Avoiding Sticky Situations

I hope you’re never in a situation like this. (Note: this is a made up story, but it might just as well be a documentary)

Sunday was a good day – a good sermon, a potluck, and family come to visit. I took Monday off, and on Tuesday my world came apart.

I arrived at the church office to find our secretary waiting for me. She looked a bit the worse for wear. Her expression showed dismay and sadness like I’ve rarely seen.

“Pastor, since Betty has been out for surgery, I’ve been doing the church books. I’m… I’m afraid there’s some stuff going on…”

“Stuff? Like what?” I asked, though her tone had already told me what she had found.

“It looks like, like Betty has been… well… not quite accurate…” she trailed off.

“This isn’t a joke, is it?” Yes, I’m slow on the uptake.

“I wish it wasn’t.”

“Wait: you’re telling me that Betty – who’s been doing our finances for fifteen years – made some mistakes?

“Worse than that.”

Silence for a few moments. “…oh, dear…”

In a rush, she added, “It looks like she’s been writing checks to herself. In big numbers.”

And just like that, our happy little church started to come apart.

Betty had been a member for at least twenty years. About fifteen years ago, she had taken over the treasurer’s position. We were pretty small then, and she was also doing the bookkeeping. She was so good at it, that we never added a bookkeeper when we started to grow. Then, with the building going on, we had so many expenses that we let her write the checks, too. And handle the bank statements. And dedicated? She never took a vacation.

Seems that might have been a bad idea. For a variety of reasons.

By the time a week was through, we had to deal with:

  • My personal shock and hurt – and guilt. Betty was like a grandmother to us. A grandmother who stabbed us in the back.
  • My own guilt. I was happy to let her keep the books and write the checks. As a pastor, I’m supposed to help folks avoid temptation. But in her case I dumped lots of temptation on her that she couldn’t handle.
  • My guilt – and shame – from not shepherding the church’s money properly.
  • Finding the damage: going through the books: sure enough, Betty had been writing checks. The entries suggested reimbursements for church expenses. Big round numbers, with no documentation to support the entries. Most of the hit came from the building fund. Some also came from the operating fund. Some of the money even came from the money earmarked for the organ we want. Well, that we wanted.
  • Finding more damage. We found a lot of checks to a certain vendor of office supplies and equipment. But even though it was a local address, we didn’t recognize the vendor’s name. So we called them. We got a recording – in Betty’s voice.
  • Dealing with Betty. She was a trusted, valued member of our church. And less than a week out of major surgery. But we had to give her a chance to clear things up. It’s clear now – she confessed to six years of fraud. It felt horrible to approach her with this. It felt worse to hear her confirm it.
  • Deciding what to do about Betty. Do we call the cops? Put Betty in jail? I mean, do we really want them to take her out in cuffs?
  • And do we let Betty stay on as Treasurer? OK, that one is easy… but do we let her stay on as a member at all? I mean, we’re supposed to forgive and help shepherd folks, but how do you handle this?
  • Deciding what to do about the missing money. Do we demand restitution? If so, how would we determine how much she took? Kinda hard to take her word for it at this point. Should we hire a fraud investigator? At how much per hour?
  • Dealing with the insurance company. Sure, we had insurance, and it covered employee theft. But it turns out that these policies are only for the current year: we were out of luck for previous years. And they told us they wouldn’t pay unless we agree to press charges. Heck, we didn’t want the cops to even KNOW about it!
  • Dealing with the congregation. OK, I don’t know who leaked it (I didn’t), but rumors started flying. I called a meeting for members only, and I told ‘em what was going on. Everyone adored Betty. And she was related to a good number of our members. Shock, disbelief, hostility… including a fair amount of hostility towards me. Towards ME? I thought, I am the good guy here. Some of the relatives didn’t show up the next week. I hoped they would be back.
  • Dealing with the press. What would you do when a reporter calls asking if I like to make a statement? I thought, “Are you nuts? No, I would prefer you to go away and not write anything about our church. Thank you.” Instead, I stammered something that I hoped sounded pastoral. Concerned. And restorative, both for Betty and for our church. When it came out in the paper I sounded naïve and clueless.

Fast forward a few years. Not happy.

  • We took Betty’s word and promise: she said she took about $6,000, and she would pay it back.
  • Later investigation showed she took more like $40,000. She didn’t pay it back, so we wrote it off.
  • We asked her to find another church. She did. And she proceeded to take a lot of her friends and relatives with her.
  • Betty proceeded to take her new church to the cleaners, too. She volunteered to help them with their books. They took her at face value, and never called us to ask for a reference. Points for them, though: they found her out only a year. Took us six years.
  • Donations were down among those who stuck around. It turns out that having donations go to an embezzler is bad press.
  • Then there was the IRS involvement. We wrote off the losses. Did you know that this is the same as extra income for the person who took the money? It turns out the IRS wants to hear about extra income. We’re in hot water for not reporting it.
  • And I still hurt. Betty was a friend, and she abused our friendship and trust. And I hurt worse, realizing that I was the one who had set her up.

How we’ve changed.

  • Do background checks on folks dealing with church money or kids. Betty’s new church didn’t do that, to their hurt.
  • Let someone deal with the money OR with the books, but not both.
  • Have one person approve checks, another sign ‘em, and a third keep the records.
  • Don’t let the bill-payer add vendors – have someone else make any changes to vendor records.
  • Have someone look at the bank statements before the bookkeeper gets ‘em. Have someone review how the bank’s numbers match with the church books.
  • Keep an eye out for telltales. Here, Betty’s husband had developed some sort of expensive chronic illness. When he lost his job and insurance, I should have spotted the financial stress. I would have also paid more attention to other things. Like dress and jewelry that didn’t match with their financial situation.

What I told my pastor friends. And what they told me.

  • If we had any sort of internal controls in place, this wouldn’t have happened. I told my pastor friends to tighten things up, so they wouldn’t have to go through what we went through.
  • Turns out that a couple of them had also been through this. And the ones that say, “Oh, that would never happen in MY church”? I have news for them…
  • And I have gotten a lot of sympathy. But I would prefer Betty back, without her having ever having had to deal with the temptations we put in front of her. I wish I could do things over.

OK, I made up this story. Thank God this hasn’t happened at my church! Or yours. At least that we know about…

One study asked pastors about theft or fraud in their churches in the last five years. One in every seven or eight pastors owned up to it. And those are the ones who knew about it. (The researchers believed that these numbers were underreported. By a lot.) So you might have fraud going on right now at your church – or it might be on the horizon. Doing nothing is like playing Russian Roulette. OK, it’s like paying once every five years. And you’re using a seven-shot revolver with one live shell. I submit that it would be far better to not play at all. It would be good to build walls around folks so they can’t defraud you. And so they aren’t even tempted. Don’t place traps in front of your members!

Please, review your internal controls and tighten them up. Do this yourself. Better, establish an audit team and have them learn what good internal controls look like. Have them review your procedures. Or hire me.

But please don’t go on trusting folks to do the right thing as if they were without a sin nature or financial stress. If ANYONE should know what is in the heart of man, it ought to be you! Don’t put temptation in front of folks – Christ spoke about that. And protect your reputation: if someone accused you of tapping the till, would you be able to refute it? Strong internal controls let you do that with ease. Trot out the guys who did the collection and the counting crew, and the ones who took the money to the bank. Show the video. The reporter will go away.

Sure, you ought to have an audit of your books. Hiring a CPA is the gold standard. But it might well cost you over ten thousand dollars. A more frugal approach might be to swap bookkeepers with a neighboring church. Let each look over the other’s books.

But you REALLY need to look at the internal controls at your church. Be sure to review your financial procedures. Want the overarching principle? Don’t let the same person have access to the money AND give them the ability to cover their tracks.

I can help. I’ve been doing numbers-based detective work since 1982. I can audit your procedures and make recommendations on how to tighten things up. The goals are is to keep temptation far away and to protect your reputation. And to keep you from ever having to deal with a situation like Betty’s.


Want to know how to win gun fights? Stay home, like I do. Let the bad guys shoot it out on the wrong side of town late at night: watch NetFlix, eat popcorn, surf the web, and raid the refrigerator instead.

By the same token, if you build out the fraud and embezzlement, you won’t have to deal with sticky situations. Let’s say that you discover that your trusted church treasurer has been taking church money for the last eight years:

  • Do you really want to have her taken away in cuffs?
  • Will you be asking her to leave? If so, what about half the church that is related to her?
  • If you don’t report it to the cops, she’ll have no record and can do the same thing to the next church.
  • Will you tell the congregation? (Don’t worry: it well get out.) How will you tell them? What will you tell them?
  • Does the church have the funds to deal with the drop in donations, either from the exodus or from lack of trust? If you lost tens of thousands so far, what guarantee do members have that their money will get to the right place?
  • How about the press? What will you say to them?
  • And your insurance – they won’t pay if you are not willing to prosecute.

Rough questions, and no good answers. Tighten your internal controls and you won’t have to deal with these.