When was the last independent audit of your church’s finances? Or of your favorite nonprofit?
This might be, for some people, the most offensive question I could possibly ask. “What do you mean,” you might say, “my church or my organization? What are you implying?”
There are two likely answers to the question.
The first answer is, “I have no idea.”
The second is, “We have a financial review every year. It’s routine.”
If you gave the second answer, present a gold star to your treasurer. Hold a dinner in the treasurer’s honor. The treasurers of churches and nonprofits are unsung heroes.
If your revenue exceeds $500,000, New Mexico state law requires an annual audit by an independent certified public accountant. If your revenue is below that, a review by an independent CPA using generally accepted accounting principles is recommended. Churches are exempt from the legal requirement but should do this anyway.
The reasons for doing financial reviews routinely are in two categories, which can be described as catching bad guys and affirming good guys. Audits affirm the good guys – treasurers, bookkeepers, etc. – by verifying that they are doing things right in protecting the precious dollars donated by their members.
Catching bad guys is something you hope never happens. But it does. Here’s the hard part: the person who steals the money is almost always someone everybody liked and trusted.
It’s so easy for a church, where everybody trusts everybody, to skip the audit because audits are expensive and there are many more compelling uses for the money. As one embezzlement victim commented to me, con-people know this.
Tsiporah Nephesh, executive director of New Mexico Thrives, provided help for this article. New Mexico Thrives is a nonprofit that helps other nonprofits. It is an affiliate of the National Council of Nonprofits.
She explained that the less expensive alternative is a Letter of Review, which can vary in scope. For moderate size organizations a good practice is to seek competitive proposals from three or more accounting firms, avoiding close friends and relatives.
Bad news stories are easy enough to find. Some reports from recent years:
In 2016 a pastor in Ruidoso was convicted of stealing more than $20,000 from his church. One news report said it was more than $70,000.
The business manager of a very small New Mexico school district pleaded guilty to embezzling $3.4 million from 2002 to 2009.
In 2015, the principal’s secretary at an Albuquerque middle school was connected to the theft of $25,000 from the school’s activity fund.
In Clovis, 2016, a former church secretary was convicted of embezzlement totaling $227,650.50. The news report said, “she was responsible for paying the church’s bills, and got board members to sign blank checks in advance so she didn’t have to hunt down signatures to pay routine bills.”
Apparently in these trusting environments, the blank check method – or perhaps an online equivalent — is not uncommon.
According to the victim I mentioned above, many more stories are kept out of the news by congregational leaders anxious to avoid embarrassment.
If your organization has reasonably tight financial practices, it will not attract people who are looking for opportunities to steal.
The degree of prudency needed may vary with the complexity of the organization. I belong to a few organizations where the treasurer routinely provides reports. I get bored listening but I am grateful that this person is a volunteer who puts time and effort into balancing our books to the penny.
And I belong to one little group that has about $3000 in the bank and collects dues plus $5 per meeting from nonmembers. For that group, I will continue to ignore my own advice. And I will always thank the treasurer.
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