Protecting His Provision; Stewardship in the Face of Fraud

Embezzlement in the church is not a pleasant subject to discuss, but a good steward takes the time to properly manage his Master’s affairs. (Matt 25:23) The fact is that we live in a fallen world. The church is not immune to criminal activity any more than congregants are immune to sinful behavior.   Just as we should not continue to sin so that grace may abound (Rom 6:1), so, too, we should not fail to protect the church just to avoid facing unpleasant realities.

Embezzlement is fraud perpetrated against an organization by a person or persons in a position of fiduciary trust. In other words, it is a crime committed by insiders with access to organizational resources. In a church environment where administrative roles are often filled with volunteers, this means fraud committed by members of our own spiritual family.

It is precisely because of the closeness of these church family relationships that many people fail to recognize signs of trouble. We have a difficult time imagining that the same people who have taught our kids in Sunday school, stood next to us at choir practice, served in soup kitchens or accompanied us half way around the globe on short-term mission teams could possibly steal from the church. “I know this person!” we say to ourselves. “How could this be?”

The Biblical Perspective:

In short, the Biblical answer is it is because of our sin nature. Even after accepting Jesus Christ as our Lord and Savior, we still wrestle with our sin nature. We are still tempted to do those things that we know are contrary to God’s will for our lives. The good news is that God never allows us to be tempted beyond what we can handle. (1 Cor. 10:13) The bad news is that people frequently fail to seek God’s counsel and willingly turn away.  Some may rightfully ask, when we repent of our sin, aren’t we forgiven based on Christ’s perfect atoning sacrifice on the cross? (Rom 10:13) Absolutely! Nonetheless, sin still has earthly consequences and those consequences almost never impact just the perpetrator.

The Criminological Perspective:

In the 1950s, Dr. Donald Cressey interviewed over 100 convicted felons in an attempt to determine the key factors that led to embezzlement. Cressey found that all these frauds had three fundamental components: Opportunity, Pressure and Rationalization. These elements, collectively, became known as the Fraud Triangle and today still stand as the cornerstone of internal anti-fraud efforts.

  • Opportunity: In order for a successful fraud to take place, the fraudster has to have the opportunity to commit the crime.
  • Pressure: Embezzlers often have some sort of pressure acting them. This pressure may manifest itself in many ways, including, but not limited to:
    • Medical bills
    • Kid’s tuition
    • The loss of a spouse’s income
    • Lawsuits
    • Divorce
    • A desire to live a life significantly beyond one’s legitimate means
  • Rationalization: The final element of the Fraud Triangle is rationalization. Many people have the opportunity to defraud their church or employer and many others feel economic or social pressures, but these legs of the triangle do not stand by themselves.  In order to complete the triangle, some sort of psychological rationalization is required.  These rationalizations may include but are not limited to the following:
    • I was only borrowing the money; I was going to give it back
    • They don’t pay me enough for all I do
    • I volunteer/work a lot of unpaid overtime; this is the least they can do
    • An organization/church this size will never even miss it

The implication of Cressey’s Fraud Triangle is that churches and other organizations can significantly reduce their exposure to embezzlement by:

  • Limiting opportunities for fraud
  • Recognizing and responding to pressures on employees
  • Proactively addressing rationalizations

Limiting Opportunities for Embezzlement:

Churches can limit opportunities for embezzlement by thoroughly vetting employees and volunteers, that is, by putting them through a thorough process of evaluation and assessment, and then ensuring a separation of key duties, implementing and consistently enforcing internal controls and maintaining reasonable levels of physical security.

  • Vetting Employees: Vetting employees and volunteers limits opportunities from embezzlement and other crimes by discouraging those with hostile intent from applying and ensuring that people are being forthright in their desire to serve. Some key things to remember about vetting employees and volunteers are:
    • Any employee or volunteer who is working in a position of fiduciary trust needs to be thoroughly vetted.
    • Vetting includes more than just a criminal background report and reference check.
    • The higher the level of trust, the more vetting is needed.
    • Anytime an employee or volunteer assumes additional responsibilities, additional reference and record checks should be made.
    • Vetting does not end with an initial application for employment or appointment by the church’s board. Vetting continues every day as trust is built up and verified over time.
    • Prior to setting up your vetting program, be sure to contact the church’s legal counsel to see what type of background checks can be legally conducted in your jurisdiction. In addition, several vendors should be contacted to compare what services they offer.
  • Separation of Key Duties: The formal separation of key fiduciary duties limits opportunities for embezzlement by adding a level of complexity and risk, to the potential fraudster. When duties are not separated, the fraudster in the right position can operate with impunity, safe in the knowledge that he or she holds all of the keys to detection. Where duties are separated, the fraudster has to find ways around the system and this adds a level of complexity. Alternatively, the fraudster can collude with another party, but in doing so, he or she assumes greater risks of exposure. One key element to consider when instituting a separation of duty policy is to ensure that Accounts Payable and Accounts Receivable should be done by different people.
  • Internal Controls: Internal controls are those methods used to deter and detect fraud and may include some or all of the following:
    • Use of online banking on a daily basis to monitor account activity
    • Using a positive pay system if your bank offers it
    • Mailing bank statements directly to a trusted and thoroughly vetted member of the church
    • Conducting surprise audits on a regular basis
    • Having a third party auditor review the books at least annually
  • Physical Security: Fundamental physical security measures can strengthen your anti-fraud program by limiting access to check stock and other valuable items. Some key physical security measures related to anti-fraud efforts include:
    • Access Control:
      • Who has a key to your church?
      • Do they need a key?
      • Is a system in place to track keys or reclaim keys as needed?
      • Is the system followed?
    • Alarm Access:
      • Does your church have a burglary alarm system?
      • When was the last time it was serviced?
      • Do you arm the system when no one is on site?
      • Who has a code to the system?
      • Do they need a code?
      • Does everyone have an individual code?
      • Who is on the call list from the central station?
      • Do they know what to do if contacted for an alarm?
    • Confidential Information
      • Do you have a secure mailbox?
      • Is confidential information such as legal documents and employee records stored in a secure cabinet?
      • Is check stock secured in a locked cabinet?
      • Is the safe under dual control?
      • If you use signature stamps (which is not advised) do you store them in a locked location?
    • Risk Analysis:
      • Has an independent security professional conducted a formal Risk Analysis (a member of the congregation with this specialty may be willing to offer services pro bono) in the last year? 

Recognizing Pressures on Employees/Volunteers:

Pressure and suffering is an inescapable fact of life. As a church family, it is incumbent upon us to watch out for our brothers and sisters in Christ. By being actively involved in one another’s lives, we can help each other through difficult times.  This is or should be natural behavior within the Christian church, yet when it comes to allegations of wrongdoing people tend to hesitate, even in the face of mounting evidence. The key issue to remember when observing behavioral indicators is that everyone has both baseline behaviors and stress behaviors. Baseline behaviors are habits, manners of speech and other day-to-day activities that are normal for that person. Stress behaviors are mannerisms that occur when under pressure. The idea is to look for significant anomalies in baseline behaviors. There have been several books and professional courses written on recognizing behaviors of concern. What follows is a short list of some common behaviors of concern that can lead to or indicate fraud may be being committed:

  • Financial Pressures
    • Is the person living beyond their means?
    • Does the person frequently discuss financial problems?
    • Does the person frequently receive calls from creditors at work?
  • Work Pressures
    • Is the quality of the person’s work slipping?
    • Has there been excessive absenteeism?
    • Have there been unexplained behavioral changes at work?
  • Personal Pressures
    • Has there been a recent divorce or marital problems?
    • Has the employee’s spouse been laid off recently?
    • Are there pressing medical situations?
    • Are there ongoing lawsuits in progress?

It is important to realize that people can be under stress for a variety of reasons that have nothing to do with criminality, but as a church body we should care about people enough to at least start asking questions.  We may even help prevent a situation from occurring.

Proactively Challenge Rationalizations:

Undercutting the third leg of the Fraud Triangle involves proactively challenging the psychological rationalizations for illegal behavior. The key issue is to create a culture of integrity, which should be an easy anti-fraud measure for a church to implement. After all, we are called to be in the world but not of the world (Rom 12:2) and that concept, in part, means exhibiting a level of integrity that is well above what the world would call “good”. Here are some of the key elements of creating this culture of integrity:

  • Openly emphasize the church’s commitment to integrity.
  • Openly talk about fraud issues in the news and use these examples as teachable moments.
  • Recognize people for their integrity.
  • Manage consistently and do not show favoritism, especially to yourself. If a policy is in place, work within the policy, or take the required steps to change the policy, but do not violate the policy. Doing so sends the message that there are no standards, no accountability and, ultimately, no moral framework.  
  • Make yourself clear. There should never be a doubt where the church stands on fraud and other moral issues.

Additional Red Flags:

Remembering the key concepts of the Fraud Triangle will go a long way to reducing your church’s exposure to fraud. In addition, the following list outlines some matters that warrant special attention.

  • Unexplained Payments to Credit Card Companies: Remember that fraudsters often pay their personal credit cards with their employer’s funds.
  • Unexplained Wire Transfers: Ask yourself, where are these going and why?
  • Payments to Consultants or Vendors you’ve never heard of: These vendors could be fictitious companies
  • Payments to employees or members you’ve never heard of: Do these people exist or are they ghost employees?
  • Missing Checks or Refunds: Is your mail secure?
  • Unauthorized checks posted against the church’s accounts: Were these checks stolen, counterfeited or altered?
  • Unusual Reimbursements: What is being reimbursed and why?


No one likes to think about embezzlement in the church, but in the fallen world in which we live, we must be prepared to wisely manage the resources that God has provided us. If sophisticated investors, large banks, government agencies and corporations, all with ample resources, can be the victim of fraud so can your church. The fact that large, well heeled organizations can’t completely eliminate the risk of fraud is not an excuse to throw up our hands and do nothing. The failure to act in good faith is not only unwise, but it exhibits poor stewardship. By applying fundamental anti-fraud practices and keeping account of those resources that have been placed under our watch care, we can prevent many frauds while further advancing the Kingdom.

Scott A. Watson, CPP, CFE is a career security professional, author, teacher, speaker and consultant who has served in a wide variety of ministries and held leadership positions in church, para-church and professional organizations.