People don’t typically volunteer at a church with the intent of stealing from it. But in desperate times, they put some of their groceries on the church debit card one week, intending to pay it back without anyone noticing. Then they do it again. Then they take some money to make a payment on a personal debt that they can no longer handle on their own. “It builds over time,” said Nate Berneking, Missouri Conference Director of Financial and Administrative.
Berneking noticed an increase in cases of financial loses at Missouri Conference churches last year. It was verified that at least $70,000 went missing, but the estimated amount of loss is closer to $100,000. Most of the cases involve small to mid-sized churches.
“When a church of that size loses $20,000, it can create a financial crisis,” Berneking said.
Lincoln VerMeer is the Vice President at Cass Commercial Bank, a 114 year-old bank in which churches comprise more than half of its portfolio. He said he has seen an uptick in theft targeting churches in recent years and has been working on ways to help his clients keep their finances secure.
“The bottom line is the fraudsters have become more sophisticated,” VerMeer said. “We’re working on ways to educate our clients on how to protect themselves.”
Although it is a growing problem, it is not one you hear much about. That is because no one involved really wants to talk about it. The crisis created by embezzlement becomes more than financial. It can wreck trust, credibility and take a heavy emotional toll. People are hesitant to call someone’s practices into question for a number of reasons. They don’t want to be perceived as a troublemaker. Even when a fraudulent practice becomes known, it is sometimes difficult to speak up.
“No one wants to be the individual that brings down the embarrassment and shame that goes along with being called out,” Berneking said. “You don’t want to see the person experience the damage that comes from naming what is going on.”
Glenn Miller, the CEO of Miller Management agrees. He has recently completed his dissertation on reducing fraud in ministry and is a certified fraud examiner. He has found the emotional trauma involved with someone stealing from within can be more than some institutions can handle. Miller said often people don’t want to talk about it, let word of it get out or prosecute; They just want it to go away. Sometimes they have been dismissed mid-investigation because institutions don’t even want to know the extent of the losses – they just want to put it behind them. That course of action may mean that the same thing could happen again somewhere else.
Miller’s dissertation highlights some startling numbers, such as ministry lost $60 billion to fraud in 2017, and fraud loses are growing at a rate of about six percent per year.
Miller used to work for seminaries and often got calls from churches seeking bookkeeping help. He thought the demand for this was strong enough that he could start a business specifically focused on ministry. Now 30 years later, Miller Management has 40 employees and has worked with 3,000 churches and non-profit organizations. Miller has worked with 40 cases of fraud in ministry at his firm.
The good news is that Miller has worked with 30 denominations and appreciates the steps that the United Methodist Church has taken to secure funds.
“The United Methodists take these issues more seriously than any other denomination,” he said. “They place a lot of emphasis on financial integrity.”
Miller has seen enough to note a few obvious warning signs of something amiss:
1. Getting financial statements later and later each month, with new excuses each time.
2. Financial statements that don’t make sense
3. You thought there should be a lot more money in the account than there is.
“We can usually just look at a church’s policies and procedures, and that will tell us where the holes are and guide us to the problem pretty quickly,” Miller said. The topic of fraud and embezzlement in churches isn’t well known because the very nature of it is inconceivable.
“People don’t think it’s possible for this to happen within a church, but it’s very possible,” Miller said. In all of the fraud cases that Miller has worked on, every person committing the fraud was a professing Christian. He said the average person caught doing something of this nature has been a member of the church for more than seven years.
When his business was celebrating it’s 25th anniversary and 2,500 clients, Miller said he wouldn’t be happy if in another 25 years the business had just worked with another 2,500 clients. Rather, he would like to see a paradigm shift within ministry where churches and non-profits adopt a more resolute posture in protecting against fraud. He has been working on nation-wide training programs and doing what he can to educate people on practices to prevent fraud.
Miller has seen losses as high as $300,000. The average loss is $60,000 – $70,000. Losses typically go undetected for more than three years.
Only about four percent of fraud is caught in a routine audit. “Auditors are not educated to detect the sophisticated nature of fraud,” Miller said.
James McGovern, senior risk consultant at Church Mutual Insurance, shares Miller’s respect for United Methodist policies and procedures.
“United Methodists always seem to be on the forefront of having safe guards in place,” he said. “I like working with Methodists because they are very proactive.”
McGovern knows of many congregations that have a practice in place to take offering money to a deposit at the bank immediately following worship. Others have a secure safe with limited access. He prefers either of these methods to having a church member take it home for deposit the next day, not just because of temptation of loss from the member but also because of the potential risk that the members home would be burglarized while the money is there.
In addition to having secure practices related to normal weekly offerings, churches must consider all of the other revenue streams and potential losses they can occur. Things like a special offering, a fundraiser for a mission trip or an unplanned estate gift can result in significant amounts of money coming into the church in a manner outside of the secure financial practices that the church has in place for weekly offerings. That money could potentially get funneled away into an individual’s account without detection.
“It’s really important to have laity handling the church business,” McGovern said. “The pastor can have oversight but shouldn’t be responsible for collecting, handling and depositing money. The pastor should be allowed to focus on ministry without having to be responsible for personally securing the finances.”
Berneking hears from churches who are concerned that their treasurer had structured their system so no one else had direct oversight of it. In one case, the church said the treasurer was a trusted person whom they had known for years, and they just wanted advice on how to guide the person toward better practices of transparency.
“Soon after that, I heard from them again and they discovered that the person had been stealing,” he said.
The United Methodist Book of Discipline requires that two unrelated people count the offering money after it is collected.
Not having sound practices in place creates an opportunity for desperate people to stumble. Having secure practices helps a church lead not into temptation.
Harold Nichols, Church Mutual’s division manager for the Heartland area, knows that it takes internal safeguards to prevent mishandling. Church Mutual has seen financial losses from theft occurring from outside and within.
“There has been an increase of phishing attempts at churches at times like following Christmas or after a big festival focused on fundraising,” Nichols said. “When they know the church has more money on hand, they know it is a good time for theft.”
A large church may have a developed system of checks and balances in place for its church staff, but a smaller church that is dependent upon volunteers may not have the same procedures. But any size of church can implement safeguards to help protect against theft.
Church Mutual insures about 25 percent of the churches in the Missouri Conference as well as the entity of the Missouri Conference itself. Nichols said theft is covered in four categories:
1. Internal embezzlement - A blanket bond coverage is provided for theft from an employee or volunteer.
2. External theft of money and securities.
3. Cyber liability – This coverage is important for churches with online giving.
4. Fraudulent transfer – Money transferred away from a church via computer hacking.
These areas aren’t covered by different policy, but rather all fall under one policy, Nichols said. He recommends that local churches follow the policy coverage recommendations put forth by the Missouri Conference.
Berneking also offers an 11-page framework that is a guideline for local church financial management practices. It is available on the Missouri Conference website at www.moumethodist.org/financialpoliciestemplate. He also delved deep into the topic in his book, The Vile Practices of Church Leadership: Finance and Administration. In addition to general guidelines, he offers some specific tips.
"I hate debit cards,” Berneking said. “It gives people direct access to the church’s bank account, and once the money goes out there is no way to recover it.”
Berneking prefers a credit card for employees, and having the employee reimbursed with the submission of receipts. Berneking’s number one piece of advice: Have more people involved in the process.
“The pastor, the secretary, the treasurer, even just the member – they all have a role to play in helping the church with financial security,” Berneking said.
He knows it is challenging to get people involved and accept the responsibility. Although he deals with large numbers as the Missouri Conference treasurer, he considers the Missouri Conference finances easier to monitor than most local churches.
“At a church you might have someone going to Sam’s Club once a week to get supplies for the Wednesday night dinner. It is difficult to monitor if that person is also putting some groceries for himself in the cart,” Berneking said.
The Book of Discipline also requires that every United Methodist Church complete an audit each year. This should be a financial review from someone outside the church. Some audits go as far as assessing what doors and file cabinets are kept locked and who has access to the safe.
“People get scared of audits because they associate them with someone trying to catch you doing something that you shouldn’t,” Berneking said.
“People should look at auditors as someone who is there to help the church be better. It’s a healthy self-examination, and as Methodists we should be all about self-examination.”