Part 3 of our series on Cash Disbursements. In our recent Fraud Survey, we asked churches to respond to this statement:

“Our church has established an “approved vendor” list.  All payments for goods or services are made only to vendors on the list.”

Survey Results – Only 20% of the churches surveyed reported using an approved vendor list.

The low compliance rate of this question was a big surprise to me.  The surprise was that so few churches have a formal process for determining who they choose to do business with.

In a previous post we discussed collusion. One of the methods of theft, resulting in some of the largest dollar losses, is vendor fraud. Vendor fraud often occurs when a purchasing agent within an organization COLLUDES with a corrupt vendor outside of the organization.

What makes this type of fraud especially effective (from the fraudster’s point of view) is that it is extremely difficult to detect, by both the church and its auditors.

KEY: Fraud prevention includes KNOWING who you are doing business with.

Having a vendor application, approval and acceptance process helps the church apply this key.