Seven Church Finance Questions for Vonna Laue
Vonna Laue is the West regional director of Capin Crouse, a national auditing firm specializing in serving churches, colleges, and missions agencies. She's been with Capin Crouse since 1996, and has served as a partner since 2008. She oversees all of the services they provide in the West, both audit and consulting, and works with 70 churches in her region. As a firm, Capin Crouse works with over 300 churches. We sat down with Vonna to find out the current financial and internal controls landscape of churches across the country.
First of all, what's the biggest thing that's changed over the past couple of years, in the church, as far as audit procedures, finances, and church management?
Well, one, it's harder to get debt covenants than it used to be. A debt covenant in a contract can be explained this way:
When a church enters into a loan agreement there are certain things it says that they have to do, or that they can't do. So an example of a negative covenant would be, "You can't enter into any more debt without our permission first." They might ask you to provide them audited financial statements within 120 days, or you have to maintain certain ratios at certain percentages. A certain ratio might be what's referred to as a debt-service ratio. Your net income has to be maybe 150 percent, or 1½ times greater than your principal and interest payments for next year.
And that's probably the one that gets them in trouble more often than not. They'll have requirements for certain ratios that they have to maintain, and if their finances don't come in where expected, they might be out of compliance with those ratios. And they can't just get instant forgiveness on that anymore.
The economy has caused it to be more difficult to service debt that they have in existence. It used to be really simple to get a waiver for a debt covenant if it was out of compliance. It's not simple anymore—so that's one area.
What else has changed?
I think we've seen more publicity of embezzlement and fraud in the churches in the last four years or so. I was doing a webinar once, and Phill Martin from NACBA asked if fraud was occurring more because of the economy being down at the time.
I don't believe that the economy has impacted people committing fraud. I think it has helped to identify where fraud or embezzlement is occurring, because now churches are looking at their budgets much more closely. And what was able to fly through before because contributions were flying in and everything was up and things were going great, can't fly through. Back then, we didn't focus as much on where money was going, and now we do.