Continuing cases of church theft or embezzlement are prompting Seventh-day Adventist Church leaders in North America to give greater attention to the way they handle local church audits.
Continuing cases of church theft or embezzlement are prompting Seventh-day Adventist Church leaders in North America to give greater attention to the way they handle local church audits.
A church in the western United States recently involved in such a case is calculating its losses, estimated to range between $170,000 and $200,000. The church treasurer is facing prosecution, according to a local conference official familiar with the situation.
While it’s a small percentage of the nearly $1 billion congregations collect in the region each year—at a rate of approximately $18 million each week—the losses are still troubling to Adventist Church officials.
Most church thefts are reported to civil authorities. However, some are not. Rick Russell, treasurer for the church’s Carolina Conference with headquarters in Charlotte, North Carolina, says a local church sometimes may try to handle theft without reporting to civil authorities.
“Often times the person is very well respected,” says Russell. “Sometimes the members go into denial that it’s happened to them, and may not want to report it. They might try to handle it another way.”
Karnik Doukmetzian, a vice president of Adventist Risk Management Inc., the church’s insurance unit, says a church handling theft without reporting to law enforcement authorities doesn’t send the message that church theft will not be tolerated. He says there is no consistent policy of mandatory reporting to the authorities. He believes it’s a significant enough issue that cases should be automatically reported. “It’s not enough to make arrangements to pay it back and say ‘I’m sorry,’” he says.
“Doukmetzian may have a point,” says Philip Palmer, church treasurer for the South Central Conference with headquarteres in Nashville, Tennessee. Palmer also points out that just because a police report is filed doesn’t mean the person is being charged.
However, Palmer says it’s a delicate matter, and whether or not to go to authorities is a tough decision for churches.
Palmer says another issue is whether or not a prosecuted church member will stay in the church.
Ken Ladd, treasurer for the Adventist Church in southern California, says the decision to report theft to the authorities should be made on a “case-by-case” basis instead of a policy mandating that the church report the thefts.
Lawrance Martin, treasurer of the church’s Allegheny East Conference in Pine Forge, Pennsylvania, agrees, saying that kind of policy might send the wrong message. “It might mean that we are more interested in getting the money back than saving the person,” he says. “But the person needs to realize that it’s a criminal act.”
Martin says it is the church board and pastor’s job to notify the conference, who should then notify authorities.
Russell cites a case of church theft where the treasurer was in charge of almost everything. “If they had a second person [checking the work], the opportunity never would have presented itself,” he says.
Conference treasurers say the best guard against church theft is regular auditing, required of each church every two years by the working policy of the Adventist Church in North America.
Two full-time auditors serve the central California Conference, and each church and school there is audited annually. “We are not taking this responsibility lightly,” says Nelson Tabingo, treasurer for the church in Central California.
According to Tabingo, constant delays in church remittances to the local conference could be a signal that something might be wrong. Tabingo is also leery of the excuse of a treasurer’s computer crashing constantly. “When they say, ‘All the information is lost,’ I am suspicious.”
Arthur Blinci, a vice president of ARM, says some local church conferences are more compliant with division working policy than others.
He cites one conference that regularly presents and distributes a list of each church and school and the date when it was last audited. “To me that sends a big statement,” says Blinci. “It also reaffirms the work of the church treasurer.”
Blinci also tells of a head elder of a church in a different conference who said his church had not been audited in the last five years.
“Conference presidents and committees are going to have to get to the point where they insist on compliance with working policy,” says Blinci.
Most of the lost money is recovered through insurance after a $2,500 deductible. Premiums for local church coverage are paid with church expense.
“The strange ones we latch onto pretty quick,” says Victor Elliott, claims counsel for ARM. Large amounts of money draw attention. What hurts, he says, is long-term lifting of small amounts. This usually occurs because of a breakdown in auditing policy. “These are harder to detect,” he says.
The Adventist Church in North America is addressing the issue by encouraging local audits, creating an awareness of the problem, and educating the local church and school treasurers and accountants, according to Juan Prestol, treasurer for the Adventist Church in North America. He refers treasurers to a video with a guidebook titled, “Trustees of the Lord’s Finances,” (available through AdventSource, http://www.adventsource.org) produced by the Adventist Church in North America. It covers two hours and 45 minutes of instruction about internal control.
Adventist Church officials advise that the local conference treasurer or auditor should be contacted if a concern arises about the use of church money.
In the United States, the importance of internal audits—helping organizations meet their goals by recognizing and implementing proper procedures—is being recognized more and more in the wake of scandals such as those of Enron, a private company.
According to Trish W. Harris, an assistant vice president of The Institute of Internal Auditors in Altamonte Springs, Florida, an internal auditor “is involved with and aware of the organization and understands its ‘corporate culture.’ That person has more of a bird’s eye view, which is why they can look [at operations] in depth.”
The institute, Harris said, offers “guidelines of what to expect [from an audit], what skills an auditor should possess, and who the audit report should go to.”
The organization publishes a free newsletter for those in executive management called “Tone at the Top,” which in October of 2002 published an article entitled, “Internal Auditing: In Your Best Interests,” (available free online at http://www.theiia.org/iia/publications/newsletters/toneatthetop/toneOct02.pdf). The group also offers courses and a certification program for internal auditors.
“The mission of internal auditing is to help management and the board [of directors] reach its goals and objectives,” Harris said. “The auditor looks at the policies and procedures in place and tries to limit risks.”