On May 19, 1986, a former staff member of Euzoa Bible Church in Steamboat Springs, Colorado, went to jail for embezzling almost $42,000 from the church over a six-year period. Below is an account of what happened. The details are actual; the experiences real. Only the staff member’s name has been changed to save further embarrassment to the family. The story is offered in the hope that this account might prevent such experiences from happening to others.
At the annual meeting of Euzoa Bible Church on October 8, 1985, our forty-two-year-old youth pastor, who had been with the church eight years, stood before the congregation and read the following confession:
I have sinned against God, my wife, my children, my family, and the body of Christ here at Euzoa.
For almost six years I have been stealing from the general offerings of this church. I have taken cash and checks and deposited them into the youth checking account. I then wrote checks for cash on that account and used the money for personal use. I have lied to many of you and have deceived you. The depth of the deception is so ingrained, I do not know the scope of the amount of my stealing. I am dependent upon the elders and their audit to know the scope of my sin.
Further, I have not filed federal or state income tax for eight years. While my wife knew of my failure to file with the IRS, I hid the extent of the shambles of our personal finances from her. She persisted in praying that I would be responsible, and from time to time attempted to confront me with questions regarding our financial affairs. But I lied to her, and she, because of her trust, accepted my lies.
I have been moved to confess my sin through the fear of God, through fear of the growing pressure and presence of the IRS, through fear of being found out. God has also used Pastor Dick, who became aware of problems in our finances and persisted in seeking to love and help me.
Mine are the sins of stealing, lying, and deceit. Those are the symptoms of a deeper sin of a lack of trusting God and a lack of inner discipline. I have asked God, my wife and family, and the board of elders for forgiveness. And I ask you to forgive me.
I have not only sinned against you but have broken the law. Since I have committed a felony against you and the people of this state by my sin, I will be meeting with the district attorney and giving a full confession of my crime.
In reading this confession I hereby resign from all pastoral positions and responsibility. I submit to the authority of the elders and to the civil authorities of this nation for God’s discipline through them.
Alan’s confession marked the anniversary of my first year of ministry at Euzoa Bible Church-and the worst tragedy of my ministerial career.
“What did I do with that letter from the church in Colorado?” I had asked my wife in May 1984.
“It’s under the bed,” she replied. One phone call led to another, and to a stop in Steamboat Springs for a brief interview while on vacation in June. We saw some tremendous obstacles to successful ministry in this independent church in a resort community. Yet within a few months, we found ourselves in a U-Haul traveling from the Pacific Northwest to northwest Colorado.
Admittedly, we had some concerns about the youth pastor, who had been open about his desire to be senior pastor. I was told, however, that Alan was a unique individual who would be able to accept whatever decision the church made. One person had mentioned in passing that Alan had some problems with his personal finances, but “nothing that important.” I was assured it had been taken care of by the church boards.
I learned later that Alan had been three months delinquent on his rent, for which he had been given a rental allowance by the church. The church’s solution had been to begin paying his rent directly to the landlord, thus “solving” the problem.
Within a month after coming to Euzoa, however, I began to sense something wrong. For the past eight years, Alan had been having his mail delivered to the church post office box. In the process of sorting it out, I couldn’t help noticing the pattern of “bad mail”-notices of late payments, intents to shut off gas and electrical service, and pink slips indicating overdrafts from the local bank.
“How can he get away with that in a town as small as Steamboat?” I asked my wife.
By the third month, I was bothered enough to raise the issue with the person who had alluded to Alan’s financial problems before I came. He assured me he would look into it further, but nothing developed.
By the sixth month, I felt a confrontation with Alan was in order. When I asked him about his personal financial situation, he seemed to struggle with what to say.
“We had a lot of unanticipated expenses following my mother-in-law’s funeral in California,” he finally replied. Indeed, they had had to drop everything to attend her funeral in California-and that just after they had vacationed there in late August. I decided to take his explanation at face value.
Nevertheless, the pattern continued. I began to document the steady stream of bad mail. But I questioned my own motives: Hadn’t Alan tried to be senior pastor? Am I trying to bring about his demise so he is not a threat to my own leadership? I began to wonder if he should get another mailbox so I wouldn’t have to confront the notices.
Perhaps most troublesome were the overdrafts. According to my experience, each of those pink slips represented a twelve-dollar expense charged against one’s account. How can he afford such neglect? I asked myself.
Then another question occurred to me, I wonder if Alan gets as many pink slips for the church’s youth fund? If he can’t manage his personal account, what about church funds? Yet, I could not challenge his integrity without damaging our relationship. The church was in the process of revising its entire accounting structure, but to this point, no one had brought the youth fund into the church’s general accounting process. When I asked about it, I was told, “Alan handles that.”
Failing to get answers through the official channels, and with Alan evasive when I tried to confront him, I decided to look for myself.
In July 1985,I opened the bank statement from the church’s youth fund. I found no notices of overdrafts, but I was perplexed. I began to make notations on a three-by-five card:
DATE FUND AMOUNT PAYEE
June Youth $300.00 Cash
May Youth $300.00 Cash
March Youth $1000.00 Cash
My index card soon couldn’t hold all the data. I gathered up as many of the checking account statements as I could find, and later, at home, I took out a legal pad and began to go through them one by one. To my amazement, I found from October 1982 to July 1985 a total of $17,792.00 in checks made out to Cash written for even amounts, and signed by Alan.
I listed my questions, including:
1. How are these accounted for?
2. Where are the receipts for auditing purposes?
3. How do funds get into this account-from young people’s fees for activities or from the church budget?
4. Do youth fees (if collected) cover all or part of the youth outings or events?
5. What percentage does the church cover?
6. Why are these checks always in round figures (youth expenses obviously aren’t)?
7. What then, was done with the change?
8. Does anybody hold the youth pastor accountable for monies spent?
I struggled long into the night with the biggest question: What do I do with the information? I knew well what such questions would mean to our relationship, whether or not there was a legitimate explanation. I knew the biblical principles for church discipline suggest individual confrontation, but based on Alan’s lack of receptivity to my inquiry into personal finances, I doubted whether another personal conversation would be fruitful.
I also knew that 1Timothy 5 said not “to entertain an accusation against an elder unless it is brought by two or three witnesses. Those who sin are to be rebuked publicly, so that the others may take warning.” To bring an accusation against someone who had made his livelihood from the ministry for the last twenty years was no small matter. I decided I needed more facts.
I took my findings the next day to the chairman of our church board. He was as puzzled as I.
“What do you make of it?” I asked.
“Well, if the IRS saw this, Alan would be required to pay personal income tax on these amounts unless he has a record of how the money was spent.”
“We need to get some answers to where this money came from and how it is being spent,” I suggested, “but I’m just not certain how to go about it.”
We agreed to ask the trustees to call for an accounting of the youth fund in preparation for a possible move to handling youth ministry expenses through the church’s general accounting structure. The rationale would be that all other aspects of the church’s finances were being reviewed, so why not the youth fund?
In the meantime, I asked the church financial secretary to document deposits from the general fund into the youth account over the last year. Her findings suggested no inordinate amounts of money going into the youth fund. Where then was that money coming from?
For the next two months, the investigation was put on hold as I was consumed by an assignment to rewrite the church constitution and restructure the ministry under a single board of elders. On September 8, with a full house, the church approved the constitution with a 77 percent vote. In addition, the combined boards of the church proposed a major fund-raising program to build a new building on the three acres of land owned by the church. We planned to present the proposal at our October 8 meeting, after which the new constitution, with an elder board, would go into effect.
During September, however, Alan began getting letters from the IRS.
“Now what kind of trouble is he in?” I commented to my wife. “Not only does he fail to pay his bills, but the tax man is after him!”
“How can he possibly be considered as an elder with that kind of reputation?” she asked. Her question lodged in my soul. Indeed, I had been teaching and preaching on the matter of elders all summer. Is it possible to exclude a staff pastor from an eldership role? Our new structure would have allowed for such a scenario, but did I dare suggest such a distinction for a man, forty-two years old, with twenty years in the ministry? It would seem like a power play.
When the third letter arrived from the IRS in as many weeks, I knew I had to have some answers. I called Alan to see if I could come to his home. The events of the next few days were to read like Sergeant Friday’s entries in a Dragnet episode.
Wednesday, October 2: “Alan, I’ve noticed for some time that you’ve been in financial difficulty. And now you’re getting notices from the IRS. Are you in trouble?”
Icy silence.
“Alan, I merely want to know how we can help you. If you’re in deep trouble financially, we need to be aware of that.”
He was quiet. Then he told me he had gotten behind in paying his taxes a few years back but that he had sought advice from a lawyer in the community and was working on getting it straightened out. I asked for permission to get a progress report from the lawyer. He said no.
My confidence in Alan’s trustworthiness and willingness to make himself accountable to the church had deteriorated.
Friday, October 4: I met with the chairman of my board for an update on the youth fund investigation, and he informed me he had passed the matter on to the trustees, as we had decided in July. He did not know what the current status of the investigation was. I told him about the recent IRS letters.
Saturday, October 5, 5 P.M.: My concern was building as we approached the annual meeting and the appointment of elders. I talked with one of the financial officers of the church, and for the first time, he saw the hard evidence. He said, regarding the IRS situation, that “Alan could work out his personal financial situation without it impacting his relationship to the church.”
What about the youth fund questions? With two years of documentation on a yellow legal pad in front of him, he said, “Alan would never do anything wrong. And anyway, that’s past, and there’s nothing we can do about it. Let’s not overreact.”
I left feeling all alone. I couldn’t understand why no one else sensed the magnitude of the information I possessed. But I couldn’t stop now.
Saturday, October 5, 7:30 P.M.: After a nervous birthday dinner for my wife, I met with two deacons in the back room of the parsonage and spilled out my concerns. By this time, I was convinced the circle of awareness had to be expanded. For the first time, the term embezzlement was suggested by one of the men. They determined that the rest of the deacon board had to be brought into the discussion. A meeting was scheduled for Sunday, immediately after the service.
Sunday, October 6, 11 A.M.: The bell in the church tower rang out over Steamboat Springs as it had for the past ninety-four years. I had Alan open the service with the call to worship-Isaiah 55:6-12. “Seek the Lord while he may be found; call upon him while he is near. Let the wicked forsake his way and the unrighteous man his thoughts; and let him return to the Lord, and he will have compassion on him; and to our God, for he will abundantly pardon.”
What Alan did not realize at the time was that my wife had prayerfully selected the passage in hopes that God would use it to bring Alan to a point of confession. He seemed emotionally gripped during the reading, barely able to make it through the passage.
Sunday, October 6, 12:30 P.M.: The deacons met in closed session after morning worship to hear the report from the two men with whom I had spent Saturday evening. I did not attend. I greeted people as they left the church, but kept fearing the consequences if my suspicions were wrong.
Sunday, October 6, 4 P.M.: At the request of the deacons, I asked Alan to be present at a meeting immediately following the evening service. He hesitantly said he would come.
Sunday, October 6, 7:30 P.M.: We stood waiting for the arrival of one deacon. Alan seemed nervous. I tried to console him-“It’s going to be okay. We just want to talk with you.”
He said softly, “I’m about to do the second most difficult thing in my life: to meet with you all. And then I’m going to do the first most difficult thing: to meet with my family.”
Ten minutes later, as we continued to wait for the latecomer, Alan was at the end of his emotional endurance. “Can we get started, fellows?” he asked.
Just then our missing board member arrived. We sat down to begin the meeting, and Alan immediately assumed the floor and proceeded to spill the guilt of six years of stealing directly out of the church offering plates.
One by one around the table, our heads were lowered into our hands. We had called the meeting to ask Alan about his personal financial problems. We weren’t prepared for what we had to hear. We silently prayed for mercy.
We agreed to meet the next night to determine our response.
Monday, October 7: The board of deacons met for the last time. The next day, they would be called “elders.” Little did they know when they agreed to serve that they would be tried by fire so soon in their new office.
We mapped out how this information would be shared with the congregation. We determined to hold the annual meeting as scheduled, followed by a public reading of confession by Alan. His resignation would then be voted on by the congregation.
Tuesday, October 8: Alan read his confession at the annual meeting of Euzoa Bible Church.
Before proceeding with the rest of the story, perhaps it would be helpful to analyze the painful lessons we learned about church finances.
The Holes in the System
We thought the church’s financial accountability systems were adequate. After all, the church was careful to insure that separate parties were required to (1) record funds and report receipts and balances monthly (the financial secretary), (2) authorize payment (the trustee board), and (3) write checks (the treasurer). Great pains were taken to reconcile any differences in the records. Written warrants were required for all checks. Any checks for more than $1,000 required two signatures.
But some large holes remained in the financial structures of our church. These holes, I’ve discovered in recent conversations with other pastors, often exist in other churches’ systems, too.
The holes exposed at Euzoa were:
1. The church held two morning services, and the offerings from the first service would be collected and placed in the room behind the pulpit, uncounted and unattended. The offering room, though just off the platform, had a rear entrance, to which Alan had access.
Following the second services the offerings would then be counted and placed in a deposit bag and left in the night depository at the bank. The next morning the financial secretary would go to the bank and record the receipts.
2. Even if we had counted the first service offering immediately, our system would still have had a hole. The Sunday counting procedure included only the cash. It was assumed that checks were not vulnerable, but they were, since they could be “officially” endorsed into a bogus account.
3. The church did not issue annual receipts for giving, unless requested by the individual. It was assumed the canceled checks were all the receipt necessary.
4. The church allowed individual ministry funds to exist in the church’s name with no required accounting and no auditing, in this case, for eight years.
5. The church allowed an employee to have sole authority to write checks against a corporate fund.
Though gaping, these are not the only holes that exist within the accounting structures of many churches. One substantial hole many churches suffer is to allow one individual to bag up the day’s receipts and take them home to count and record. The practice remains in many congregations because challenging such procedures seems an affront to the individual’s integrity. The irony, however, is that only those who have something to hide should be disturbed by such changes in financial procedures. If financial reforms are met with resistance, it may be an indication the changes are even more sorely needed.
Using and Abusing the System
With the opportunity before him, Alan employed the following procedure to divert church funds for his own needs:
1. In addition to the “Euzoa Youth Fund,” Alan set up a separate account for the “Euzoa Youth Fellowship Fund.” Thus there were two youth funds in the church’s name-one for legitimate youth funds and activities, and another through which church offerings could be laundered.
2. He would take checks directly out of the offering plates between services or during the second service. I remembered many Sundays seeing Alan leave during the middle of a service and return later on. At the time, I assumed he was checking on the nursery or children’s church-not an unusual procedure for a youth pastor.
3. He would then stamp the checks on the back EUZOA BIBLE CHURCH-FOR DEPOSIT ONLY, blocking out the general account number and depositing them in the Youth Fellowship Fund. Individuals would thus receive their canceled checks with Euzoa Bible Church clearly stamped on the back. Because no annual giving receipts were provided, no one suspected the funds were not going to the designated accounts.
4. Having deposited the funds into the bogus youth account, Alan was then free to write checks with no questions asked.
5. When questions were asked from time to time by the trustees, Alan was able to provide a clean accounting of the “official” Euzoa Youth Fund.
Our experience reveals one glaring weakness many churches face: namely, that if an individual can access checks, and can set up a separate account in the name of the church, it is then within that person’s reach to divert church funds. Of course, cash can be pocketed without the fuss.
Our situation was complicated by the fact that a fund existed in the name of the church that the church did not even know about. This was made easier by the fact that we are situated in a smaller community where things may be more informal than in a larger city. Someone in a position of trust, such as a minister, is often able to convince bank personnel to override policies.
I was troubled enough about the matter to ask two local bank officials about it. “Do you mean, if I came into your bank off the street and asked to open a checking account in a corporate name, you would do that without a letter of authorization from the corporation?” Their response:
1. A corporate account initially requires a form to be filled out and placed on file with the bank. It provides “the authorization of a corporation to maintain a deposit account.” In some cases, a single document may authorize a host of accounts under one umbrella, all supposedly on record with the bank. In other cases, a bank may require an authorization letter for every account opened under that corporate name.
2. It is the responsibility of the corporation to provide the bank with a list, updated annually, of persons authorized to sign checks on corporate accounts. If it fails to do this, former employees or corporate officers may be able to continue to write checks against corporate accounts without any indication of wrongdoing.
3. Any new accounts opened under the corporation’s name ought to have a signed letter of authorization before that account is opened by the bank. However, it is conceivable that the same person opening the account could be authorized to sign such a form-or could easily forge the signature of a corporate officer without raising undue suspicions.
That means anyone, potentially, could go into a bank and open an account in the name of the church.
Then, any check not immediately recorded and secured is vulnerable. Specific examples of such points of vulnerability would be:
-A member is handed a check to put in the offering plate from a parishioner who was not able to be in the service.
-A secretary receives checks in the mail from absent or out-of-town donors.
-A counter is left alone with church funds.
-An usher “lifts” checks from the offering on the way to the counting room.
In one church, an ingenious usher slid bills out of the top offering plate and stashed them in a bottom plate as he went to the counting room. Then, as he returned the “empty” plates to the storage cupboard, he would recover the bills.
These scenarios are not offered to create a climate of suspicion in churches, but to point out that financial irresponsibility can take many guises.
How We Closed the Holes
As a result of the crisis, several steps we took, which would have been difficult otherwise, were made easier. But I’m convinced they are worth taking even without such a precipitating event, since they help churches insure their financial integrity.
First, we began to place the filled offering plates on the table in front of the church for all to see. In many churches, an immediate counting in a secured room is more practical and just as effective. In our case, we felt a public demonstration of our accountability was in order.
Second, a new schedule of counters was drawn up. Two individuals were required to be present at all times when offerings are handled and counted. Two signatures are required on the counters’ sheet.
Third, two copies of the counting sheet are completely filled out and signed by the counters. One is included in the bank deposit bag for the financial secretary, and one is given to the pastor.
Fourth, all separate church checking accounts (women’s fellowship, benevolence fund) were brought under the general accounting structure of the church. We now require them to be balanced monthly by the church treasurer. A better option may be to have no separate checking accounts, but to have all funds handled through a central account. Often because of the confidential nature of the benevolence fund, this is a fund that may be open to abuse.
Fifth, as of January 1, 1986, we began issuing annual receipts for giving to all contributors.
Sixth, all local charge accounts that would not include individual receipts along with their monthly invoices were closed. It became impossible to monitor charge accounts that did not provide this service. We suspected that abuses had taken place with the church’s grocery store account.
Seventh, all ministry heads or program leaders were made accountable for the expenditures within their budget areas. They are required to sign all requests for payments before the finance committee receives them. The effect is to give responsibility for monitoring the budget back to the program chairpersons. Though cumbersome at times, we chose this as an alternative to a single purchasing agent or an advance purchase order system.
A Matter of Trust
The above measures may seem extreme. They were not for us. A sacred trust had been violated. Confidence needed to be restored.
For the first months following the public disclosure, no one, including myself, wanted to be seen holding the money or left alone in a room with it. We were almost paranoid about someone suspecting us of wrongdoing. The extreme measures were taken not only to restore confidence in the system, but to assure people involved in handling church finances that they were beyond suspicion.
As a result of aggressive reform and complete openness before our church body, the level of stewardship did not decline, but rather increased after the embezzlement problem had been cleared up.
Too often churches, because they are communities of faith built upon trust, place opportunities for temptation in front of their members or their ministers. No system is beyond abuse, but responsible stewardship demands church finances be handled with absolute integrity.
Epilogue
On October 8, 1985, following Alan’s confession, the congregation voted to accept his resignation but not to press charges against him for his crimes.
On October 10, officers of the church reported the crime to the Colorado district attorney’s office, their legal obligation as fiduciaries of corporate accounts (Sec. 18-8-115 of the Colorado Criminal Code: “Duty to report a crime-liability for disclosure”).
On December 24, Alan was charged with thirteen counts of felony theft (1979-1985) and two counts of misdemeanor theft (1977-1978). Each felony charge represented a period of six months in which more than $200 but less than $10,000 was stolen. Each carried a possible jail sentence of one to eight years in the state correctional system, and a maximum fine of $500,000.
On April 1, 1986, Alan pleaded guilty to four counts of class IV felony theft.
On May 19, Alan was sentenced to thirty days in the Routt County Jail and four years of supervised probation. As required by the courts, but not by Euzoa Bible Church, he will be making restitution of $41,857.35 of stolen church funds.
Alan remains in the community and in the church as a member under the discipline of the elder board. He has willingly complied with the conditions set forth by the elders for restoration to fellowship, though not leadership at this time.
QUESTIONS WORTH ASKING
When evaluating church financial structures, these questions, as Euzoa Bible Church learned the hard way, need to be raised.
Do we count and record offerings immediately after they are received?
Are offerings always stored in a secure or well-supervised area?
Do we make sure that offerings are never handled by only one person before they are counted and recorded?
Do we issue annual receipts for giving?
Do all church accounts fall under the general accounting and auditing structure of the church?
Are all persons authorized and able to write checks against church funds held responsible through an accounting-auditing system?
Do we make sure the same person is not involved in more than one of the financial procedures of the church (collecting the funds, counting them, recording the giving, authorizing expenditures, writing the checks, auditing the accounts)?
Do we provide the bank with annual updates of persons authorized to sign checks against any account associated with the church?
Unless you can give a firm yes to all of these questions, you may have a hole in your church financial structure through which you could be losing hundreds or perhaps thousands of dollars.
– Richard L. Bergstrom is pastor of Euzoa Bible Church in Steamboat Springs, Colorado.
Copyright © 1987 by the author or Christianity Today/Leadership Journal. Click here for reprint information on Leadership Journal.
