E-giving means fewer envelopes to open and less chance of fraudFINANCE, Giving, RISK MANAGEMENT, Security, Theft/Fraud Thursday, October 1st, 2009
Electronic tithing continues to grow in its use, because it makes sense in a world where we seek convenience.
By Eric Spacek
Bad weather, vacations and illnesses can cause parishioners to miss church services during the year. While some people will make up their missed donations, many won’t. That’s where electronic giving, or e-giving, can help.
E-giving enables church members to “set it and forget it.” This allows contributions to continue automatically, regardless of members’ weekly attendance.
For church members, e-giving is all about convenience. As more and more of the population pay their bills online, they become used to the with-a-click simplicity of electronic payments. It’s only natural that parishioners want to extend this convenience to their tithing.
Church staff also benefit from e-giving. Electronic contributions mean fewer envelopes to open, less manual accounting and reduced chances for errors, and yes, even fraud.
How does it work?
E-giving is very simple for both church members and staff, particularly as more and more people get used to the process. Here’s an overview:
Through a simple form, a church member pre-authorizes the church to have his or her contribution automatically debited from a checking or savings account. The church member can typically choose to have the contribution deducted weekly, semi-monthly, monthly or even annually.
Once the church receives authorization for an electronic funds transfer (EFT), it sends the payment, via electronic file, through the automated clearing house (ACH) network with instructions to move it from one bank account to another. The church’s bank account is credited, and the parishioner’s account is debited the same amount.
The first step to setting up an e-giving program is selecting a reputable, quality EFT service provider. While many banks provide EFT services, there are specialized EFT processing companies in the market as well. [See sidebar below.] Regardless, you’ll want to consider the following two main factors when making your decision:
Security — Before signing up for electronic giving with any institution, make sure the program offered is safe and secure. Have the bank or EFT provider supply detailed information on the security measures in place to prevent fraud or other unauthorized use.
Also, discuss the number of EFT transactions they process in a given day or week, and find out the error rate. Ask about any previous breaches in security.
Cost — Ask for detailed information in advance about any and all fees. Fees for EFT programs vary widely, so your church should get information in writing about any start-up fees, monthly access fees, per batch or per transaction fees and so on.
The best services will have minimal (or no) start-up fees and low transaction fees. While many church management software packages already include ACH capability, find out if you’ll need to buy additional software to begin your e-giving program.
Before selecting an EFT provider, do your homework. Check with the Better Business Bureau in the state in which they are domiciled. Churches have been involved with electronic giving for several years now, so the EFT provider should be able to supply a list of other churches that have utilized their service. Follow through and contact those churches as references.
Once your church has chosen its EFT provider, the provider typically sends a service agreement for the church to sign. Read this document carefully. One protection your church may want to consider is a clause in which the provider agrees to indemnify the church (hold it harmless) for any losses stemming from the use of the provider’s EFT system.
It’s not uncommon for EFT processors to turn this language around and require the church to indemnify the provider.
While EFT systems are secure and incidents of breaches to the system rare, no system is entirely fail-safe. Consider having your church’s attorney review the agreement if you have any questions.
The best practice is to require that all authorizations to start, stop or change a person’s electronic giving be put in writing and signed by that person. This will help avoid any misunderstandings or disputes with church members down the road.
Because parishioners may not think to increase the amount of their electronic tithe from year-to-year, you may even want to consider automatically sending out a new authorization form to each electronic giver at the start of the fiscal year.
Include a note requesting that they sign and return the authorization change form if they would like to change their tithe for the new church year.
Policies and procedures
Be sure to establish clear policies and procedures about your program, but keep them simple. A concise authorization form, along with a one or two page policy statement, should be all you need.
One important item to include is how your church will handle a member’s request to terminate electronic giving. After speaking with your EFT processor about terminations, ensure that your policy leaves the church enough time between a termination request and when it will take effect.
For example, what if a member who is upset with the church calls to cancel an electronic tithe scheduled to take place the next day? Without a policy dictating that it may take up to three business days to cancel an authorization, the dispute with that member could turn ugly when the debit takes place as scheduled.
With this new form of financial transaction taking place at your church, make sure its financial policies and procedures are up-to-date, especially your internal controls. A second person should review the electronic giving program, and it should be included in your church’s annual audit or financial review.
Finally, review your church’s insurance policy to ensure appropriate employee dishonesty coverage is in place. It’s better to be safe than sorry.
Ready to provide your parishioners with another stewardship tool? An e-giving program may be for you. Do the research and make sure proper safeguards are in place, and you’ll be able to provide your congregation and staff with a time-saving convenience everyone will appreciate.
Eric Spacek is senior church risk manager at GuideOne Insurance, West Des Moines, IA. [wwww.GuideOne.com]
AMONG EFT PROVIDERS
WHY CHURCHES SHOULD PROVIDE E-GIVING
- Convenience for parishioners
- The possibility of increased contributions
- Timely contributions
- The ability of the church to forecast future contributions
- Less work for office staff and/or volunteers