Founder's Page

For Nonprofits the Time has come: Transparency, Accountability and Controls
Christian McClellan

Founder, ClearBlue Solutions.

ClearBlue Solutions was founded to respond both to an age-old problem of lax accounting that has been in need of correcting for far too long and the new challenges brought to nonprofits with the Sarbanes-Oxley legislation.  Lax accounting and controls all too often are leaving the doors open to fraud and abuse, sadly by the very leaders in whom we place our trust and our faith.  “Lax accounting is blamed for financial scandals” is the conclusion of Catholic lay organizations and financial experts emblazoned on an October 14, 2006 Miami Herald headline.

Recent News Accounts of church funds mismanagement to outright fraud have dealt a blow to the confidence of church members in many denominations. A headline of the South Florida Sun-Sentinel of September 29, 2006 shocked the Catholic Dioceses in Palm Beach county and made the front page nationwide; “Police: 2 priests stole $8 million”  This is truly a difficult predicament for the religious community. Clearly church cannons of ethical behavior call for honesty, transparency and accountability in the matters of managing member contributions and other cash assets. The suggestion that a denomination needs to impose financial oversight and contribution management controls on its church community implies the suspicion of fraud and such controls are therefore resisted and even soundly rejected.  In the case of the two priests in Palm Beach County, Florida, the outgoing priest made an impassioned plea to the Arch Bishop to forgo the audit that exposed him citing the insulting implication of impropriety. (“Letter shows priest's fury over audit” Sun-Sentinel, March 9, 2007) Resistance to accept an uncomfortable reality is, in fact, perpetuating the veil of secrecy that allows such fraud to exist unchecked.

According to the results of a recent Villanova University survey of U.S. Catholic Dioceses, as reported in The Palm Beach Post, January 5, 2007, “Survey finds widespread embezzlement, lax oversight in Catholic dioceses”, it was found that 85% of those that responded reported embezzlement of church funds in the past five years. More shocking than that, 11% reported theft of funds in excess of $500,000. The resulting report, Internal Financial Controls in the Catholic Church, was quite thorough in its analysis and revealed lax financial controls even where such controls were well established. Although embezzlement occurs in all types of organizations, the not-for-profit status and small size of church organizations present unique challenges to financial oversight.

Based on their findings, the authors recommended the following environment control policies:

The authors state that “policies and procedures and the other two levels of internal control systems (accounting system, control procedures) should be implemented” but that discussion was not within the scope of their paper. These policy and procedure recommendations would be beneficial for any denomination.

It is time for all denominations to develop the collective resolve and internal consensus that strict financial controls are something to welcome and embrace so as to provide accountability which mitigates financial risk and increases confidence and trust in the contributions mechanism.

Beyond fraud and embezzlement, religious organizations are continually nagged by the challenges in timely and accurate reporting of contributions receipts to denomination leadership, accuracy of tax reporting for members, correctly accounting for fund and mission allocations, and financial management of church assets. A standard accounting system throughout the denomination would go far to eliminate these nagging issues.

There is clearly a dire need in the nonprofit community, both churches and secular entities, for greater security and accountability of in-house financial management. Secure accounting systems and financial management controls in place are the most visible ways a denomination can demonstrate to contributing members their commitment to ensuring financial health and accountability.  With Sarbanes-Oxley regulations poised to expand into the non-profit sector the time to prepare for this challenge is now.

Clare Chapman, vice president for administration and finance at the National Council of Churches puts it bluntly.  “The big struggle in a church environment is trust,” she is quoted as saying in a September 30, 2006 news report in the Sun-Sentinel.   The article goes on to say that church practices still vary widely.  The United Methodist Church – a “connectional” body, where churches link up under bishops – has elaborate auditing standards.  The denomination’s Florida Conference has its nine district offices use the same accounting software.  The Massachusetts legislature in August of 2005 openly called for laws requiring standardized public reporting of denomination finances.  Reported in the August 8, 2005 Boston Globe, “Bill would force church to disclose its finances,” the state legislature showed its intent to look into “where the money is” inside the Catholic Church in the aftermath of the priest abuse scandals.  

For these reasons and more, a clear solution for the church leadership community is to adopt an accounting system that covers an entire denomination and with financial controls management implemented that addresses these systemic challenges. Standardized software in place throughout an entire denomination removes the stigma of the implication of wrongdoing and empowers all areas of the denomination to be part of the solution. A solution that promotes church collections controls securing member receipts thereby increasing member confidence in the denomination's financial stewardship. A solution that allows timely and accurate reporting of monthly receipts and one that offers denomination leadership the option of transparency and efficient auditing across the entire denomination.

It's clearly time for a new level of accountability, one that allows church leadership to demonstrate their commitment to ensuring the security of their membership contributions and a dedication to sound financial management. Clear Blue Solutions' founding mission is to deliver this level of accountability without drastic operational changes or costs. We're here to assist your denomination in charting a course that will demonstrate a new level of commitment to financial accountability.