September 18, 2018

Internal Controls Are of the Devil (Or: Why Stealing from the Catholic Church Is So Easy)

The other day I asked my wife if she'd be mad if I started a new religion. I clarified that she would not be required to join my new religion; I just wanted to know if I'd have her support. She didn't really answer. Not out loud. But her nonverbal message was as clear as an auditing standard that was clarified in the Clarity Project1. What she wasn't saying was either (a) she'd be pissed if I really did it, or (b) she'll tolerate my stupid questions, or (c) she'd be shocked if I could get more religious followers than I have Twitter followers2.

The other day I asked my wife if she'd be mad if I started a new religion. I clarified that she would not be required to join my new religion; I just wanted to know if I'd have her support. She didn't really answer. Not out loud. But her nonverbal message was as clear as an auditing standard that was clarified in the Clarity Project1. What she wasn't saying was either (a) she'd be pissed if I really did it, or (b) she'll tolerate my stupid questions, or (c) she'd be shocked if I could get more religious followers than I have Twitter followers2.

My motivation for wanting to start a new religion was purely financial. L. Ron Hubbard was quoted as saying, "If you want to get rich, you start a religion." And I believe it, just like everything else L. Ron Hubbard said. Because if you start a religion, not only do you get to collect offerings from the faithful, but you get to do it tax-free as a 501(c)(3) organization. And churches don't even have to file a 990. My god3!

But I recently found out that there's an easier way. Instead of enduring the brain damage, persecution, and late-night angel-following that go along with starting your own religion, it's a lot easier to simply start embezzling money from a church that already exists. This was initially brought to my attention after listening to a recent Planet Money podcast.

Now, let's stop for just a second. I have songs by Duran Duran, Prince, and Frankie Goes To Hollywood on my metallic pink iPod nano, and I don't really care if, as a result, people think I'm gay. I've lived in Provo, Utah, for about 20 years, and I don't really care if people think I'm Mormon. But just because I subscribe to Planet Money, an NPR podcast, don't you dare assume for a second that I'm one of those pretentious assbags who begins every sentence with, "So I was listening to 'This American Life' on NPR the other day …"4 because I'm not! I'm a completely different type of pretentious assbag.
 
According to Episode 440 of Planet Money, 85 percent of Catholic dioceses reported embezzlements during the past five years. Of these, 11 percent reported total embezzlements over $500,000. And U.S. Catholic magazine says that 13 percent of the money given to all charitable institutions is lost to embezzlement.
 
It makes a lot of sense. Skimming cash would be pretty easy in a church because if someone puts cash in the offering plate, there's no way to get a receipt. Add to that an institutional resistance to internal controls and you've got yourself a fraud pentagram.
Since churches rely on sacred belief systems, internal controls might be viewed as a secular concern and either inherently evil or at a minimum unnecessary in churches. In fact, it might be considered insulting to church workers and volunteers to even imply that internal financial controls are important.
It's possible that churches could implement some basic aspects of the control environment component of the COSO Framework. Maybe churches could try to adopt some sort of code of ethics. Behavioral economist Dan Ariely's research shows that one way to reduce cheating is to get test-takers to recite the ten commandments prior to taking a test. By having his study participants do this one simple activity, cheating was completely eliminated.
And it's not as if the people who are more religious or who remember more commandments cheat less. In fact even when we get atheists to swear on the Bible, they don't cheat afterwards. So it's not about fear of God; it's about reminding people of their own moral standards.
So be careful. If you want to start stealing from God, you have to do whatever it takes to avoid the ten commandments when you're at church because they're sin-kryptonite5. Fortunately avoiding the ten commandments at church can't be too hard. People have been able to do it in more than four out of five Catholic dioceses.
 
1 Not clear
2 Hey, sinners, follow @gregkyte to receive uplifting spiritual tweets every day!
3 Name, origin story, and mountain of residence yet to be determined.
4 Mom, I'm so sorry that you had to find out this way that I think you're a pretentious assbag.
5 Just try to read the ten commandments and then make a graven image. You can't do it.
 

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SHOCKER: Doesn’t Appear that Stanford Auditors were Doing Any Auditing

allen-stanford_1018295c.jpgLast week’s indictment of Allen Stanford has brought up the always popular question when fraud, occurs: “Who are the auditors that were asleep at the wheel of this disaster?”
Well, in this case, the auditors were a local UK two-person shop, CAS Hewlett, which must be Queen’s English for Friehling & Horowitz.
It doesn’t appear that CAS Hewlett has a website, but they’ve been doing the Stanford “audits” for at least 10 years, so obv they’re legit. PwC and KPMG both have offices on Antigua but Stanford preferred to stay with its “trusted firm”. Totally understandable.
And the best part? The founder of the firm, Charlesworth “Shelly” Hewlett died in January, approximately a month before the story broke on the Ponz de Stanford.
This all adds up to who-the-fuck-knows if audits were even occurring and for us to speculate if Shelly needed to get got because Stan knew that the poo and fan were coming together. Just sayin’.

New Bail Hearing for Stanford Set for Monday Because He Just Might Split

Stan the Man will spend the weekend pumping iron in a Houston jail because all signs are kinda, sorta pointing to the possibility of him going on the lam after a judge granted the silver medalist in the Ponzi competition a measly $500,000 bail.
Stanford’s attorney called bullshit because “he had already shown the financier was no flight threat.”
Judge David Hittner didn’t buy it and remanded Stan to jail until Monday based on the evidence presented by prosecutors:

testimony from a pilot who flew Mr. Stanford to Libya and Switzerland before government officials raided his Houston offices; testimony from a friend of Mr. Stanford’s daughter who gave him $36,000 in cash, and claims that $100 million was withdrawn from a Swiss bank account Mr. Stanford controlled

C’mon, your honor, that’s just walking around money! My client can’t be expected to strut around without serious money on hand!

New Bail Hearing Set for Stanford
[WSJ]