FIRST BAPTIST CHURCH OF DeSOTO, MISSISSIPPI:
A CASE OF EMBEZZLEMENT
Introduction
Dr. Patrick O’Hara, pastor of the First Baptist Church of DeSoto, Mississippi, sat alone in his
office feeling exhausted and emotionally drained. He had just completed the most difficult
task in his 33 years as a minister. In a special Sunday evening business meeting, Dr. O’Hara
and Mr. David Channel, the church treasurer, had just informed the congregation of the First
Baptist Church of DeSoto that during the last three years, one of their fellow church members
had embezzled more than $700,000 from the church.
The initial reaction of the congregation had been one of shock and anger. The business
meeting lasted more than two hours, but the church had failed to come to any agreement
regarding how to deal with the situation. Dr. O’Hara was beginning to think that the
congregation might be split over whether to press charges against the perpetrator of this
crime. He was also beginning to think that the best option for his career would be to try to
find another church to pastor. The last few days had been very trying and difficult. Dr.
O’Hara was becoming a firm believer in the old saying that an ounce of prevention was worth
a pound of cure. He wished there were a real cure for his church. He wished even more that
the church had implemented some controls that could have helped to prevent this tragedy
from occurring.
Background
DeSoto, Mississippi is the county seat of Delta County. The First Baptist Church of DeSoto is
the largest church in Delta County. Dr. O’Hara has been the pastor of the church for fourteen
years. He is one of three full-time ministers employed by the church. The other ministers are
Rev. Bob White, the minister of music and youth, and Rev. Mark Dickerson, the minister of
Education. Mrs. Lynda Easterling is employed as the receptionist and secretary of the church.
Mrs. Trudy Able has served as the financial secretary of the church for the past four years.
In 1996, the First Baptist Church of DeSoto had about 1,800 total members and 1,100 resident
members. The church had an average attendance in Sunday School of about 425 during 1996.
Cash receipts for the years in question follow:
Year
1994
1995
1996
Undesignated
Donations
$620,000
690,000
800,000
Total
Donations
$735,000
900,000
1,000,000
Total
Receipts
$915,000
1,000,000
1,000,050
First Baptist Church of DeSoto currently has no outstanding debt and is not required to issue
financial statements to any external parties (as an unincorporated nonprofit organization).
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The church has never had an external audit. Mr. David Channel, the church treasurer, is a
local CPA who has a private practice. Mr. Channel and the other members of the finance
committee never thought that the church needed to waste money on an audit.
The Embezzlement Process
Mrs. Trudy Able became the financial secretary for the First Baptist Church of DeSoto in 1993.
The previous financial secretary had worked for the church for eight years. Mrs. Able was a
native of DeSoto and both she and her husband had been members of the First Baptist
Church since they were children.
When Mrs. Able was hired by the church, she had two sons in college. Her oldest child, Rita,
was married and had two young children. Shortly after Mrs. Able began working for the
church, Rita’s husband left Rita and the children.
In 1994, the Ables found themselves in financial trouble. They were trying to support their
two sons who were attending college as well as their daughter and two grandchildren.
Without permission from anyone at the church, Mrs. Able began to borrow money from the
church from time to time to help the family get through their hard times. The church had
very few internal controls in place, so she found ways to take cash without being discovered.
At first Mrs. Able planned to repay the amounts that she had taken, but after a few months,
she began to justify her actions. Mrs. Able thought that she was underpaid for the amount
of work that she did. She also knew that the Bible stated that churches should help orphans
and widows. Some of the money that she took was being used to help support her daughter
and grandchildren and she rationalized that this was the responsibility of the church. In
addition, one of her sons wanted to become a preacher. If Mrs. Able could not help him
finish college and seminary, he would never be able to become a minister. She believed that
God wanted her son to enter the ministry, and she rationalized that the church should help
him get the necessary education.
The first time Mrs. Able took money from the church was in February 1994. Every Sunday,
the church counting committee would count the offerings and prepare a contribution report
and a bank deposit slip which were forwarded to Mrs. Able. The money was then placed in
the church safe. On Monday morning, Mrs. Able deposited the Sunday offerings at the Bank
of DeSoto. Ms. Kellie Satcher, a teller at the Bank of Desoto, was a personal friend of Mrs.
Able. Mrs. Able almost always went to the window of Mrs. Satcher when she made the
Monday morning deposit. One Monday, Mrs. Able requested $500 cash to take back to the
church to use for petty cash. Ms. Satcher gladly granted this request and noted on the
deposit slip the amount of cash that Mrs. Able kept. Mrs. Able kept this cash and used to
pay some of her delinquent bills. In order to get the books to balance, Mrs. Able later
debited various expense accounts for $500 of phony expenses and she credited the cash
account to reduce the general ledger account balance to equal the amount in the bank
account. She could not simply record a debit to the cash account for the net amount of the
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deposit, because subsidiary contribution records were maintained for church members.
Contribution notices were mailed out at the end of the year, and the total amount of the
deposits would need to equal the total of the subsidiary contribution records. Therefore,
Mrs. Ables expensed the amount of the cash that she took.
When the bank statement came to the church each month, Mrs. Able was the individual who
prepared the bank reconciliation. Because no audit procedures were ever conducted, no
one other, than Mrs. Able ever examined the bank reconciliation or the deposit slips. She
filed the counting committee’s collection reports on a weekly basis, and no one ever
compared the collection reports with the deposit slips. The Ables continued to need extra
money to support their children. Because it was so easy to take money in this fashion, Mrs.
Able began to take cash from the Monday deposit on a weekly basis. She always went to Ms.
Satcher’s window to make the deposit, and Ms. Satcher never questioned the practice of Mrs.
Able taking cash back to the church to use for various needs that would arise during the
week. Some weeks Mrs. Able would request a few thousand dollars in cash, but she always
had a good reason as to why the cash was needed. Sometimes she would say that the church
was having a banquet. Other times she would mention that the church was undertaking a
special mission project or helping needy families.
While the Ables were in the worst part of their financial difficulties, Mrs. Ables began to look
for another way to take cash from the church. After serving as the church financial secretary
for a few months, Mrs. Able knew that she was the only person at the church that ever
examined the monthly bank statements. Every week Mrs. Able used an electric typewriter to
prepare checks for Mr. Channel, the church treasurer, to sign. Mr. Channel would usually sign
the checks on Wednesday night before the weekly prayer meeting. After Mr. Channel signed
the checks, Mrs. Able would put the checks in the church safe and mail them on Thursday
morning.
One week after Mr. Channel signed the checks in his usual manner, Mrs. Able altered a check
that was made payable to “MBCB” (Mississippi Baptist Convention Board). Each week First
Baptist Church of DeSoto would send a portion of the total offerings to the state convention
board as a Cooperative Program contribution. The Cooperative Program is the agency that
funds the mission agenda of the Southern Baptist Convention. To alter the check, Mrs. Able
placed the check into the electronic typewriter and erased the letters “MBCB” and replaced
them with “CASH.” The next day she deposited the check into her personal account at a
bank in a nearby city. When the cancelled check was returned to the church with the
monthly statement, Mrs. Able used the electric typewriter to remove the letters “CASH” and
she retyped the letters “MBCB.” Mrs. Able then prepared the monthly bank reconciliation
and placed the bank statement and cancelled checks in the appropriate file. Because the
church’s donations to the Cooperative Program are voluntary contributions, no one ever
noticed that these funds did not arrive at their intended destination.
As the months passed, the Ables used church funds to alleviate their financial problems. Mrs.
Able continued, however, to take cash from the church. She continued to deposit the full
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amount of the offerings received and request cash from the teller to take back to the church
office. She always expensed the amount taken, so the books always balanced. Mrs. Able
prepared the financial statements that were distributed to the congregation at the regularly
scheduled business meetings. Somehow, no one ever noticed the large amounts of cash that
Mrs. Able was taking.
Mrs. Able began to enjoy her new wealth. She told friends that she had inherited a large
amount of money from a relative. Mr. and Mrs. Able were two of the most faithful members
of the First Baptist Church of DeSoto and they had always been well respected in the
community. During the summer of 1995, in order to further endear herself to the church
congregation, Mrs. Able purchased a new grand piano for the sanctuary. Mrs. Able also told
the congregation that because of the large sum of money she had inherited, she no longer
needed the income from her position as financial secretary of the church. She did, however,
want to continue serving the church, so she stopped accepting a salary for her work as the
financial secretary. Shortly after this, the Ables purchased a new home for their daughter
and grandchildren. Later that same year, they purchased a small townhouse for the two
sons to occupy until they finished college. By this time, the congregation of the First Baptist
Church of DeSoto considered the Ables to be two of the most generous and wonderful people
in the community.
The Discovery of the Embezzlement
In March of 1996, Mrs. Able became ill and had to miss work for several days while she
recovered. During her illness, Mr. Channel took the weekly offering to the bank to be
deposited. He happened to go to the window of Ms. Satcher to make the deposit. After
receiving collections proceeds and the deposit slip, Ms. Satcher asked Mr. Channel how much
cash he needed to take back to the church. Mr. Channel was in a foul mood that day,
because this was his busy season and he was having to spend time doing the work of the
financial secretary of the church. In a rather terse manner he replied that the church did not
need any cash and he instructed Ms. Satcher to please hurry with the processing of the
deposit. Ms Satcher remarked defensively that Mrs. Able almost always took cash back to
the church on Mondays. On the way back to his office, Mr. Channel began to think about
what the bank teller had said about Mrs. Able almost always taking cash from the weekly
deposit to the church. When he reached the office, Mr. Channel called Dr. O’Hara and asked
if he knew anything about cash being used for expenses at the church. Dr. O’Hara had never
wanted to know much about the financial operations of the church. He did not have any
formal training in finance and accounting, and left that part of the operations of the church to
other people. Dr. O’Hara told Mr. Channel that he knew nothing about cash being kept at the
church for weekly operations.
Mr. Channel then went back to the bank and began to ask Ms. Satcher about her statement
concerning Mrs. Able taking cash to the church almost every Monday. Ms. Satcher explained
that almost every week Mrs. Able came to her window to deposit the church’s Sunday
offerings and that Mrs. Able almost always kept a large amount of cash for the church to use
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during the week. Mr. Channel then asked to see Mr. Joe Laird, the president of the Bank of
DeSoto. Mr. Channel explained to Mr. Laird that there could be a problem. Mr. Laird had his
internal audit staff begin to investigate the matter that afternoon. The auditors began to
examine each deposit slip from First United Baptist Church of DeSoto. They quickly found
that almost every deposit slip on record since 1994 showed that cash had been retained by
the depositor.
Mr. Laird informed Mr. Channel of the findings of the bank’s internal auditors. Mr. Channel
then informed Dr. O’Hara that it appeared that thousands of dollars had been taken from the
church. Dr. O’Hara asked if Mr. Channel could perform an audit to determine the financial
condition of the church. Mr. Channel informed Dr. O’Hara that he was not an independent
party and could not actually conduct an independent audit. Mr. Channel and another CPA
who was a member of the church agreed to perform some audit procedures to try to
determine what irregularities had occurred.
In the course of their investigation, the two CPAs discovered that the amount reported as
received by the Mississippi Baptist Convention Board for the past two years did not agree
with the amount of the Cooperative program contributions in the church’s accounting
records. The records of the church showed that for each of the past three years, the church
had contributed at least $50,000 more to the Cooperative Program than the amount reported
as received by the Mississippi Baptist Convention Board. This amount combined with the
amount that the bank’s internal auditors found to be missing totaled about $700,000 of cash
that could not be accounted for during a period of about three years. This represents about
23.6% if the total cash receipts for the three year period.
Once they had determined that a theft of this magnitude had occurred, Dr. O’Hara and Mr.
Channel had to determine how to proceed in dealing with the matter. The First Baptist
Church of DeSoto is incorporated and the constitution and by-laws of the church name the
Board of Deacons as the governing board of the church. The Board of Deacons, therefore,
was the first body to hear the report of Mr. Channel. Mr. Channel suspected that Mrs. Able
had embezzled $700,000 from the church between 1994 and 1996. He explained how cash
had been taken from the deposit almost every week during this time period. He also stated
that the church’s accounting records show contributions to the Cooperative Program of
$50,000 more than the record of the Mississippi Baptist Convention Board, the recipient of
these contributions.
Despite concerns of the possible liability associated with wrongful accusation, the Board of
Deacons decided to confront Mrs. Able about these allegations. Many of the deacons did not
believe that Mrs. Able would ever steal money from the church. When she was confronted
with the allegations, Mrs. Able burst into tears and admitted that she had in fact been taking
cash from the church.
Once she admitted that she had committed this act of embezzlement, the church had to
decide what actions to take. Almost all of the money that Mrs. Able had taken had been
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spent. The only assets that could be sold to repay a significant amount of the embezzled
funds were the house that had been purchased for her daughter and the townhouse in which
her two sons were living while attending college in another part of the state. Word of the
embezzlement began to spread through the small city of DeSoto. Many church members
wanted to prosecute Mrs. Able while others wanted to try to hide the incident from the
public to avoid further embarrassment to the church and to the Christian faith in general.
The Board of Deacons decided to let the congregation decide how to proceed with the
matter. They decided to let Dr. O’Hara and Mr. Channel present the matter to the church in a
special business meeting on Sunday night.
There were several things that needed to be considered. The church had a bonding insurance
policy that would probably cover part of the loss. In order to collect on the policy, however,
the church would have to press charges against Mrs. Able. The deacons were unsure what
actions the insurance company might try to take against the individuals in the church that
should have discovered that the embezzlement was taking place at an earlier point in time.
They feared that the insurance company might seek to recover some of the funds from either
the church staff or the Board of Deacons based on negligence.
The church did not have any significant debt outstanding and the leaders had never noticed
that the money had been taken. Pressing charges against Mrs. Able would probably draw
national attention to the church – the type of attention that no church would want to have.
Some individuals felt that the church should be forgiving based on various passages in the
Bible. In addition, Mrs. Able had many friends in the church, and some of these people just
wanted the incident to be forgotten
The Sunday evening business meeting was a disaster. There were two hours of very heated
arguments as to what to do. Some members blamed the church staff, the church treasurer,
and finance committee for letting this event occur. Others put the blame entirely on Mrs.
Able, and some of these individuals wanted to see her taken away by the police in handcuffs
that very night. The meeting was ended by the Chairman of the Board of Deacons after two
hours when shouting and name-calling had become the main method of communication. The
church had failed to reach a consensus as to how to proceed at this point in time.
The Dilemma
Dr. O’Hara now sat in his office faced with a dilemma. He wished that the church had taken
precautions to prevent this situation, but it would do no good at this point to sit around and
think “if only.” There were many pressing questions that the church was facing. The
preliminary question was what action to take against Mrs. Able.
This would bring a
tremendous amount of negative attention to the church that most church members would
want to avoid. Should the church refrain from pressing charges to avoid the negative
publicity and the unavoidable damage to the reputation of the church? Will members of the
congregation be able to forgive Mrs. Able? Will the congregation have faith in its current
staff to run the day-to-day operations of the church in the future? Could the current
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leadership in the church survive this scandal? Would the church be split over the question of
whether to continue support of the current staff?
The church must also consider implementation of internal controls to help prevent
irregularities in the future. Implementation of controls will probably create another round of
dissension because of the inconveniences that will be created by the controls that need to be
put in place.
Dr. O’Hara remembered being in a meeting one time when someone said that it was better
for a church to burn to the ground than to experience embezzlement. The individual said that
when a church burns, the congregation unites and usually becomes stronger. When a church
experiences embezzlement, however, the church almost always divides. Now Dr. O’Hara was
realizing the truth of the statement.
Epilogue
The congregation of the First Baptist Church of DeSoto decided not to press charges against
Mrs. Able. The majority of the congregation wanted to avoid the widespread negative
publicity that the church would receive if this case became public information. The church,
therefore, decided not to attempt to collect on the bonding policy that was in place. Mrs.
Able is no longer a member of the church and she no longer works for the church. A few
months after the embezzlement was discovered, Dr. O’Hara decided that it was time for him
to retire. He has not served as the pastor of a church since he resigned from his position at
the First Baptist Church of DeSoto. Many church leaders in Mississippi have heard about this
case and have attempted to strengthen the system of internal control in their own churches.
The Mississippi Baptist Convention Board now freely distributes a publication entitled
Safeguarding Your Church Offerings which is designed to help churches evaluate and improve
their accounting systems.
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Discussion Questions
1. Obviously, internal controls should have been in place at the First Baptist Church of
DeSoto. What kinds of internal controls should be put in place now that the embezzlement
has taken place?
2. How often should an independent audit take place?
3. Who or what group of people has responsibility for enacting internal controls?
4. What might be some of the fallout from an incident like this in an organization, especially a
nonprofit organization?
5. Do you consider Mrs. Able to be the only one who should be dealt with concerning the
acts of embezzlement?
5. What action, if any, should have taken place against Mrs. Able?
6. Who is the First Baptist Church of DeSoto accountable to?
7. Do you think this church (or any church) should be have a strategic plan?
8. Would the IRS have any interest in this situation?
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