18 Church Trends (and More!): Trend 5

Continuing my highly derivative series on church trends, the next 10 are from an article by church growth consultant and author Thom Rainer:

5. Increased financial fraud in churches.

Once again, some of those with ill intent see the church as a place of opportunity to commit theft. I will address this issue more fully later. I am an advocate of outsourced church financial ministries like MAG Bookkeeping to do payroll, bookkeeping, and financial records. It takes the burden and liability off the church. Indeed, I could have added to the list an entire trend of churches moving toward more virtual workers through organizations like MAG Bookkeeping and eaHELP.

Again, no one gives the checkbook to someone they don’t trust. Therefore, all embezzlement is by highly trusted individuals — and many never are caught.

Some theft is by manipulative thieves, but in the churches, I suspect most is by good but weak people who got in financial trouble at home, “borrowed” money from the church, and then manipulated the books to buy time to pay the money back. Some support a gambling or sex addiction.  Some just don’t see what’s so wrong with stealing from a church. Really. I’ve dealt with senior ministers who couldn’t understand why this is wrong.

Other forms of theft are more subtle — false expense reports, buying lunches for the family on the church credit card, etc. And many elders don’t want to “run the church like a business” and so don’t require the preacher to account for his expenses — which is a violation of federal tax law and a breach of fiduciary duty to the congregation (and God).

So here are the rules:

  1. Run your church according to the tax laws. You aren’t above the law just because you’re a church. Require concurrent documentation for all expenses, mileage, and such. You must have an “accountable” plan — that is, unless you require documentation showing the money to be spent on church business, you have to report the reimbursement as extra wages — usually W-2 income. Period. Obey the law — and the law will help protect the church from abuse.
  2. Find a friendly CPA and ask about “internal controls” for your church’s money. Take his advice. For example, he’ll tell you that the person counting the money and the person depositing the money and recording donations by member should not be the same person. CPAs are trained in fraud prevention.
  3. Bond anyone handling cash. Do a criminal background check (before you hire him or her). If he fails the check, he likely won’t be bondable. But be sure that the church is insured against theft through bonding.
  4. Report to each member the contributions made year by year — showing each check. Most church software does this automatically, and the IRS rules require it for most donations. It’s a good reminder to the members to make up a missed donation, and if someone has sticky fingers, a member will likely notice the absence of a record of his donation.
  5. Encourage electronic giving, because it allows you to automate the tracking of donations — even smaller ones.
  6. Insist that the church office issues a written receipt from a pre-printed receipt book for every single donation, even if not requested. Again, it creates an audit trail. The total shown by the receipt book should match the cash on hand. If it doesn’t, someone is stealing..
  7. The controls you put in place for general fund donations should also apply to money raised for the teen mission trip and the building fund — receipts issued on receipt of funds and annual reporting of what’s been received. Talk to your CPA. Bonding.
  8. Quarterly or so, have someone from outside the church office and usual volunteer pool compare the receipt book, the deposits, etc. to the cash on hand. Do periodic internal audits. It shouldn’t take long — and just letting the staff know that you’re looking will eliminate much of the temptation to steal.
  9. If a staff member gets in financial trouble, INSIST that he or she receive financial counseling. MAKE him or her bring the spouse along. MAKE SURE IT HAPPENS.
  10. Adopt clear policies as to what expenses the church will reimburse. Do you pay mileage for commuting? No business does. The IRS doesn’t allow it. You shouldn’t either. Do you pay for lunches with members? Well, you might cap the amount you pay and insist that the preacher not invite the same person to lunch every Friday just to get a free lunch on the church. If the church leader plays games to “work” the system rather than to build the Kingdom (you can tell the difference), have a frank talk, a warning, and fire him if he does it again. He should STRONGLY feel the need to treat the church’s money as the Lord’s money — and to be meticulously careful only to spend it on Kingdom business — without rationalization.
  11. If he refuses to account for his expenditures, report the cash as taxable income and then fire him. In fairness, he may need warning and training, but ultimately, it’s about integrity and love for Jesus. It really is the Lord’s money — in every sense of the word. And if he doesn’t feel that in his bones, he is not qualified to preach. I mean, he should rather lose his house than mis-spend one penny of God’s money.
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About Jay F Guin

My name is Jay Guin, and I’m a retired elder. I wrote The Holy Spirit and Revolutionary Grace about 18 years ago. I’ve spoken at the Pepperdine, Lipscomb, ACU, Harding, and Tulsa lectureships and at ElderLink. My wife’s name is Denise, and I have four sons, Chris, Jonathan, Tyler, and Philip. I have two grandchildren. And I practice law.
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2 Responses to 18 Church Trends (and More!): Trend 5

  1. John says:

    From what I have witnessed over the years, fraud was committed mostly by ministers of small churches who had access to the money more so than by elders who were treasurers. Maybe other readers have had different experiences, but all the elders I have known who took care of the finances were quite conscientious regarding their responsibilities. Maybe because they were given a trust by life long friends. But a minister, being the outsider of sorts, did not have that barrier of trust between self and the money.

  2. Mark says:

    If you have a petty cash box, this needs frequent auditing and receipts as that is one way for money to disappear. Every year or two rebid the contracts between the church and vendors, insurers, etc. That way the vendor never gets complacent and the members don’t start wondering if someone is getting a kickback. Even if the current vendor is used for the next year or two, at least you have the competing bids. If there is only one baptistry pump repair company in a three-state area or one roofer that you trust, then you have no choice, just note that no one else does it.

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