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Plugging leaks

Charity | Watchdogs try to stop billions in losses to "ecclesiastical crime"

Issue: "Playing with capitalism," May 23, 2009

The largest Christian ministry in the world-Food For The Poor-takes in about $1 billion a year. The 500 largest Christian ministries in the world-according to MinistryWatch.com-take in a combined total of about $15 billion.

That's less than the estimated amount of money that is likely wasted by "ecclesiastical crime" each year. The Center for the Study of Global Philanthropy at Gordon-Conwell Theological Seminary estimates that the total amount of money that "leaks" out of the church and Christian philanthropy system via waste, fraud, and abuse could top $27 billion in 2009. "That's about 6 percent of the global total of $410 billion given to Christian charities," said Bert Hickman, a research associate with the group.

"The truth is that we don't know for sure how big the number is because the overwhelming majority is unreported," said John Van Drunen of the Evangelical Council for Financial Accountability (ECFA). "But we know that it is a very big number. We also know that not addressing this issue causes a diminished witness for Christ in the world."

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That's why the ECFA and other organizations-under the umbrella of the Lausanne Movement-are attempting to quantify the leakage, and the source of the leaks, in advance of the Third Lausanne Congress on World Evangelization to be held in 2010 in Cape Town, South Africa.

The causes of these leaks are not that hard to identify. "Embezzlement or fraud accounts for a significant part of the total," Hickman said. "But sometimes it starts out fairly innocently, with a loan to an employee that doesn't get paid back because it is improperly accounted for and then forgotten or written off."

That's why rigorous internal controls are necessary. In large organizations, basic internal controls are standard operating procedure. They include such precautions as separating financial functions and giving these separate functions to different people-a practice often called a "segregation of duties." For example, the person handling the money coming in should not also be the person paying the bills. This segregation of duties ensures that discrepancies are more easily and quickly identified.

But the overwhelming majority of Christian ministries operate on less than $1 million in annual income and can't afford two or three people in the accounting department to implement a segregation of duties. Some smaller organizations turn to outsourcing firms, such as Colorado Springs-based VisionQuest Alliance, which outsources accounting and other services for Christian nonprofits. "Outsourcing allows ministries to afford services they wouldn't be able to afford on their own," said Steve Hoffman, vice president for shared advancement services at VisionQuest Alliance. "It allows for segregation of duties and an additional objective look at the financial operations on an ongoing basis."

The ECFA's Van Drunen said the performance of an annual audit and the creation of a truly independent board-with members who are not related to or employed by the ministry-are good places for even small ministries to start if they want to raise their financial standards.

Ron Ensminger, a partner with the Strategic Resource Group, is part of a Lausanne committee driving this effort to, as he puts it, "plug the leaks." He says the committee will invite high-capacity donors to its 2010 Capetown Congress: "If we're going to ask these individuals to significantly fund the Great Commission, we need to make sure the money is actually going to Great Commission activities."

Ship shape

The ECFA publishes its "Seven Standards of Stewardship" at ecfa.org. If your organization-or one you donate money to-is not an ECFA member, it can take immediate steps to move the ministry toward the ECFA standards:

• Have a truly independent board-with a majority of members neither employed by the ministry nor related to employees.

• Have an annual audit. They can be expensive, but the benefit in increased donor confidence and management peace of mind, is-most agree-more than worth the cost.

• Network with leaders of ministries that are slightly larger than yours. They can tell you how they solved the problems you are currently facing.

Warren Cole Smith
Warren Cole Smith

Warren, who lives in Charlotte, N.C., is vice president of WORLD News Group and the host of the radio program Listening In. Follow Warren on Twitter @WarrenColeSmith.

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