Embezzlement Prevention

Implement an effective system of internal control.

As hard as it may be to believe, embezzlement is an all-too-common occurrence in churches. The risk of embezzlement can be substantially reduced by adopting a strong system of internal control. Internal control is an accounting term that refers to policies and procedures adopted by churches to safeguard its assets and promote the accuracy of its financial records.

What policies and procedures has your church adopted to ensure that cash receipts are properly recorded and deposited? What policies and procedures has your church enacted to ensure only those cash disbursements that are properly authorized are made? These are the kinds of questions that are addressed by a church’s system of internal control.

Key point. The most important point to emphasize when it comes to internal control is “division of responsibilities.” The more that tasks and responsibilities are shared or divided, the lower the risk of embezzlement.

Key point. Many churches refuse to implement basic principles of internal control out of a fear of “offending” persons who may feel that they are being suspected of misconduct. The issue here is not one of hurt feelings, but accountability. The church, more than any other institution in society, should set the standard for financial accountability. After all, its programs and activities are rooted in religion, and it is funded with donations from persons who rightfully assume that their contributions are being used for religious purposes. The church has a high responsibility to promote financial accountability.

Church leaders can reduce the risk of embezzlement by reviewing common examples of poor internal controls, such as one person counts church offerings.

Additional reading

For more on internal controls and embezzlement, see the following:

Return to “15 Things Richard Hammar Wants Pastors to Know” to see the full list and choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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