an opportunity for theft. Additionally, having one designated person deposit the money also gives an opportunity for money to be stolen. While having two people with the money at all times may seem like common sense, it is only effective the rule is followed completely.

2. Separation of duties

The majority of faith-based organizations are run by a select group of people. Because of this, the houses of worship are short on staff and rely on volunteers to collect, count, and record the donations. This tip can be the most beneficial for smaller organizations, who are more likely to fall short of staff. To prevent fraud, the organization can implement consistent procedures and processes, and provide safeguards both for the organization and for those responsible for the money. Accounting agencies are an essential safeguard for organizations and can have a huge impact on larceny theft. Accounting agencies provide services for nonprofit clients such as financial statement audits, internal control analysis, improvement suggestions, tax consulting, and policies/procedure development. These services not only provide extra protection in deterring fraud, but they also work to improve other defenses of fraud throughout the organization

3. All forms of donation should be protected

Faith-based organizations not only receive donations from collection plates. Donations are also given at church suppers, fundraisers, thrift stores, day schools, etc. Usually, these do not generate substantial amounts of money. Therefore, these donations typically generate the greatest amount of fraud. The lack of attention to money collected allows for skimming to happen prior to the counting and depositing of money. Treat all forms of donation the same, have two people with money at all times and still have procedures in place as a safeguard.

4. Online Giving

Online banking makes bill payments and donations much more convenient. Online banking does leave a paper trail; however, it does not always include effective controls. As with tip number 2 and 3, it is important to require a separation of duties when processing online donations. These donations should also be treated the same as all donations and should have outlined procedures to safeguard the contributions.

It is important to remember that people make donations to their house of worship out of the kindness of their hearts. As much as people fear credit card fraud, donors also worry that their contributions to faith-based organizations are ending up in the hands of the wrong people. Klein Hall CPAs is an accounting agency that can protect your organization from larceny and skimming. Contact us to see how we can help you!