Another Reason Vacations Are Important

Another Reason Vacations Are Important

September 19, 2019 Uncategorized 0

The Case:

You have an extremely dedicated employee, who never takes a vacation. It’s time to kick them out the door – at least for a couple of weeks.

According to the indictment, the office manager embezzled over $200,000 over six years: she was the bookkeeper for the church, and falsified records to cover her tracks. Her actions came to light when she was out sick – others covering for her noticed oddities in the books and started the investigation. She has been indicted on grand theft charges with preliminary hearings this week, and is facing two years and eight months in prison.  Link1 Link2

Analysis:

One of the red flags for fraud is when a trusted employee never takes vacation. Here, we don’t know about the office manager’s vacation habits, but the odd numbers showed up when she was out sick.

She appears to have had check-writing authority, and was the bookkeeper as well. This is a violation of the key principle of separation-of-duties: if they can touch the money, don’t let them keep the books. If they keep the books, don’t let them touch the money. (Strictly speaking, the concept is a bit more general: “Don’t let the same person have access to the assets and have the ability to cover their tracks.” So this would also apply to the usher taking up a collection on the balcony and being out of sight on the stairs. He would have a plate full of cash, and would be out of sight for a short time.)

And it appears that nobody was looking at the bank statements: had they been looking for odd entries, they might have caught the problem earlier: it appears that she had been at it for over six years.

How To Prevent This At Your Church:

  • Don’t let the person keeping the books have ANY access to church assets. This includes bank accounts, check-writing,  debit or credit cards, checks arriving in the mail, and cash.
  • Have someone look over the bank and credit card statements before giving them to the bookkeeper. The easy way to do this is to have the bank mail them directly to the pastor’s home (or the home of another senior staff person or elder). That person’s job is to do a ‘smell check’ on the statements, looking for odd entries.
  • Ensure that all employees and volunteers who work with church money take vacations, and that someone else do their job while they are gone.

Best Choice?

Consider our church audit service – it’s easy and surprisingly affordable. We help find holes in financial procedures and tell you how to plug them.

  • Your church’s chief money person answers a bunch of questions online
  • He or she fields questions out to others as needed;
  • All the answers are reviewed by the church staff, elders, and deacons (and corrected as necessary);
  • We produce a book showing what is being done well and what could be improved.
  • The book also includes a ‘best practices’ section and a plan to do it all with the minimum number of people;
  • We print copies of the book for the pastor and each board member, and meet by video conference to discuss implementation.

Start answering questions now!