Internal Controls Matter at Church

Dr. Randy Smit, an accounting professor, has always kept a foot in industry, from working as a financial controller for a trading company to doing accounting at a local accounting firm.

“I get to use my gifts to serve not only my students but the community as well. I enjoy the variety, and I believe having industry experience makes me a better professor.”

One place Smit has used his gifts to serve the community is in the church, where he was treasurer for his local congregation in Orange City and for Classis Heartland.

It was during this time that he noticed a lack of internal financial controls and wondered how prevalent that was in the church at large. This realization prompted Smit to focus his doctoral research on internal controls in the church, particularly within the Christian Reformed Church (CRC). He also wanted to research how common fraud was within the church.

For the church worldwide, he was floored to find that 95% of fraud goes undetected. Billions of dollars are misappropriated, simply because few, if any, internal controls are in place.

“The controls in the church are typically built on trust. Most church councils will say, ‘We have a deacon or a treasurer in this position for a reason, and we wouldn’t put him in that position if he wasn’t trustworthy,’” says Smit.

The shortage of accountability is often due to churches not implementing basic internal controls. In most cases, financial duties such as collecting, counting, and depositing funds are handled by one or two people, without the checks and balances often found in other organizations.

Smit’s dissertation research considered the “fraud triangle,” which is used to explain why people commit fraud.

“If there are no controls in place, people may be under personal or financial pressure, find ways to rationalize theft, and see an opportunity,” he explains. Even well-intentioned individuals can make mistakes or find themselves in situations where fraud becomes tempting, especially if no one is watching.

In the Christian Reformed denomination, deacons often handle church finances, including collecting, counting, and depositing the weekly offering. Those with backgrounds in finance, accounting, and banking are well-suited for the position of deacon, says Smit. But not every deacon is chosen for their ability to handle money well.

“It’s important for churches to ask competent personnel to serve as deacon, otherwise there could be a risk of intentional or accidental fraud,” he says.

In the classroom, Smit urges his students to step into the role of deacon or treasurer at their churches. One of his favorite verses is, “Each of you should use whatever gift you have received to serve others, as faithful stewards of God’s grace in its various forms” (1 Peter 4:10).

“I tell all my accounting and finance students, ‘You have financial competency; God gave you this gift, and you need to use this gift to help your church. This is not the sacred versus secular: accounting is just as sacred as anything else God has created. You can play an important role in the church.”

At his own church, Smit has worked with the council to put safeguards in place. As treasurer, he now only handles bill payments; he does not have access to cash collections or deposits. Duties are divided to ensure that no single person controls the entire financial process. “This is as much for my protection as it is for the church,” Smit says. “Internal controls ensure that accusations of theft or mismanagement can be easily invalidated.”

He also encourages churches to find simple ways to encourage good behavior. Installing a security camera or having multiple deacons to promote separation of duties can be powerful steps to keep people from intentionally or unintentionally committing fraud.

“We want to believe that good people won’t steal, but Satan can get a foothold—as sinful creatures, we are all susceptible to temptation,” he says. “Putting controls in place in the church isn’t about distrust—it’s about accountability and stewardship.”