Warren Cole Smith: Avoiding Financial and Governance Disasters

ALTAVOCES
WARREN COLE SMITH, JULIE ROYS

JULIE ROYS 00:04
When you give to a church or nonprofit, how do you know your money is being well spent? How do you know if leadership is truly being held accountable? Welcome to The Roys Report, a podcast dedicated to reporting the truth and restoring the church. I’m Julie Roys. And in this episode, veteran journalist and president of Ministry Watch, Warren Cole Smith, answers these vital questions. As Warren explains in this message from the recent Restore conference, the evangelical church has shown itself completely incapable of policing itself.

As scandal after scandal has shown, elders often protect their pastors rather than holding them accountable. And many Christian organizations are so invested in celebrity pastors and mega churches that they look the other way. So how do you know if your church or nonprofit is being governed well in handling its money appropriately? Well, one way is following the work of Christian journalists reporting the unvarnished truth so corruption and abuse can be exposed and dealt with, is a major reason The Roys Report, as well as Ministry Watch, exist. But there’s another crucial component, and that’s educating donors and supporters to detect the red flags and take action. And that’s what Warren does extremely well in this podcast. So, I’m so excited to share it with you.

But first, I’d like to thank the sponsors of this podcast, Judson University, and Marquardt of Barrington. Judson University is a top ranked Christian University providing a caring community and an excellent college experience. Plus, the school offers more than 60 majors great leadership opportunities and strong financial aid. Judson University is shaping lives that shaped the world. For more information, just go to judsonu.edu

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Well, again, you’re about to hear a talk by Warren Cole Smith, on how to detect financial and governance disasters before they make headlines, and before some church or Christian organization misuses your money, Warren is the president of Ministry Watch. He’s also a senior fellow at the Coulson Center, and former vice president of World News Group. Here’s Warren Cole Smith.

WARREN COLE SMITH 02:37
It’s a real pleasure to be here today. It’s just an honor to be in a room like this with folks that care about issues that I care about that we care about here at Ministry Watch. And so, I’m just really, you know, kind of, I just feel in awe to be in your presence. And also, in the presence of some of the other speakers here today, many of whom I have interviewed for stories that we’ve done in Ministry Watch, and/or actually had them on the podcast and read their books. And so, to be in their company is really humbling.

So, what I’ve been asked to talk about today, though, is something maybe a little bit different from what the other speakers are talking about. We’ve been talking a lot about sexual abuse and sexual harassment, and Paul Coughlin will be on later to talk about bullying and toxic leadership, and of course, they all kind of relate to each other. But I’m specifically going to talk about money. Avoiding financial and governance disasters. And I hope that by the time I’m through, you might be able to see not only the importance of thinking about governance and financial issues as it relates to Christian ministries, but also the relationship that it has to the other issues that we’ve already been talking about today, but we’ll continue to talk about throughout the rest of the weekend.

The thing that I’d like to do to get started is just to mention that boy, there have been a lot of scandals in the church lately. Bill Hybels and Willow Creek Church, Bill Gothard, Ravi Zacharias International Ministries, of course, has already been mentioned today, Jerry Falwell, Jr, and Liberty University, Brian Houston, Carl Wentz, and Hillsong Kanakuk Ministries, the Southern Baptist Convention. If you want to generate a headline, the accusation, an accusation of sexual abuse in a ministry or a church is almost sure to do that. In fact, I would say based on the lineup of speakers here this weekend at Restore, I would hazard a guess that concerns about sexual abuse and toxic leadership, bullying and harassment, energize many of you in the room. And if that is why you are here, I want to affirm your concerns.

Sexual harassment and sexual abuse are horrible, and we should stand against these behaviors. I know that some of you are survivors and others of you are survivor advocates. And I applaud you for your courage in these efforts. Courage being what CS Lewis called the rarest of the Christian virtues. And I see it in abundance here in this room, and I’m just really grateful to be in your presence. I share this affirmation. So, you won’t think that I am trying to diminish the importance of your efforts when I say that in some very important ways, sexual abuse and sexual harassment in the church are affects; they are consequences. They are fruits and not roots. And if that’s true, or if there’s any truth in that, you might be asking, so what’s the cause? And I think that part of the cause is, or part of the answer that question is an answer that doesn’t generate as many headlines. And when it does generate a headline, it’s often quickly ignored or forgotten. And that cause is money. More specifically, the love of money, not money itself.

On the one hand, this assertion is probably not terribly surprising. Some of you may know that sex, money, and power, at least in my world, are sometimes called the devil’s triangle. The Bible in ! John 2:16 refers to this triad as the lust of the flesh, the lust of the eyes, and the pride of life. Lust of the flesh, of course, being sex, the lust of the eyes, covetousness, and acquisitiveness. In other words, money. And the pride of life often is talking about some of the toxic leadership issues that we’re dealing with this weekend. So, at a minimum, I think that we evangelicals should be spending as much time understanding and uncovering financial fraud and organizational leadership issues as we spend on sexual abuse and other issues.

But I should say that there’s also another reason. The Bible, as I’ve already alluded, says that the love of money is the root. And most of us, miss translate or misquote this verse. Bible doesn’t say the love of money is the root of evil, it says all sorts of evil. And I think that’s a pretty important distinction. Many of the sins that we see in the church find their root in a love of money. And I’m not talking about or merely talking about the love of money that we see in the prosperity gospel. We’ve already talked about the prosperity gospel this morning.

And there’s no question that it’s a scourge on evangelicalism. Prosperity preachers such as Benny Hinn, Kenneth Copeland, Creflo Dollar, Paula White, and others are perverting the gospel in some pretty obvious ways.

But my guess is that most of you in this room, already see that perversion for yourself, you can diagnose it. I am much more concerned today, with unpacking some of the scandals that I just mentioned a few moments ago, especially those that were related to sexual abuse and harassment and helping us understand that the root cause of these scandals is not sex at all, but power and money.

Specifically, in all the cases that I’ve already mentioned; Bill Hybels and Willow Creek, Bill Gothard, Ravi Zacharias International Ministries and so on, the common pathology was not sexual misconduct, even though sexual misconduct was certainly the presenting issue, a symptom in all of these cases. No, I would argue that the presenting pathology was transparency and accountability.

Once again, we should admit that these are pretty unglamorous ideas to talk about, but I hope you will see why these issues should be a vital importance to Christians, especially those of us who care about the peace, purity, and unity of the church of Jesus Christ. So, with that context, let me just say it plainly, transparency and accountability are the instruments of truth seeking and truth telling. Transparency and accountability are the two essentials non-negotiable ingredients when it comes to the restoration of the evangelical church. Now, of course, these two words transparency and accountability can mean a lot of things. On the purely tactical and practical level., they mean that Christian nonprofits should release their form 990s to the public.

There’s a trend among Christian ministries that we’ve actually written about a good deal at Ministry Watch, that this trend is for ministries to claim to be churches in order to receive an exemption from that disclosure requirement because churches are exempt from filing their form 990s. Now I should say that this practice is not new. Controversial and sometimes outright fraudulent organizations have been claiming the church exemption for many, many years.

It’s been a common practice, for example, among televangelist and the prosperity gospel preachers. In fact, from 2008 to 2011, Senator Charles Grassley investigated six televangelists. Some I’ve already mentioned; Benny Hinn, Eddie Long, Joyce Meyer, Kenneth Copeland, Creflo Dollar and Paula White-Cain. The investigation was necessary, in part because their organizations were not transparent in their dealings. The organizations that they lead, spent money on mansions, lavish lifestyles, and private jets.

In fact, I wrote an article for World Magazine called What Would Jesus,Why? that actually listed more than two dozen jets owned by these prosperity gospel ministers. Now though other organizations are following the terrible example of these prosperity gospel preachers. Some of these organizations are those that I would have told you five years ago, were exemplars, ministries that set the standards that were above reproach.

Alas, I can no longer say that is true for organizations who now hide behind the church exemption as an excuse for a lack of transparency. And some of these names I’m sad to say you probably know. There are organizations like Cru, formerly known as Campus Crusade for Christ, the Navigators, the Billy Graham Evangelistic Association, the Willow Creek Association now called the Global Leadership Network, Gideons International, Ethnos 360, formerly known as New Tribes Mission, Precept Ministries, Dennison Ministries, Voice of the Martyrs, Missio Nexus, and of course, the now defunct Ravi Zacharias International Ministries.

Many of these organizations have made this change in the last five years. And at least two of these organizations, the aforementioned RZIM and Willow Creek have had, of course, major scandals in recent years. Indeed, RZIM, at least in its previously known form, is no longer in business at all. I have so far heard of no scandals at the Billy Graham Evangelistic Association, Cru, or some of the others. And I rejoice in that.

But let me repeat, evil thrives in darkness. My recommendation to these organizations and others considering the church exemption, walk in the light as He is in the light. That should be the only option for us as leaders of Christian organizations.

To make this point even more explicitly, though, I would like to pause for a moment on RZIM. We think of it, of course, at least in part, as a case of sexual abuse. And of course, it was that, but I would assert that the seeds of that toxic tree were actually planted back in 2014., when RZIM stopped filing its form 990s with the Internal Revenue Service.

When that happened, we stopped knowing who was on the organization’s board. We stopped knowing how many members of the Zacharias family were in the key leadership positions. We stopped knowing how much money RZIM spent on activities, such as, for example, legal fees. Think about that for a moment. And Ravi Zacharias, his own travel, that might have revealed problems long before they became fatal.

So let me say again, evil thrives in darkness. Sunlight is the best disinfectant. It should therefore come as no surprise whatsoever that when RZIM chose to conceal its financial information from the public in 2014, that scandal quickly followed. And less than a decade later, of course, that scandal proved fatal to the ministry.

These words transparency and accountability also mean that board members should be independent. They should not have financial or familial arrangements with the organization they are supposedly governing. This lack of independence is a flaw that we saw at Mars Hill at Kanakuk at RZIM at Liberty University and elsewhere.

And once again, I’d like to pause for an example in this time from Mars Hill Church. I did a lot of reporting that ultimately resulted in Mark Driscoll leaving Mars Hill Church, and that church ultimately dissolving. One of the early warning signs at Mars Hill was a lack of independent board members. The number of elders there floated around a bit, at least during the couple of years that I reported on them. But there were about 35 elders when I was doing my reporting for World Magazine. And of those 35, more than 30 of them were on the staff of the church, they were on the payroll. That meant that they had a direct financial conflict of interest. Their duty as elders to hold Mark Driscoll accountable conflicted directly with their role as employees, employees that Mark Driscoll could fire if he didn’t like the messages that they were bringing him and in fact, he did fire several of them.

I should also mention that even if all of Mars Hills elders had been independent, it would still have been much too large a board. Having a board that is too large is as bad as having a board that is too small.

Large boards make it difficult for individual board members to speak out in meetings. Dissident board members have a hard time making themselves heard and have an even harder time mustering the support they need from other board members to affect change. This was a big part for example of the problem at Liberty University.

The salacious headlines related to Jerry Falwell Jr. disguise the real problems were on the board. Liberty’s board remains too large. It has 33 members, and in the recent past has had as many as 41 members, much too large for efficient decision making or for dissenting voices to be appropriately heard. Picture their board by the way. Opinions vary about the optimal size of a board.

According to the Corporate Library study, the average board size of for-profit organizations is 9.2 members. Some analysts think that the ideal size is 7. At Ministry Watch, we recommend that ministries have 7 to 11 board members. Secondly, Liberty’s board is for the most part what is called a pay to play board. It is made up mostly of either big donors, of Christian celebrities, or pastors of big churches who have the ability to use their platforms as a bully pulpit to promote Liberty. Using their influence, for example, to recruit students, or giving among alumni and other donors.

Now, most nonprofit boards exhibit some degree of this pay to play phenomenon and it’s not always a bad thing. Big note, big donors, and opinion influencers such as pastors are often people who care deeply about the institution. They want to make commitments even sacrifices for the organization. They invest their dollars, their time, and their reputations.

But boards especially boards of large and complex organizations such as Liberty, or as RZIM ultimately became, they’re supposed to do real work. Sometimes that work is complicated, technical and time consuming. It requires real professional expertise, not people who will merely rubber stamp staff recommendations.

Now I’m sure the vast majority of Liberty University’s Board members were well meaning people and care about the school. But being an effective board member of a $750 million a year enterprise requires much, much more than merely having good intentions. The bottom line here is hard to say especially hard for me because I know some of the board members and they’re good people. But it must be said, the failure of Liberty University was not just a failure of Jerry Falwell, Jr. It was a failure of the Board of Trustees.

And I would also add that that’s often the case, whenever we see scandal in large and even smaller organizations. Liberty University’s trustees failed the school students, faculty, administration, and parents. They failed donors and alumni. They failed to hold the one member of the Liberty staff that reports to them. The one member. Like, you got one job guys. Right? They failed to hold the one member of the Liberty staff that reports to them to the biblical standards of leadership, or even to the standards that every other member of the Liberty community must live up to.

If Liberty is to experience true healing and positive path forward, Jerry Falwell Jr, should not be the only person who departs that organization. All or a substantial number of Liberty’s board members should follow him into retirement.

Now, for those who think these kinds of issues are not solvable, or too esoteric, or you know, let’s face it, just plain boring, or those of you who might get discouraged by all the negative examples, let me offer a positive one, and that’s from the American Bible Society.

Now, the American Bible Society is one of American Christianity’s grand old institutions. More than 200 years old, founded in 1816. It has helped finance hundreds of Bible translations over the decades and even centuries, and has a 45,000-volume collection of Bibles, the largest outside of the Vatican. But in the early 2000s, the American Bible Society ran into a number of difficulties, I will not recount them here.

If you’re interested, I did a lengthy article, again for World magazine on the American Bible Society around 2014, that itemized many of those problems. The key point that I want to make here is that during the era of the troubles, sounds like I’m talking about Ireland doesn’t it, the ABS had 72 board members. The board was far too large and badly misaligned with the historic mission of the organization.

Now, in my view, I should be plain, I think the American Bible Society still has issues. For example, it has an endowment of $750,000,000.00. Three quarters of a billion dollars. Now, some of you might have seen that verse in Scripture about building a bigger storehouse. Right? Well, I think that this sort of qualifies. In my view, in an era with so many urgent ministry needs for a Christian ministry to hoard that much money, and not deploy it in ministry activities, is unbiblical, and arguably immoral.

That said, I will also say that the organization has come a long way, and now has about 20 board members. Still too large, but a huge reduction from its high of 72. The organization also has had more stable leadership and a clear focus in recent years. It has not arrived at the destination yet, but it is definitely moving in the right direction.

Now, if you’ll allow me to sort of pause, I have a couple of personalized notes here, we might even call it shameless self-promotion. I’d like to talk a little bit in this side trip about the indispensable role that journalism and whistleblowers have played in exposing evil and helping to enhance transparency and accountability, both in the cases that I’ve mentioned and many more that I have not. Said plainly, in a fallen world, with so many competing, sometimes synergistic financial incentives and disincentives, it is foolish to expect ministries to police themselves.

The temptation is just too strong for board members and others in leadership to look the other way when wrongdoing and irregularities occur. And the bigger and more powerful the institutions become, the greater to keep quiet, that temptation becomes. Now I should also say that we can’t count on the Evangelical Council for Financial Accountability.

The ECFA does good work. But it is not a watchdog organization. The membership is too small. If you’re a bad guy, you can just not join and nobody cares, right? And members pay dues to the organization. This means that the ECFA is not really independent. They have a financial disincentive to police their own members. In fact, in every case that I’ve mentioned today, I believe there might be one or two exceptions. neither the government nor the Evangelical Council for Financial Accountability, nor denominations, nor the boards of trustees of these organizations brought the stories into the open.

Indeed, these institutions that I just mentioned, were largely either absent or impotent. In some cases, such as Mars Hill Church, Willow Creek and Ravi Zacharias International Ministries, the boards were arguably some would say, I say definitely, complicit in the wrongdoing. RZIM was a member of the ECFA the entire time it was engaged in its wrongdoing. The ECFA finally kicked them out after everything that we now know became public. But that was far too late. Instead, Christian journalists played a key role in each of these stories.

Journalism ended up being vital, essential, in part because one of the pathologies of the evangelical church today is exactly what I just said. It has grown incapable of policing itself with anything resembling biblical structures of church polity. And just a quick little factoid, I’ve been covering the evangelical church for a long time.

There’s a church growth expert named Elmer Towns who estimated in 1970, there were only about 20 mega churches in the United States. That’s a church with more than 2000 members. And of those 20, virtually all of them were members of a denomination. Today, there are at least 3000 mega churches in the country. And 25%, at least are not members of any denomination whatsoever.

So, there’s really been a groundswell shift in church governance and church polity over the last 20 or 30 or 40 years. And I think that it’s really important that we understand that, and we act appropriately as evangelicals today. So, I don’t want to belabor this point too much. But I would say that I have much more to say on this matter, as you might imagine. And it’s one of the reasons why I’m delighted, you know, to be here today and cooperate and collaborate with The Roys Report on many stories, and with Julie Roys. I just really want to affirm and honor her and her work.

And once again, at the risk of shameless self-promotion, let me mention that I recently did a speech at the National Meeting of the Evangelical Press Association, titled How Journalism Can Save Evangelicalism. No hubris in that title, right? And if you want to dig a little more deeply into this issue, I commend that speech to you, which you can hear and read on the Ministry Watch website. But let me also say that we journalists can’t do our jobs without whistleblowers.

Without courageous people who stand up and step up with their stories. I know some of you are in the audience today. And it humbles me to be in the same room with you. We will be hearing from some of you this weekend.

Some of you are here because you have stories you’ve never told. And you think that maybe by being here, you might learn how to or to whom, to tell your stories. So, to all of you that might fit in either of those two categories, and those of you who are here standing in solidarity with them, let me just say, thank you, and God bless you. We hear you; we believe you.

But let me also say that as a journalist, it is my job to do more than merely hear you and merely believe you. I have to tell the truth in ways that are credible to my readers. It’s not enough for me to believe; you have to help other people believe you.

And that’s where journalism comes in. We ask hard questions. Sometimes we even have to ask hard questions of survivors. In fact, often when a whistleblower comes to me, whether it’s financial fraud, sexual abuse, toxic leadership, or whatever, the first words out of my mouth are often, I believe you, but I’ve got to ask you some really hard questions so that I can help others believe you too.

And that’s the ground rule that I usually go in with, with all of the stories that we write that involve whistleblowers. It’s a kind of a tough truth, a tough reality of the world that we live in today. So, if you’re a whistleblower, or contemplating being a whistleblower, I just want you to keep that in mind. If you come to someone like me, or Julie, and we have to ask you tough questions, it’s not because we don’t believe you.

It’s not because we don’t trust you. It’s because we have a job. If we’re going to move the needle in these cultural conversations, we’ve got to make people who believe us, who now do not believe us, and this is the process by which we have to go through to make that happen.

So, with that, let me kind of close my presentation today with some practical suggestions. At least I hope you will find them to be practical suggestions. Some of them are maybe almost pedantic in their commonness, but I hope that maybe taken together, you will see them as a way forward in the way that we can maybe move the needle in some of these cultural conversations.

The first suggestion that I have for you is to get a copy of the 75 Red Flags document that has been produced by Ministry Watch. It’s available for free on our website, if you just go to Ministrwatch.com, and type in the numeral 75, it’ll pop right up on the search engine. It’s a list of 75 questions, which is why we call the 75 Red Flags, that you should be asking if you want to give money to a Christian ministry. Or if you’re a ministry leader, and you are kind of wanting to take a deep dive into your organizational culture. It’s absolutely free. And again, it’s on our website.

The second thing that I would like to recommend is that you should get a copy of the financial statements of any organization that you plan to give money to or that you might currently be giving money to; no exceptions. Even if you have no idea how to read a financial statement, ask for it anyway. You will learn a lot about an organization by how they respond to that request.

And next, do not give any money to a ministry that does not release its form 990 to the public. I know that’s a pretty absolutist point of view, but it is a view that I have come to believe is so vital. I’ve just seen so many scandals, and whenever you know, the scandals occur, everybody says, you know, Ravi Zacharias, how could we have known, you know? Willow Creek? I mean, you know, these guys were leaders, and they were well respected.

And I’m like, you know what? all you gotta do, the signs were there all along! But we ignored them. We said that this is the exception. Well, guess what? It’s not the exception. So, make no exceptions. If an organization doesn’t release its form 990 to the public, don’t give money to them.

Next, check the Ministry Watch 1000 database. We have the financial statements of the thousand largest Christian ministries in the country at the Ministry Watch website. Again, I know this sounds a little bit like shameless self-promotion, but I think there’s a lot of really good information there that you glean. This is a screenshot of one of the pages of one of the ministries there. We give them a donor confidence score, should you give to them with confidence?

Should you give with caution? Or should you withhold your giving from them? We run a lot of those ratios for you. So, you can find out whether an organization is worth your support.

Okay, next is look for independent board with 7 to 11 board members. Is that the magic number? Well, as I’ve already said, No, that’s not the magic number. But we have found that having either too many or too few board members is a problem. And an independent board to reiterate, is one with no financial, relational, familial conflicts of interest.

Not an employee, not a contractor and not a family member. Next, give to an organization that has a clear biblical statement of faith. Now, having a biblical statement of faith doesn’t guarantee that there won’t be fraud there. I mean, you know, Ravi Zacharias was an apologetics guy, right?

I mean, his doctrinal statement was probably pristine. But at a minimum, you should start there. A recent survey by Grey Matter Research, found that the favorite ministries of evangelical Christians are often not Christian ministries, and in some cases, such as UNICEF, are organizations that are actively in opposition to Christian ideals.

Next, expose the evil deeds of darkness. If you see something, say something.

And finally, make no exceptions. Your financial support is your leverage. If you’re going to give to a ministry, even if they violate the rules, then you may as well not have any rules. Don’t say, well, I know that Ravi Zacharias doesn’t release its form 990s to the public, but well, come on. It’s Ravi Zacharias. To which I would say, exactly.

So, in closing, I have one more thing that I’d like to leave you with. We live in a broken world. Most evangelical Christians know that. We know we need Jesus to save us from that brokenness, from sin, from death, from hell.

These ideals have been drilled into us if we’ve been raised in the evangelical world. And by the way, these ideas are true. But they’re not the whole truth. They tell us what we have been saved from. They don’t tell us what we have been saved for.

Scripture tells us that we have been reconciled in order to be reconcilers. We have a ministry of reconciliation in this beautiful but broken world. We are participating with God in the repairing the restoration of this world. And one of the ways that we do that is to tell the truth.

The truth always sets us free. The truth never doesn’t set us free. Telling the truth is an act of love. That’s why we ask hard questions. That’s why we speak up. Because telling the truth, let me repeat that, it’s an act of love. So, it’s my prayer that something that I said today will help you to love well, in this beautiful but broken world. Thank you very much for your attention. I’m grateful.

JULIE ROYS 36:29
Well, again, that was Warren Cole Smith speaking at this year’s Restore conference. And just a reminder, you can find the transcript of this podcast at our website, just go to Julieroys.com and then click on the podcast tab.

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