Academic journal article Journal of Case Studies

We're All Family-Why Waste Time and Money on Unessential Internal Controls

Academic journal article Journal of Case Studies

We're All Family-Why Waste Time and Money on Unessential Internal Controls

Article excerpt


A job description for a new office administrator that Ken Jephson and the rest of the church's finance team had been asked to critique had a problem. Its approval would sanction internal control deficiencies that previously had been brought to leadership's attention. Uncorrected, Ken though those deficiencies had potential to produce significant financial loss for the church and make its leadership financially responsible.

Ken's discussion with the church's Pastor Paul had made it clear that he thought Ken's concerns were unwarranted and would result in unnecessary costly changes with no real benefits. Ken wondered. Did circumstances and the environment in which the church operated mitigate the need for changes that he thought were necessary?

What should be done? Should Ken and the finance team support leadership and approve the job description thereby sanctioning what might not be right or demand changes that would better protect the church and its leadership?

The Dilemma

Ken, a new member of the church finance team, had been elected co-chair of the team. He had only been on the team a couple of months when he felt the need to draft a memo regarding internal control. He had noted what he thought were deficiencies while participating in the counting of the church's weekly offerings. The memo had been presented as a discussion item at a finance team meeting. Without amendment, and with the unanimous support of the team, the outgoing finance chair had forwarded it to head pastor, Paul Carlton, and other church leaders for their consideration. More than a month had passed since then. However, the memo had not generated any feedback. That was certainly understandable; such considerations took time and there were a lot of changes being made at the church.

But, when Pastor Paul asked Ken to spearhead a review of the job description for a new office administrator that seemed to endorse some of the internal control violations included in the memo, Ken became upset. Had anyone in church leadership even considered the memo and what he thought were serious internal control problems? Ken was concerned that there might be consequences for himself, other finance team members, and members of church leadership if the job description were not modified.

He was distraught. Pastor Paul, in conjunction with other church leaders, had made many improvements in the last couple of years. Why wasn't leadership embracing internal control changes that would only make the church stronger? At least for Ken, what he thought were internal control deficiencies were a major stumbling block that required changes to reduce unnecessary avoidable risks and possible losses. Was he wrong? Were what Ken thought to be deficiencies only his perceptions and not so serious that changes were required?

Church Background

It was a small vibrant church located in a sleepy rural town with a population of a few thousand people. Neither it nor its members were affluent. Nevertheless, it committed 20 percent of its annual budget to supporting missionary efforts. Most of its members were not highly educated but were hard-working folks who scraped to make a living, (e.g. farmers, ranchers, and construction workers) and were heavily committed to their families.

A change at the top of church leadership (pastor and associate pastor) a few years ago had resulted in a revival and significant church growth. One result was that the church's physical plant had become too small and the church had embarked on a plan to build a new facility even though it had very limited financial resources. Knowing that money would be a significant constraint for building a new facility, church leadership was frugal in spending the church's money. If something was not absolutely essential, it could wait; the new facility was priority one.

Perhaps, in part, to overcome its lack of financial resources, church leadership had embarked on a multiyear, multipronged effort to grow fellowship among church members and their personal commitments of time and talents to the church. …

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