Appendix A

Financial Integrity and Accountability in Churches and Ministries

In 2 Corinthians 8, Paul advises the church at Corinth about the proper handling and distribution of church funds—and the need to do so in an aboveboard and accountable fashion. The Corinthians were collecting a substantial offering to be distributed to the poor in distant Jerusalem. Paul assures them that Titus, whom they knew to be a man of integrity, and another highly regarded man (unnamed in the text) had been “chosen by the churches to accompany us as we carry the offering” (2 Corinthians 8:19).

Paul also mentions a third Christian brother, a man with equally impeccable credentials, who would watch over the carrying of the funds. Titus and these two men, who were to join Paul and his group, formed a company to be trusted in handling and distributing the offerings (2 Corinthians 8:22-23).

Paul assures the Corinthians that his group would administer the funds “in order to honor the Lord himself and to show our eagerness to help” (2 Corinthians 8:19). Paul did not resent the direct participation of the other two character-approved men in this process of watching over the funds. On the contrary, he welcomed it. In fact, it is likely he initiated their involvement.

Any Christian leaders who resist financial accountability make themselves suspect. Leaders who put too much trust in themselves should not be trusted by others.

I spoke with a Christian leader who had been caught embezzling funds. His downfall came when he was in a personal financial crisis. Because of a lack of checks and balances, he was able to “borrow” money easily from an account that didn’t belong to him. He rationalized that he would pay it back later. Many financial disasters could be avoided by setting up careful procedures that take into account our natural tendency to sin.

I know of a large church where all contributors’ checks are stamped: “Pay to the order of Grace Church, or John Smith, pastor” (not real names). At best, this procedure generates suspicion. At some point, it will almost certainly present a serious temptation to this pastor. Someday, it may result in his downfall, heartache to the church, and damage to Christ’s reputation. All unnecessary, if only proper precautions had been taken.

Paul says, “We want to avoid any criticism of the way we administer this liberal gift” (2 Corinthians 8:20). He went out of his way to include other character-approved men—both from inside and outside his own group.

Paul also says, “We are taking pains to do what is right, not only in the eyes of the Lord but also in the eyes of men” (2 Corinthians 8:21). Here are two important safeguards for preserving financial integrity and accountability:

First, we need to take pains to do what is right. A system of financial accountability may seem awkward, time-consuming, or a nuisance. At times it may seem unnecessary. But it is right, and therefore we must take pains to establish proper checks and balances.

Second, it’s not enough for a leader to say, “My conscience is clear before the Lord.” Our actions must be above reproach, “not only in the eyes of the Lord but also in the eyes of men.” Whatever system of collecting and distributing funds we choose, it must involve awareness and accountability, with a plurality of character-approved men or women (preferably not chosen by each other but by a church or constituency). Although two character-qualified family members might appropriately sit together on a board, there’s no place for the sort of nepotism that makes some organizations top-heavy with underqualified relatives and childhood friends who look the other way instead of fostering accountability.

One of the most telling questions to ask in any church or ministry is this: Who has the courage and authority to tell the decision makers that what they are doing is unbiblical?

According to global missions researcher David B. Barrett, an estimated $16 billion was embezzled by the world’s Christian churches in the year 2000, with an estimated $75 billion embezzled between 1980 and 2000. Barrett recommends that “Christians need to tighten up the scrutinizing of all funds holding their monies and to insist on all the accepted safeguards and controls and on all the strictest procedures.”206

How financially transparent is a ministry? Do the leaders conceal salaries, expenditures, and sources of income? When they make bad decisions, do they admit and correct their mistakes or cover them up? Responsible kingdom investors should ask these questions, as part of the “Nineteen Questions to Ask before You Give to Any Organization” listed on pages 277–278.207

In light of the serious consequences of past carelessness, the leaders of every church and ministry should review the necessary steps they must take to be (and to appear) financially above reproach in the eyes of God and men—even if the steps are unprecedented and inconvenient.

ECFA and Other Accountability Organizations

The Evangelical Council for Financial Accountability (ECFA) was established in 1979. It comprises more than one thousand charitable, religious, and educational organizations that are qualified for tax-exempt, nonprofit status. The ECFA monitors its members, investigates alleged abuses, and issues public reports.208

The ECFA upholds “Seven Standards of Responsible Stewardship,” including an orthodox doctrinal statement, a responsible board of directors, annual audits, and the avoidance of conflicts of interest.209 The council requires every member organization to comply with twelve standards for fund-raising. These include communicating honestly, honoring of donor intent, and specific reporting on projects for which gifts are solicited. It also prohibits percentage compensation for fund-raisers and bars the principals of any organization from receiving royalties for any product used for fund-raising or promotional purposes.210 The ECFA maintains that “good charities willingly answer tough questions” and has formulated a Donor’s Bill of Rights.211

Certain ministries, including the one I direct, have legitimate reasons for not belonging to the ECFA. In our case, I’m the only full-time employee of our small ministry, and the cost of audits and other procedures to qualify for ECFA membership, which would be minimal to a larger ministry, is prohibitive for some small ministries. However, from the very beginning of Eternal Perspective Ministries, we have taken seriously the ECFA guidelines and have sought to comply with them voluntarily, even as a nonmember organization. (Our board and accountant carefully review our financial practices, and our books are open to those who inquire.)

Accountability to outsiders is important. But it must begin internally with wise and careful choices of leaders. It must include a commitment to plural leadership that does not leave one person, or one commanding individual surrounded by passive ones, in a position to embezzle, squander, or use funds for his or her personal benefit.

The spending patterns of some Christian organizations are exemplary. They are conscious of God’s ownership of their assets and the fact that financial gifts have been given to them by other stewards who are sacrificing to further God’s kingdom. These ministries spend their money carefully and thoughtfully with a view toward the purpose for which it has been given.

Other Christian organizations think nothing of providing expensive cars for their executives, booking first-class flights around the world, accommodating their staff in luxury hotels, and wooing donors at $200 dinners. Funds are contributed to ministries in good faith by people who assume they’re being used carefully. Every organization needs staff members who are vocal advocates for the ministry’s donors and beneficiaries.

Smart Money and Forbes magazines have issued annual “best in the nation” charity rankings. They’ve reduced their assessment criteria to three simplistic ratios, with various weightings to determine which charity is most efficient. However, the ratios are not the same for each publication, and even where they correspond, they are calculated or weighted differently.

Money magazine gives its own ratings, relying on calculated ratios and a grading system to identify those it considers most worthy of support. But such ratios can be misleading. For instance, the American Red Cross received more than $500 million in contributions following the September 11 terrorist attacks without spending very much on fund-raising. When they later admitted that only $100 million was going to victims’ families, there was public outrage.212 Yet when the Red Cross was rated against other charities, they scored very well—not because they were really more efficient but because they had received so much free public exposure.

Ministry Watch is a program of Wall Watchers, dedicated to comparing and ranking ministries, and giving information in areas that include efficiency and transparency.213 Because its rating system is based on financial data derived from each organization’s IRS Form 990 or audited financial statements, the playing field is theoretically level for every charity. However, there are many intangible qualities that cannot be measured by looking at financial data alone. Efficiency of operation, for example, is very different from effectiveness of mission.

In the nonprofit sector, it is very challenging to evaluate ratios and other numerical performance criteria. Although I applaud Wall Watchers and others for trying to hold ministries accountable, there is no substitute for personal interaction with a ministry to evaluate its mission, sense firsthand its heartbeat and vision, and assess its true accomplishments.214

Surveys indicate that 70 million people may be refraining from giving to nonprofit organizations because they don’t know enough about them.215 With 50,000 new charities emerging each year, accountability is critical. Still, donors must realize that some organizations that are ranked high by certain standards are not doing as vital or Christ-centered work as some that may be ranked lower.