SDA Church Frauds Trouble Leaders

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BY ANSEL OLIVER, Adventist News Network editorial assistant

Continuing cases of church theft or embezzlement are prompting Adventist 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 North America each year--at a rate of approximately $18 million each week--the losses are still troubling to church leaders.

Most church thefts are reported to civil authorities. However, some are not. Rick Russell, treasurer for Carolina Conference, 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, South Central Conference treasurer. 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.

Lawrance Martin, Allegheny East Conference treasurer, 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."

He says it is the church board and pastor's job to notify the conference, which should then notify authorities.

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, Central California Conference treasurer.

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 conferences are more compliant with division working policy than others. He cites one conference that regularly presents and distributes a list with the date when each church 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 quickly," 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, North American Division treasurer. He refers treasurers to a video with a guidebook titled, "Trustees of the Lord's Finances," (available through AdventSource, produced by the Adventist Church in North America. It covers two hours and 45 minutes of instruction about internal control.

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. - Adventist News Network