Oops! What Went Wrong?

7/16/2018

I had known Pastor Jason for almost 20 years. He was the Senior Pastor of a prominent Church in his community and I was glad to see him in the Church Management Conference I was conducting in a neighboring city.

Pastor Jason was the first at that conference to engage our services. While I was completing the paperwork, he told me a familiar story that I hear very often in conferences. He thought his Church was in great financial shape. The former Church treasurer gave monthly reports to the board and they thought they had a million dollars in their Church account. The treasurer died suddenly, and the Church had a CPA review the accounting program used by the Church. Within 30 minutes reviewing the computer reports, the CPA hit one key and brought the Church to a shocking reality. They did not have a million dollars in their account, but were shocked to discover they barely had ten thousand dollars.

Horrible Bookkeeping Skills or Embezzlement

Churches are the easiest target for either. Many Churches are filled with family relationships and when it comes to keeping the financial records Churches will often select a treasurer based upon their math skills, the relationship of the treasurer within the membership, or both. None of these three reasons qualify for placing someone in a position of such importance.

When our office begins a compliance process for a church, most of the problems are the result of shoddy bookkeeping. However, embezzlement is still rampant in the Church world.

More embezzlement happens in Church and ministry settings than any other areas of corporate America. Ten percent of Churches reported embezzlement, but according to a study by Gordon Conwell Theological Seminary in Hamilton MA, 95% of embezzlement from Churches is not reported. 1 The reason that much of the embezzlement within Church ranks is not reported is because of the spiritual foundation of a Church. We are taught to forgive, therefore when most Churches suspect or discover embezzlement, they usually remove the treasurer from the position, and “put the matter under the blood of Jesus.”

In the scenario that I mentioned at the beginning of this blog, both were involved. The former treasurer did not have any bookkeeping skills, but was also ciphering money from Church coffers.

It’s Not what You Know that will Hurt You

Church records should be reviewed by outside independent parties at least annually, but one report provided a shocking statistic that less than 25% of Churches in the USA ever had their books reviewed in an independent audit.

Refusing to allow a reputable firm to review financial records of your Church only serves to continue incompetent bookkeeping practices or to allow continued or future embezzlement.

You Get what You Inspect, Not what You Expect

If you have an incompetent Church Treasurer and do not want to remove them from their position, it will be necessary for the Church to retain Chitwood & Chitwood to provide monthly review and oversight of those books to ensure the Church operates on a solid financial foundation.

If there is embezzlement you should take the following steps immediately:

1.      Adopt and enforce clearly stated policies for handling cash

The more eyes there are on the books, the more likely it will be that someone will notice any irregularities.

2.      Training

Pastors should hire Chitwood & Chitwood to provide the tools necessary to educate Check Writers and Board Members.

3.      Audits

As I mentioned earlier, “You get what you inspect – not what you expect!” Because of our 80 years of experience, Chitwood & Chitwood has seen it all.

4.      Use the Three-Person Rule

Always make sure at least three unrelated people are counting the money, and do not have personal financial issues.

5.      Background and Credit Checks

6.      Be Alert for Warning Signs

These are numerous, but a few are: “Only one person having access to offering, cash, checks, or checking account; The person with access doesn’t want to take a vacation and guards against someone else doing their job; The person with access is living beyond their means; The person with access has personal financial issues.”

7.      Act on Suspicion

NO ONE should be above accountability or oversight.

In Closing

Chitwood & Chitwood has 80 years of experience in Church and Clergy financial management. We have seen it all. Don’t ever not do the right thing because you think you cannot afford it or because of fear when it comes to protecting Church finances.

Call us today at 800-344-0076 to register for a Church Compliance Conference where you will learn more about this subject and other vital information or contact drshaw@cmtc.org to find out how to make sure your books are in order and that you are not a victim of Church fraud. Pastors, we are on your side and desire to assist you in helping your Church reach its next level for God. Every day you do not contact us is another day that thousands of dollars may be walking out of your Church because of fraud. Remember Pastor, God and the IRS are holding you responsible. Get it fixed now.

By Dr. Michael Chitwood

What You Will Learn at our Conferences

Our Church Management Conferences will arm you with the information you must have to shield your Church or Ministry from IRS intrusiveness; teach you how to get your Taxes to the lowest possible rate; and daily operate your Church or Ministry within IRS acceptable guidelines.

Our Conferences have been taught across the Nation for over 48 years. Because of the Penalties, Fines, and even Imprisonment that the IRS imposed on many Churches and Pastors, Dr. Chitwood felt led by the Holy Spirit to become a buffer between Churches, Ministers, and the IRS.