The severity of a fraud incident is usually measured in one way – How much money was lost?  When presenting fraud case studies to church groups I have noticed a common reaction: the larger the dollar loss, the louder the gasps from the audience.  While it cannot be denied that in some cases the economic impact of embezzlement can cripple, or in some cases, result in the death of a congregation, the dollar loss is often the least of the church’s problems.

In the church environment, the real cost of economic fraud has little to do with lost funds.  In fact, most churches can replace stolen money with insurance claims. (Or perhaps a great sermon series!)  The real cost of an incident comes in the aftermath, when the church body learns they have been betrayed.  Loss of trust can, and often does, outweigh the dollars lost to an embezzler.

One of my most unpleasant tasks has been to report embezzlement findings to a congregation.  It is not a great deal of fun to stand on a sanctuary platform, accompanied by attorneys and law enforcement officials, and explain what has happened.  The pain in the room is so thick you can cut it with a knife.  Emotions rage out of control: anger, grief, betrayal, despair and discouragement.  In the worst of cases some congregations cannot adequately address the situation and church members leave in droves.  Some churches don’t survive.

But, even this may not be the ultimate cost of fraud.  Some people, letting discouragement get the better of them, not only leave the victimized church, but leave the faith altogether.  And seekers, those contemplating following Christ, may abandon their search because of the ugly scene.  This is a cost that cannot be calculated.

P.S. – Fraud prevention is a team sport and churches wishing to defend themselves against fraud should develop a fraud prevention team.  Competent accounting and legal counsel should be included on the team roster. If you would like PSK to be a member of your team, or if you simply have a question about any of this, feel free to contact me at verne@pskcpa.com.  As for legal counsel you might want to contact the Church Law Group. (www.churchlawgroup.com)

PSK LLP has provided this article as a resource to help churches prevent fraud.
We can help you with your specific needs by calling us at 817.664-3000 (Toll Free: 800.424.5790)
or email Verne at verne@pskcpa.com