Suppose, beloved pastor, you wanted to know how much money your church had on hand today. How would you find out?
You could ask the financial secretary and she would give you a number but how do you know this is accurate? (Hint: You don’t).
You could find the latest financial report given to the church but this might not be current and, besides, the figure might not be correct.
You could call the bank if you are an authorized church person and they would tell you. While this would answer the question, you might not on the bank’s list of approved persons to whom they may release information. In that case, you get one of the people who is and go to the bank with them, or possibly access it online. There is the risk that you would be considered overly inquisitive about the information or mistrustful of church personnel.
But, you persist and get a number.
How do you know this is an accurate amount?
You may or may not have an accurate number. You don’t know if the number your administrative assistant or treasurer wrote down for you is correct. The latest bank statement would probably suffice if it is not too dated.
What I’m getting at is this: your church could be flat broke and you might not know it. The financial software can be manipulated by your secretary. The reports given to the church could be inaccurate. While we would like to think all of our volunteers and employees are honest and trustworthy, the fact is that many are not.
Recently, a large church in my area found out that they were broke. No money on hand at all for the payroll, current bills, or other routine expenses. Predictably, there was a simple explanation for this. The financial secretary had been stealing from the church. There was nothing particularly sophisticated about it. She wrote checks to herself over a period of time. Eventually, the sum approached six figures and people caught on but not until she cleaned them out.
Didn’t anyone in that church look at the bank statements? Didn’t the church require two signatures (both of which can be forged, of course, and banks are unlikely to catch it)? Isn’t there some oversight committee that does an annual audit?
No. No. No.
Was the pastor so disengaged that he or she never bothered to take a look?
Yes.
The money’s gone and the church is flat broke. They will survive because of generous and understanding members who might be upset at the failure of church leadership to protect against simple theft but will step up and keep the church going until the mess is managed.
This happens. All. The. Time. It happens in churches, in PTAs, sports booster clubs, and other nonprofits. All. The. Time. More now than ever, so I’m informed.
My state convention (doubtless all of them as well), LifeWay, GuideStone regularly address this but churches are known for closing the barn door after the horses have fled. It doesn’t require much to put simple internal controls in place.
Ten Ways To Prevent Embezzlement of Church Funds is a good place to start. The average SBC church has around 125 in the pews on Sundays. The median SBC church is about 70. Volunteers likely handle church finances. For the pastor who would like to know if his church has the proper controls in place, start by answering these questions:
- Do you know what your bank balances are? What the church income and expenses are? If not, you might want to be less disengaged. It’s ultimately your responsibility. Chances are the church will appreciate that their pastor is serious about this.
- Do you have a church treasurer? Does he or she know what their responsibilities are? “Sure, pastor, I’ll be treasurer if I don’t have to do much” will not be good enough. You need not have a CPA but someone who will understand the issues, pay attention to how money is handled, and call finance committee meetings. You need a treasurer who is curious and nosy and who doesn’t mind asking quesitons about church finances.
- Does the church have a team or committee that oversees finances? Deacons sometimes do this. Do they know what they need to do?
- Who collects the offerings? Who counts them? And who makes the deposit? One person, same person? Multiple persons should handle the money at all times.
- Who can sign checks? One person or more than one? Same person who counts the money? More than one is best but many churches just have one. In such cases, someone else should scrutinize the bank statement each month.
- Does the same person who writes checks sign them? Are they the one who receives and checks the bank statement? Does anyone else ever look at the bank statement?
- Are regular reports made to the congregation? The more the church knows the better all this will be.
- Do you use sealed bank bags? The cheap disposable ones work well.
- Does your church conduct some level of annual financial review? A time when you look at the income, expenses, checks, statements but also review your procedures.
- Do you or some church committee track income and expenses to see if anything looks askew?
As a pastor, I refused to handle church funds. I refused to be a signer of checks but I doggone made sure I knew what was going on with church finances. In retirement I’ve been asked to work with some churches regarding their financial procedures. Most churches want to do things properly but may not be sure where to start or what to do. There are simple solutions to most problems in this area but being proactive is the key.
I have occasionally been asked to return to my last church, we still live in the community, and I assist by preaching and teaching. When the church was without a pastor and financial matters got a bit out of hand, sloppiness not embezzlement, I was recalled to do some administrative work to straighten out some messes. As a part of that, I spent a few weeks with the tellers counting the Sunday offerings. In addition to that, I was asked to be a cosigner on church checks, something I had never done.
When the church finally called a new pastor, I told my friends on the search committee to inform the new guy that the former pastor would be signing his paychecks. This, I believed, would be the ultimate test of God’s calling this man to the church. How does that sound as an exercise of raw power? I sign my successor’s paychecks. When the new guy moved to the community, I stopped by to visit and we had a good laugh about it. I no longer sign his checks.
So, what do you do with the employee or church volunteeer who is caught stealing from the church? My view is that you report them and see that they are prosecuted. Chances are they will steal again if given the chance.
Hey…pastor…pay attention to finances. Your church might be broke.
I was sent information about what I assume must be a DIFFERENT situation than the one that prompted William to write, because this one did not happen near where he lives.
A friend sent me a link to a news article. It’s out there. I am going to include the link not to pile on a sister church that is going through issues but because this is real and it happens.
I was in a church many years ago that had a similar problem (while I was in seminary). The treasurer (she counted the money, made the deposits, balanced the books – yikes) did not make any cash deposits. If you put cash in the plates it went in her pockets. No one knew how much she pilfered. Of course, she was not prosecuted. Churches never prosecute.
http://www.clarionledger.com/story/news/local/2017/10/25/pastor-embezzled-over-300-000-church-says/800768001/
I don’t know if I would advocate prosecution or not. I believe that our financial controls make it very difficult at our church to do something like this, but who knows?
Institute sound financial controls. Don’t make the news.
As would be expected, there’s more to the case Dave linked.
Attorney statement: “The controversy regarding Broadmoor Baptist Church and its former employee, Riley Brown, is a civil dispute that was settled two weeks ago. There was no criminal conduct on behalf of Mr. Brown. Disagreements over church policy and procedure and who, if anyone, authorized certain expenditures led to Mr. Brown’s employment being terminated. Due to the settlement, we do not expect any judicial or other governmental involvement in the business of the church, but if there is, we are ready to defend our position,” Kelly said in the statement.”
The church is also quoted as saying that they would cooperate if charges are pursued “independently.”
I’d love to know more, just out of curiosity.
It sounds to me like criminal prosecution is happening, but that it will be driven by other than the church.
I agree with you, though, that it is not a great statement.
From the link I sent, it sounds like the pastor’s problem won’t be prosecution by the church, but likely by the IRS. The IRS doesn’t play. I am guessing that he didn’t report the 300,000+ in pilfered money.
Obviously, all of this is alleged and the executive pastor gets his day in (tax?) court.
We have three people who count the offering. All thre record the amount for themselves. Two of them take the sealed pouch to the night deposit at the bank while the third turns in his record of it. Monday, the numbers in th e account [what was deposited] match the recorded offering. They could all siphon some off but they woud all have to be in it.
Both pastors and elders see what checks are witten and for what. I think there is a limit that can be written before prior authorization is needed. It is possible that there is also another limit that requires two signers, above that amount.
This is a real problem and one that is MUCH bigger than most people would care to admit.
The NC State Bureau of Investigation (SBI) contacted the associational missionary in the association where I am bi-vocational pastor (rural NC but near the Research Triangle). They had gotten wind of three churches in our association where embezzlement was either actively occurring or had recently occurred. As a result, the association is putting together an audit team to assist any church who wishes to make sure their finances are in compliance.
Mike, looks like your church has good policies. While I favor letting any member see the check register, with a few exceptions, I recognize that many churches are less open about it. If the church has staff and then lay elders, that looks pretty secure also. If the pastors are the only elders, I’d question that. There ought to be primarily lay oversight of finances. Some different questions are raised if that is not the case.
At our church, there are 3 levels (and ideally a fourth).
We have counters (tellers) who count the offerings. Two are required – they check each other’s work. It is done in the office – locked but public.
We have a treasurer who handles the books and writes the checks.
We have an administrative team that developes the budget and policy and oversees things.
We believe that no one should serve in more than one area. One group counts. Another group controls. Another group manages.
We’d also like to do audits, but frankly, they are very expensive and we just can’t afford it. We have some professionals on our admin team who do sort of unofficial audits. We present a full, complete financial report every month. so, while an annual or biannual audit would be ideal, it is impractical at this point.
We have carefully written financial policies for reimbursement, etc.
I used to disdain these things. I changed my mind. To NOT have them now is foolish.
The minimum for a smaller church – which can’t afford expensive programs and such.
1. Do NOT have a “powerful” treasurer. The church treasurer should have almost NO involvement in policy and in determining the budget. The treasurer should write checks and balance the books. A strong treasurer in a small church is an Rx for trouble.
2. Have multiple offering counters who are not involved in any other aspect of the church’s financial team. Not the treasurer or the finance team.
3. Policies, policies, policies. Have written, legal, and carefully followed policies.
4. Guidestone – after much research (as a result of much heartache) the material from Guidestone is as reliable and wise as anything else. And it is free.
William is right to sound an alarm about this. In the course of my ministry (49 years now), I’ve experienced embezzlement by a church financial secretary, amounting to about $5,000, and by the secretary at our association’s office, amounting to about $50,000. In the case of our church, we discovered that the financial secretary had embezzled money from three churches where she had worked previously. So, I agree with William–prosecute the person so that the crime becomes a public record. Otherwise, the person may steal from other churches in the future. In the cases I mentioned both were prosecuted.
Dave Miller is a very sensible guy, I don’t care what anyone may say differently.
I never had a full church audit. Usually, there’s no need to spend the money. My state promotes a much simpler but still thorough financial “review” and provides a checklist to churches for doing one. They also recommend involving knowledgeable non-members in the task but I doubt this is done much. If the pastor or church leader suspects a problem or knows there are improper procedures and/or confusing or erroneous financial reports, at the least someone should lead the church to utilize individuals other than the folks who are serving as treasurer, tellers, financial secretary, etc.
It is a sad, twisted abuse of the concept of grace, but people are prone to steal from churches because we a) are trusting and b) not likely to prosecute. It usually starts out harmless. “I need to pay my bills, I’ll just borrow and pay it back.” There may be some with evil hearts. but usually it’s rooted in folly.
Yearly audit from an outside agency. Two signatures required on all checks. Treasurer insists on additional counters on Sundays and Finance Chair works closely with me and Treasurer.
Definitely a problem in many churches but just those few tweeks can help Pastors rest easy, like this one does!
When we started our congregation in 1992, we were fortunate to get some good advice about finances.
I did a lot of this for the first 2 to 3 years of our congregation. Then it got too big for me to handle.
Guidestone would be an excellent resource, I bet.
We now have a bookkeeper who assists others in the offering count each week, prompt deposits, reconciling bank statements to a general ledger each month, a finance team to review the monthly finances, and elder review of finances each month. We have 2 signers on all checks. Elders see a listing of all checks each month. We will have an audit performed this year and have in the past, but we have not done that every year.
We started with a $25,000 gift and 10 adults.
Things are more complicated after 10 years. About 900 in attendance each week, and a budget over $2M.
We recently asked the chairman of our finance team to make the financial presentations to the congregation, instead of the bookkeeper. He agreed, but before doing so, wanted to improve the financial controls further. That request showed there was still room for improvement.
I meant after 25 years, not 10!
I am a CPA and have done work for churches. An audit is relatively expensive and we do look for fraud in an audit but it is not designed to find fraud. It is designed to attest to the financial statements.
Another option a church can use is called agreed upon procedures. This kind of an engagement is less expensive than an audit and can accomplish what you really want done. We have reviewed the internal controls and procedures of a church and made recommendations to strengthen them. One church wanted to know if their finance person was handling the bills properly. We pulled a sample of checks and credit card bills and reviewed supporting invoices to make sure procedures were followed. Don’t let the price of an audit deter you from using a CPA to help your church with its finances.
Thank you.
Yes, sound financial controls and policies, carefully followed, usually suffice – at least in the average church.
A surprising number of checks written to the church “bounce” for some reason. Having a system to deal with these is necessary.
Once, I bounced my offering check to the church!
Now THAT was embarrassing. It was about 20 years ago.
Don’t forget another easy place this can happen – with the ushers. Make sure that your ushers are never alone with the offering plate, even for a few seconds to walk down a hall or a flight of stairs. Multiple people should be able to see all offering plates that they have money in them at all times.
I would add one item to William’s list: Make sure the secretary who handles money is bonded. In my comment above I mentioned two secretaries who embezzled money. In both cases the secretary was bonded, and the insurance company reimbursed the church and the association. I realize this may be impractical for a small church, but larger churches should arrange for the financial secretary to be bonded.
This is an area where the state convention is very helpful. Chances are your state convention guy who deals with this will be happy to talk to you about such things. Most pastors don’t want to spend time finding out if they have insurance to cover theft of offerings, or bonded personnel, or the like, although the pastor should be generally familiar. There are way too many details in church administration for the pastor to manage personally.
I do insurance and these bonds pretty enexpensive.