by Ken Walker 22 Nov 2006

This fall, the former financial secretary at Southside Baptist Church in Princeton, Ky., was indicted by a grand jury on charges that she embezzled more than $396,000 over a six-year period ending in July of 2006.

The week before that news broke, the financial oversight committee at a suburban Louisville church reported that its former pastor had accumulated $162,000 in losses and fees to the church through day trading stocks.

In mid-November, the General Baptist Convention of Texas directed a committee to draft new guidelines for church planting after receiving a report alleging three pastors mismanaged $1.3 million in church starting funds over a seven-year period.

The convention’s executive director is consulting with attorneys to see if it can recover any of the monies. And, whether information uncovered in a six-month investigation should be turned over to a government agency.

Fleeced by the trusted

As seen from these cases, the perpetrator of a church fraud is often the person least likely to be suspected of wrongdoing, be it the pastor, secretary or other trusted official.

The problem is made worse by lax collection and accounting procedures in most churches, according to Jeremy White, a certified public accountant whose firm offers consulting services to congregations.

Since megachurches usually have staff members to track expenditures, the problem is worst among medium and small-size congregations, says the Paducah, Ky., accountant.

When churches are victimized, he says a person overseeing collections or managing money is usually the culprit.

"Trust is an issue but there aren’t adequate controls," White says. "The problem boils down to one person handling too many things or no one’s been checking on them."

In conducting audits, White’s firm has even discovered large churches that allow treasurers to take offerings home and record them on a home computer before depositing the money. He calls such situations ripe for fraud.

Rotate officers regularly

Another problem is allowing the same person to endlessly fill a position, such as a person acting as treasurer for 30 years.

No matter how tough it is to find a replacement, White recommends rotating officers every two to three years to prevent potential abuses.

The CPA says churches can provide more accountability through insisting on good reporting to members and adequate disclosure of expenditures.

"It doesn’t matter how much they spent on paper clips or how much it costs to print the bulletin," White says. "But at least have some kind of reporting. Transparent disclosure is very important."

While excellence should be required in all of a church’s reporting and accounting procedures, the Baptist layman says he is "amazed" at the sloppiness even professionals within congregations accept.

Often that is because the same person has been serving as treasurer for the last 20 years, so members let things slide even though nobody can understand his or her reports, White says.

Follow set guidelines

The president of the Evangelical Council for Financial Accountability (ECFA) says the standards his organization uses in overseeing more than 1,200 ministries are adaptable to churches.

They include such items as annual audited statements, providing donors information about programs they support, avoiding conflicts of interest and requiring resources are used according to applicable state and federal laws.

"When we work with anyone we talk about best practice—how you operate and how you help…maintain integrity," says Ken Behr, the chief operating officer of a Pittsburgh church before coming to ECFA.

"The Pharisees set up fences, rules to stop people from breaking God’s law," Behr says. "They got carried away, which is why Jesus criticized them. But if you set up rules that help keep people from breaking the law, it helps people have integrity."

Don't let offenders walk

In addition to having integrity, when theft occurs White says churches should follow through instead of letting the offender go without penalty.

Most losses are never reported to police or other authorities because churches are embarrassed and fear disclosure might negatively affect contributions from other donors, the CPA says.

White says that isn’t much different from businesses, which routinely cover up embezzlement or other theft because they don’t want any bad publicity or adverse impact on the company’s image.

Still, that is a problem for other potential victims.

"Many (churches) hide them; they either fire the person or move them out," White says. "That’s a problem because that secretary can go to another church and do the same thing."