Resource Library

It's a Matter of Trust

Resource from Ecumenical Stewardship Center Archives
Resource Library

It's a Matter of Trust

By Dan Busby

This article was originally published in Giving Magazine Vol. 22, No. 1 in 2020. You can access the full issue here

When we hear the latest report of fraud occurring in a ministry, we often say, “How could this happen?” Conditions that give rise to fraud follow common themes, and the actions that can prevent it rest on both policies and people.

According to the Association of Certified Fraud Examiners (ACFE), the typical organization loses five percent of its annual revenues to fraud. And because frauds frequently last over a year-and-a-half before detection, the typical fraudster steals an average of $150,000 or more.1

For religious, charitable, and social service organizations, the top five areas for fraud involve (1) corruption (28.8%), (2) billing (25%), (3) expense reimbursement (25%), (4) check tampering (25%), and (5) skimming (19.2%).2

Good internal controls can help discover these frauds. More importantly, they are reasons to help discourage fraud from starting. Few people consciously start out intending to steal. Rather, many fraudsters are ordinary people with a financial need (motivation) that helps them internally justify (rationalize) why it is okay for them to take nonprofit assets (opportunity).

The ACFE report noted that the average fraud was discovered by (1) tip (39.1%), (2) internal audit (16.5%), (3) management review (13.4%), (4) accident (5.6%), and (5) account reconciliation (5.5%).3

The first part of being a good steward is safeguarding financial resources. The second is not placing a stumbling block in the path of employees and volunteers by relying on human nature, rather than internal controls, to help prevent fraud.

Like a lot of crime, embezzlement typically starts small and grows over time. Ministries often have good controls in place, but many are inconsistent in their application.

Consistency comes from both thorough staff training and a commitment to accountability throughout the ministry—starting at the top. When either is lacking, a motivated thief can seize the opportunity for fraud.

Trust is a double-edged sword. It creates a positive, efficient work environment, but it can lead to complacency. It’s no coincidence embezzlers are often described as “trusted insiders.”

People who work together tend to get to a point where they’re familiar with each other and tend to like each other. There’s a temptation to avoid confrontation and to assume the best motives of the other person.

The sole staff member of a ministry pilfered about $100,000. Even as red flags appeared, some directors assumed others were monitoring for problems, and fear of conflict left important questions unasked.

It is impossible to reduce fraud risk to zero, but fraud can be greatly minimized with a combination of solid financial controls and a supportive culture.

Start the fraud minimization process with the following three steps:

1.  Identify the areas most susceptible for major fraud occurrences.

For the ministry you serve, what are the three areas which are most susceptible to fraud? If you can’t readily answer that question, the risk of fraud is probably not very high on your radar screen. For ministries with sound overall internal controls, the largest risks will likely be with electronic transactions—receiving gifts, fees, and sales. For a ministry with weak internal controls, the largest risks may relate to check approvals, bank reconciliations, and more.

2. Design and apply fraud prevention steps specifically to address the susceptibility of major fraud.

Once the most significant risk areas are identified, fraud prevention steps must be especially designed to minimize fraud in each of these areas.

3. Review and revisit.

Periodically review the top areas of fraud susceptibility. These areas may change over time. For example, a ministry may only have a major construction project once every 20 years, but that one project could be an opportunity for major fraud while the project is in process. Revisit the fraud prevention steps to see if they need to be updated. And, review the application of the fraud prevention steps. Policies are not enough to reduce the risk of major fraud—the consistent application of the polices is the key. After focusing on major fraud risks, be sure the following measures are in place:

  • Segregation of duties. No one person should be responsible for all accounting functions.
  • Double approval of expenses. At least for expenses over a predetermined level, two expenditure authorizations should be required. For small ministries, this will often require the involvement of a board member.
  • Multiple reviews. Bank and credit card statements and expense reports should be reviewed by more than one person.
  • Diligent background checks. For any staff or volunteer position that interacts with financial transactions, background checks can reveal previous criminal records.
  • Recurring fraud-risk assessments. Periodically select certain financial processes and test them to be sure policies and procedures are being followed. Even the mere presence of such reviews can act as a deterrent.
  • Increase samples of transactions reviewed. Consider increasing the volume of transactions sampled in a standard external audit—yes, this will increase the audit costs. With or without an external audit, staff should periodically and randomly sample transactions to ensure compliance with financial procedures.

Many ministries that suffer fraud get clean audits every year. Executives and boards have a false sense of security about their financial audits. While some fraud testing is done by external auditors, a financial audit is not designed to discover fraud. Because a routine audit tests a sample of transactions, when it does uncover fraud, it’s almost by accident. Look at the big picture. Where are the major flows of money coming into the ministry? Are significant sums being received digitally? How easy would it be for someone to redirect the routing of digital deposits just for a few hours a week or each month? Are large amounts received remotely from the ministry’s primary office? Are the remote location controls as strong as the controls in the home office?

Based on the flow of funds, take aggressive steps to monitor major inflows and outflows. These areas should be your prime targets for review.

Where are significant expenditures made of a non-routine fashion? Construction projects are a haven for fraud. Here, payments are being made to vendors that usually do not receive funds—ministry staff are not as familiar with these vendors, and a payment to a fraudulent vendor is easier to occur.

In Luke 16:10–14, Jesus declared: If you’re honest in small things, you’ll be honest in big things; If you’re a crook in small things, you’ll be a crook in big things. If you’re not honest in small jobs, who will put you in charge of the store? No worker can serve two bosses: He’ll either hate the first and love the second Or adore the first and despise the second. You can’t serve both God and the Bank. (The Message)

When the Pharisees, a money-obsessed bunch, heard him say these things, they rolled their eyes, dismissing him as hopelessly out of touch. Jesus was not out of touch. He spoke the truth and struck a sensitive nerve with the Pharisees. Make sure you stay in touch with the financial aspects of your ministry so it is always one that can be trusted.

1 Association of Certified Fraud Examiners (ACFE), “Report to the Nations on Occupational Fraud and Abuse: 2016 Global Fraud Study,” 9, nations.pdf.

ACFE, 2016 Global Fraud Study, 36.

3 ACFE, 2016 Global Fraud Study, 21.

From TRUST: The Firm Foundation for Kingdom Fruitfulness, ECFAPress, 2015, Shared with permission.

Giving Magazine was a premier stewardship resource published by the Ecumenical Stewardship Center (ESC) from 1999 until 2020. The magazine served Christian faith communities throughout North America, providing thoughtful, practical, and inspirational content on faith and giving from thought leaders and practitioners alike. Giving was published annually from 1999 until 2018 (volumes 1-20), and then quarterly in 2019 and 2020 (volumes 21-28) in digital form only. In 2021 ESC closed its doors and committed its archives to the care of Lake Institute on Faith & Giving. For further information on ESC or its archives, please contact us at

DATE: January 31, 2020
TOPIC: Organizational Leadership
TYPE: Article
SOURCE: Ecumenical Stewardship Center Archives
KEYWORDS: Financial Crisis
AUTHOR: Dan Busby