This free article is offered as an introduction to our three-part series for members on financial transparency for churches by Church Law & Tax Contributing Editor Tim Samuel.
Churches run on trust.
We trust our pastors to lead. We trust our volunteers to serve. And we trust the people handling the money to do it well.
However, trust alone is not enough.
Churches also need intentional, basic systems that protect that trust.
These systems are called internal controls, and they help make sure the church’s finances are managed with integrity.
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Most financial problems in churches don’t start with bad people. They start with unclear roles, missing steps, or assumptions that someone else is probably checking. Over time, those gaps create risk.
That’s why recognizing the signs of financial problems is so critical.
So, what are ‘internal controls’?
Internal controls are the habits and guardrails that help a church handle its money wisely. They answer questions like:
- Who counts the offering?
- Who signs the checks?
- Who reconciles the bank account?
- Who reviews the reports?
When those tasks are clearly divided and regularly reviewed, they create a financial culture of accountability.
When they’re all handled by one person, or when no one is really paying attention, problems can hide. Even churches that have never had a theft or a scandal can still be at risk for confusion, misreporting, or avoidable loss.
Let’s look at three red flags. You don’t need formal training to spot them, but you do need eyes to see—and the courage to keep looking.
Red Flag Number 1: One person does all the money jobs.
In some churches, one person does everything that has to do with money.
They count the offering, take the money to the bank, and enter the numbers in the computer. They also write the checks and look at the bank account. They make the monthly reports and give updates to the board.
At first, this might seem like a good idea. Maybe the person is very trustworthy and has been doing it for years.
Maybe they’re the only one who knows how the system works or the church only has money to hire one person to do the tasks.
However, when one person does all the work, it becomes a big problem because no one else is watching what they do.
Even kind and honest people can make mistakes. They might forget to record something and they could enter a number wrong. They might miss something important because they are tired or busy. When no one checks their work, those mistakes can go on for a long time.
Sometimes, the problem is more serious. Someone might feel pressure at home, like a job loss or bills they can’t pay. If they’re the only one handling the money, they might take some, thinking they’ll return it later. Since no one else is looking, they don’t return the money, and no one knows the money is missing until it’s too late.
But even if nothing bad happens, it’s unfair to lay the church’s financial pressures on just one person. If something does go wrong, they’ll be the one blamed.
A better system shares the work, and at least one other person should be helping and checking the records.
Church Law & Tax offers real examples of how to do this in Strengthening Internal Controls for Churches: Key Steps and Risks
Red Flag Number 2: The numbers don’t make sense, and no one can explain why.
When budget reports are unclear, late, or don’t match what people expect, that’s a red flag.
It doesn’t always mean someone is doing something wrong. But it does mean the system is weak.
If questions like “Why did this expense change?” or “How much have we actually spent this year?” lead to confusion or silence, that’s a sign the reports aren’t helping.
Good reports bring clarity and bad ones create confusion.
Another sign that something may be wrong is a church reporting a budget surplus year after year while seeing its cash balance shrink. On paper, it appears that the church is doing well. The income is greater than the expenses, so the budget shows a positive result. However, the actual amount of money in the bank keeps going down.
This decline is not because the church is investing in property, paying off loans, or building up other long-term assets. Instead, the cash is quietly disappearing, and no one seems to notice.
This happens when reports are built to match the budget instead of showing the real movement of money.
In some cases, it may mean that unpaid bills are piling up, or that designated funds are being used without being properly tracked.
The problem is harder to spot when financial terms like “in the black” are used without explanation. That phrase sounds positive, even when it is misleading.
A healthy church financial system does not just look at whether the budget is balanced. It also asks, Is our cash growing or shrinking? and Do our reports match our real financial position?
Dig deeper: Communicating Key Financial Information to Church Boards, Committees
Red Flag Number 3: People resist outside review, even when it would help.
Sometimes, churches don’t want anyone from the outside to look at their finances. They might say, “We’ve got it covered,” or “We don’t need help.” It can be a sign of hesitation, fear, pride, or a culture that doesn’t welcome questions.
Healthy churches are not afraid to be checked. They understand that a second set of eyes brings protection, not punishment. Outside reviews help build trust. They can also spot things that were missed.
A full audit by a professional can be expensive, but even small reviews by board members or trusted volunteers can be helpful.
Still, you get what you pay for.
Quick or casual reviews may not catch everything. For example, if the church uses paper records and no one compares them to the actual bank account, someone could fake the numbers. They could print a report that looks real, but hides the truth. If no one checks the bank’s website directly, they might never know.
Even honest systems need outside review. Not to catch bad people, but to protect good ones and keep the process clean.
Have you spotted one or more of these red flags?
Asking the right questions is a good start, but in many churches, it is not going to be enough
If you’re not on the finance team, the answer you get might be vague, overly confident, or not fully true.
Or, the culture may not welcome real questions or they may not even know what they are saying. Therefore, before asking questions seek clarity, context, and cover.
- Clarity means knowing what a healthy system actually looks like. That way, you’re not guessing. You’re comparing.
- Context means understanding your role. You may not have the authority to dig deep, but you can raise concerns through the right channels. That might be a board member you trust or a leader who can ask harder questions on your behalf.
- Cover means bringing it up in a way that won’t isolate you. You might say, I was reading this article from Church Law & Tax about internal controls. It made me wonder if we’ve ever done a review like that. When you reference an outside source, it takes pressure off you and shifts the focus to shared learning.
You may not be able to fix the system but you can tell the truth about what you see.
Do it with wisdom, not fear. Sometimes a church has money problems, and no one notices for a long time. It might not look like anything is wrong. The budget might say the church is doing fine. The reports might show the numbers are in the black. But behind the scenes, something could still be off.
This does not mean someone is doing something bad. It might just mean the system is too quiet. No one is asking questions. No one is checking the work. People are trusting each other, but they are not checking the process.
You do not have to fix everything right away. But you can start by paying attention.
Look for what feels off. Notice what is missing. You are not being difficult. You are being careful.
That is part of what it means to care for a church.