When religion is used as a scam

A church in London run by a South African couple is under investigation for allegedly misspending charitable funds. Martin and Sandy Phelps moved to the UK in 1991, where they opened the Rhema Church in London.

Kingston Smith, an auditing firm that was analysing the church’s funds, could not complete the audit, as they did not have access to “all the information and explanations that we considered necessary for the purpose of our audit.”

The couple have apparently taken trips to exotic destinations, and there are photographs of them on their personal Facebook page enjoying time in expensive hotels. According to the church, the funds are used “to advance the Christian religion…through services, evangelism, seminars, crusades,” and other projects, including “overseas workshops.”

It is not entirely clear what the connection to Rhema Church South Africa is. Justmoney tried to contact Rhema Church London for clarification, but has not yet received a response. According to a Sunday Times article from 20 September, a spokesperson for the church said: “Rhema Bible Church North South Africa is a separate entity to Rhema Church in London, they are also not affiliated with our Rhema Family Churches body.”

Breaches of faith

There are several instances where a church has been used for the purpose of laundering money or defrauding people.

Earlier this year, there was a pastor who was under investigation for allegedly scamming his victims out of over R100 million. The pastor, Colin Davids, has been investigated by the Hawks for running an alleged pyramid scheme called Platinum Forex Group, which promised investors returns of up to 84%. Davids is accused of using the funds from the scheme to purchase two properties, as well as cars for his wife.

While this scheme was not conducted through the church, Davids’ role as a pastor and a ‘man of God’ would add credibility and a trustworthiness to what he said or promised.

There was another case in July which saw R40 million allegedly vanish from the funds of the Evangelical Lutheran Church in Southern Africa (ELCSA). Some have said that the church’s council and executive made decisions regarding the funds that were “unauthorised and reckless”, while others believed that fraud was a factor.

A report explained: “The disappeared R40m was destined to fund a church development project. The new development titled Luther City Project is meant to feature a Cathedral amongst other church related amenities. This is designed to bulk up an extensive property portfolio in the hands of the ELCSA.”

“The R40m was disinvested from an Old Mutual investment account and handed to a third party which had promised to invest the money in a better performing instrument. The decision to move the money is said to have been effected last year without proper authority by some members of the council/executive.”

However, there are not only cases of churches being defrauded or people working within churches defrauding their congregations out of money. There are other incidents where pastors and ministers abuse the power and authority that they hold over people. For example, earlier this year there was a pastor who was making members of his congregation eat snakes.

Penuel Mnguni, the leader at the End Time Disciples Ministries, reportedly declared that a snake was a chocolate bar and ordered the congregation to eat it. In addition to making his congregation eat snakes, he has reportedly also told them to eat a woman’s weave as it had allegedly been turned into food, as well as made congregants remove all their clothes before sitting on top of other church goers and praying for them.

Charges of animal abuse had been laid against Mnguni, however, these have since been provisionally withdrawn.

Declaring expenses as a non-profit or religious entity

Religious institutions and bodies are considered non-profit organisations (NPO), together with non-governmental organisations (NGO), community-based organisations (CBO), civil society organisations (CSO), public benefit organisations (PBO), trusts or foundations, and charities.

According to the Department for Social Development (DSD), “Every registered non-profit organisation (NPO) is obligated in terms of section 17 of the Non-profit Organisations Act, 71 of 1997, to maintain its financial transaction records accordingly to the standards of generally acceptable accounting practices.”

NPOs are required to keep proper and accurate financial records, and to submit financial statements to the Directorate of Non-profit Organisations nine months after the end of the financial year of the organisation.

Included in this statement needs to be the flow of all money through the organisation. “This includes all money coming into the organisation (income) and all money flowing out (expenditure),” explains the DSD on its website.

“Proper financial systems are a necessary feature of any well managed organisation-whether for profit or non-profit in nature. Good financial management practices for non-profit organisations is especially important as they play an essential part in helping to instil confidence in potential donors and beneficiaries that the organisations’ assets are secure and that they are managed in an efficient manner. Effective financial management control gives a sense of confidence in the entire non-profit sector and increases attraction of the sector to potential donors,” adds the DSD.

Furthermore, the DSD notes: “While the vast majority of people are honest, organisation still need to take steps to avoid putting people in situations where they might be tempted to defraud the organisation. The lack of proper guidelines may cause harm to the reputation of the organisation. Proper financial management ensures the protection of interest of the organisation’s beneficiaries, its employees and governing body members themselves.”

To read the Code of Good Practice for South African NPOs, click here.