1. www.capincrouse.com Operations 104 Class 6—Fraud

2. www.capincrouse.com Guest Lecturer Stan is a Principal with CapinCrouse, serving as the National Director of Outsourced Financial Services and as a member of the firm’s national consulting services team. He has over 20 years in ministry operations, public accounting, government accounting, and missionary work. He has been the COO for a large financial ministry. This leadership experience provided him the opportunity to oversee the day-to-day operations and sustainability of the ministry, which encompassed human resources, technology, sales and marketing, global presence, volunteer involvement, and funding.

3. www.capincrouse.com Class 6—Fraud No one wants to hear the words, “Pastor, I have to tell you about fraud that we discovered in our church.” Yet, hundreds of churches discover each year that someone has pilfered the collection plate, the offering boxes, checks for events, falsified invoices, created dummy bank accounts, and many more creative ways to steal money. Do an internet search and you will discover that millions of dollars go missing each year from local churches. This class will delve into real-life examples of fraud. Then we will study the tactics that you can enact to prevent fraud in your church.

4. www.capincrouse.com PRESENTED BY: Internal Control Risks and Responses for Churches XPastor Certification Course March 2014 Stan Reiff, CPA

5. www.capincrouse.com Overview Purpose and objectives of internal controls Control problems in the church Fraud triangle Risk assessment Internal control systems Internal control practices

6. www.capincrouse.com Purpose and Objectives Protect employees Protect the assets and reputation of the church Provide reliable financial information Detect dishonest acts Detect honest errors

7. www.capincrouse.com Control Problems in the Church Separation of duties Authorization of transactions Recording of transactions Custody of assets Organizational structure Job descriptions Volunteers need supervision and structure

8. www.capincrouse.com Control Problems in the Church, cont. Qualified Personnel Pity hiring/retention Churches are a different kind of accounting Pay structure Training Accounting procedures manual Limited time and staff Lack of monitoring Trust

9. www.capincrouse.com Internal Controls Systems Be reasonable Review each significant area Cash receipts (contributions and others) Cash disbursements Payroll Consider the separation of duties for each area

10. www.capincrouse.com Fraud Triangle Incentive Opportunity Rationalization

11. www.capincrouse.com Risk Assessment Control environment Risk assessment Control activities Information and communication Monitoring

12. www.capincrouse.com Control Environment Sets the tone of the organization Is the foundation of internal control Management’s philosophy and operating style Ethical values and competence

13. www.capincrouse.com Risk Assessment Identification and analysis of relevant risks to achievement of the objectives

14. www.capincrouse.com Control Activities Policies and procedures that help ensure management directives are carried out Include approvals, authorizations, verifications, reconciliations, security of assets, segregation of duties

15. www.capincrouse.com Information and Communication Pertinent information must be identified, captured, and communicated Information systems produce reports (operational and financial)

16. www.capincrouse.com Monitoring Internal control systems need to be monitored – a process that assesses the quality of the system’s performance over time

17. www.capincrouse.com Control Practices General

18. www.capincrouse.com Control Practices Board Governance

19. www.capincrouse.com Control Practices Cash Receipts

20. www.capincrouse.com Control Practices Cash Disbursements

21. www.capincrouse.com Control Practices Payroll

22. www.capincrouse.com Control Practices Reconciliations

23. www.capincrouse.com Resources Essential Guide to Church Finance published by Christianity Today 2009 Church and Nonprofit Tax and Financial Guide published by Zondervan 2010 www.ecfa.org www.nacba.net www.christianitytoday.com/yc

24. www.capincrouse.com Thank You for Attending Today!!! Stan Reiff, CPA sreiff@capincrouse.com (678) 521-0182