I was saddened to read some stats recently showing that fraud in the church costs more each year than what is given to missions. The numbers were $35 billion in fraud in 2012 and $23 billion given to global foreign missions. How can this be true and what can we do to combat fraud?
According to the Center for the Study of Global Christianity at Gordon-Conwell Theological Seminary who published the 2012 Status of Global Mission, financial crime at churches is estimated to hit $60 billion in 2025 if the same trends continue.
Here are two key things those of us who have been entrusted to steward ministry funds can do each day to combat fraud:
- Create an environment of “Trust, but Verify”. We first heard this phrase from the President Ronald Reagan, who used it often when discussing U.S. relations with the Soviet Union. It suggests that we maintain an environment of trust while also verifying that information is accurate and procedures are followed. This involves accountability, dual custody, and separation of duties in the financial area of your ministry. By doing these things, you can literally eliminate opportunities to commit fraud.
- Stay connected with your staff and volunteers. The precursor to fraud is a motive that causes an individual to have an intense need for money. It could be a financial hardship, a gambling problem, a family financial crisis, or negative work-related feelings. Once there is a motive, the individual then just needs to rationalize that what they are contemplating is okay given the circumstances. Staying connected with your staff and volunteers and knowing what is going on in there lives will provide you not only with an opportunity to minister but also an indication of the need to monitor actions and behaviors more carefully.
These two steps will help keep your ministry from becoming the next bad news story.
What have you found to be helpful for combating fraud at your ministry?
The Commission on Accountability and Policy for Religious Organizations just published their report, which was presented last week to Senator Charles Grassley. The report is based on two years of work by 80 nonprofit, tax, and legal experts and leaders, including ECCU President/CEO Mark G. Holbrook. It promotes solutions to key policy issues related to financial accountability in the religious and broader nonprofit sector.
The Evangelical Council for Financial Accountability (ECFA) led the effort to form the Commission and has made the 94 page report available for review.
Among its contents, the report covers the following topics and includes 43 recommendations related to:
- Executive Compensation and Excess Benefit Transactions
- Clergy Housing Exclusion
- Churches, Accountability, and Donor Engagement
- IRS Advisory Committee for Religious Organizations
- Independent Accreditation and ECFA’s Model
- Religious Organization Examinations and Third-Party Oversight
- Examinations of Church Leaders
- Love Offerings
- Public Disclosure of Highly Sensitive Information
I think you will find this to be very helpful information which can lead all of us in the nonprofit community to better governance, accountability, and transparency without greater government oversight or regulation. I highly recommend you take a look at the report and let me know what you think.
An area often overlooked at ministries is the review and approval of senior leaders’ expenses. While we tend to trust our leaders’ integrity, small mistakes or outright abuse can lead to questions and mistrust by donors and diminish the reputation of your ministry.
While it is more common for staff within the organization to have their supervisor review and approve expenses, this is not often true of the most senior leader. Who should review his or her expenses? The business administrator, CFO, or accountant? Or should it be the chair of the board or corporate treasurer?
Here are some steps you can take to be sure your organization has sound practices to protect both your senior leader and your ministry.
- Make sure your organization has a clear set of guidelines that specify appropriate expenses for your most senior leader. These guidelines should clearly distinguish between organizational and personal expenses, even addressing expenses that are appropriate for spouses. This is an important document for your board chair and senior leader to discuss, then present to your entire board for approval. These guidelines help avoid misunderstandings and prevent reimbursement of questionable expenses.
- As a part of the annual budgeting process, be sure the board is aware of and approves the expense budget for your senior leader. This should be in addition to the overall annual budget of the organization.
- Create a process for the board chair or corporate treasurer to review and approve all expenses incurred by the senior leader each month. This process should be easy and consistent, and it should enable the board chair or corporate treasurer to immediately address any questions.
Taking these steps will help to ensure that your board has taken adequate responsibility and oversight to protect the organization and senior leader from scandal.
There’s no avoiding it. Sooner or later, we are all accountable. When it’s welcomed as an integral part of our lives, accountability is the very foundation of personal development and organizational health. When accountability is absent, delayed, or dysfunctional, our character, reputation, and effectiveness suffer. And when the inevitable consequences arise, weakly accountable people are surprised when their lives begin to fall apart.
Scripture is clear that there will come a day of ultimate accountability for every single person. “…for it is written, ‘As I live, says the Lord, every knee shall bow to me,
and every tongue shall confess to God.’ So then each of us will give an account of himself to God.” (Romans 14:11–13)
So what keeps us from welcoming or inviting personal accountability?
- Sometimes we are fearful of being told the truth, or fearful of the consequences of our vulnerability, so we close off ourselves from giving and receiving much-needed, refining, character-building truth about ourselves.
- Those close to us avoid offering feedback because it doesn’t seem safe for others to tell us the truth about ourselves. We get defensive, or even go on the attack, so people just avoid even gentle words of counsel.
- Some accountability suffers when churches and organizations lack the will or processes that enable consistent feedback. It’s not a priority, so most accountability is ad hoc and inconsistent.
As a result, most people and organizations—particularly Christians—aren’t very good at holding one another accountable. This tension at times leads to frustration, inconsistency, lack of fairness. The very thing that Jesus prayed for the church—unity—is weakened or destroyed.
Yet it is in God-honoring accountability that we break down barriers to unity and build up the body of Christ. A stronger, more God-glorifying church emerges from a healthy culture of accountability. “For you know that we dealt with each of you as a father deals with his own children, encouraging, comforting, and urging you to live lives worthy of God, who calls you into his kingdom and glory.” (1 Thessalonians 2:11–12 NIV, emphasis mine)
In my next few blog posts I will explore with you what the Bible says about God-honoring accountability. We’ll answer the question: What should accountability look like and how can we do it well?