The sound of Pastor Fred’s voice over the phone was heartbreaking as he reported the embezzlement crime to the local police. Only days before, the church had announced that the fundraising for its building campaign had successfully raised $500,000 to construct the church’s new sanctuary and children’s wing. They would be breaking ground in two weeks. That morning, however, in reviewing the church’s accounts, they learned that $50,000 was missing.

How did it happen? The church’s financial director had been transferring small amounts of money from the church’s account over the three-year period of the building fundraising campaign. The financial director was also responsible for depositing weekly donations as well and had been stealing portions of cash donations from each deposit. This was never detected because he was responsible for reviewing and verifying all tithe and offering count sheets and verifying bank deposits. All Pastor Fred could think of now was, “Could this have been prevented?”

Although this is a fictional story, this is an all-too-common experience for many churches today. Through this post, I want you to find encouragement in the fact that via hard work and due diligence, you can help prevent this from happening to your church.

Lessons we can learn

We want to think, “This will never be my story.” But the fact of the matter is that people are broken and misguided at times, and there are also wolves in sheep’s clothing, seemingly offering a helping hand but ready to take advantage of position and power granted them.

Not every financial issue a church faces is as diabolical as this one, yet a well-trained staff and airtight policy may be the answer to saving your church from financial ruin.

Let’s take a look at some lessons that are better learned early, rather than late.

Lesson 1: Accountability, Accountability, Accountability

Churches are trusting environments. Because of this, some church leaders may have a difficult time creating strict parameters to govern church business affairs. Leaders, paid staff, and volunteers are sometimes held to an honor-system type of accountability with no oversight.

However, it is the little foxes that spoil the vine. As we can see from Pastor Fred’s story, more oversight of the financial director could have saved the church thousands of dollars in not only offerings, but legal fees, and it could have saved the church much heartache.

Proverbs 11:14 says, “Where there is a multitude of counselors there is safety.”This Scripture reinforces the truth that having multiple people able to understand the church’s financial situation is wisdom.

This does not have to be a daunting task. Here are some simple ways to implement this principle:

  • Have a team of people trained to count and review counting of tithes and offerings (this is discussed further in lesson 3).
  • Do a quarterly review of the church’s income and expense statements. Have a skilled financial person review the books to ensure that the offering count sheets, deposit slips and donor records are consistent.
  • Have a financial audit of the church’s records annually by a third party to verify accuracy of data and to catch any accounting mistakes.

Lesson 2: Knowledge is key

In our story, Pastor Fred was not confident in his ability to oversee the financial director because he was intimidated by his lack of knowledge on the subject. While every pastor does not need a business degree, it is a good idea for church leaders to take a hands-on approach to knowing what is going on with finances.

To further your knowledge, I would encourage you and some of your board members to attend our Ultimate Church Structure Conference that is geared towards teaching ministers and ministries the strategies of operating in today’s legal environment.

Lesson 3: When fraud is found, report it.

One thing Pastor Fred did correctly was to report the fraud immediately when it was discovered.

If members of the board of directors discover embezzlement, they have a fiduciary duty to correct it and then report it. It is the best way to avoid personal liability. When it comes to the IRS, as stated in Regulation 26 CFR 1.501, the church could lose its tax-exempt status if the board knows that embezzlement has occurred and fails to report it. Moreover, a fine of up to $20,000.00 per board member could be imposed for failure to correct the problem, per section 4958.

Lesson 4: Create a solid tithe and offering counting policy

Churches are usually good at trusting individuals because of their Christian character.Anyone who works in the tithes and offerings counting system of the church should be someone the pastor and leadership can trust. If a church uses a volunteer, it must ensure that the volunteer is trustworthy, able to pass a test of scrutiny, and displays a balance between accountability and trustworthiness.

Below are recommended guidelines for how to properly handle church tithes and offerings.

  1. Select multiple money counters, regardless of the size of the church. Never allow this job to be done by just one person during any given worship service. Always have more than one person in the counting room at all times; enough individuals should be selected so that more than one team of counters can exist and rotate.
  2. Select a safe room for the counters to do their job, and guard the entrance to this room by a person standing on the outside to ensure that no one person enters either accidentally or on purpose. This also provides protection to the counters.
  3. The counters should use a count sheet to record the tithes and offerings.
  4. All counting should be done on the same day the offerings are collected. The counters should meet at the same time, count together, sign the count sheet, and prepare a deposit slip. A copy of the tithes and offerings count sheet needs to be given to the treasurer and the secretary.
  5. Place in the church safe. After money has been counted and the deposit slip prepared, it needs to be placed in the church safe (or a predesignated area that is safe), under the supervision of the treasurer.
  6. Deposit specified amount. The money needs to be deposited by the treasurer and a deposit receipt showing the exact amount that was actually deposited needs to be given to the counters.
  7. Verify for accuracy. Do a spot check of offering counting sheets and deposit slips to verify accuracy and to ensure that funds are being managed properly.
  8. Put it in writing. We recommend that the church put its tithe and offering counting policy in writing to ensure that everyone, whether paid staff or volunteer, follows the exact same procedure every time.