When the misappropriation of funds occurs, it does far more than we want to admit. Most congregations look the other way or choose not to deal with it at all! I know of six congregations, and have helped two, within the last six years that have dealt with the heartache and agony of misappropriation of funds.
These days there seems to be a federal guideline for everything. Such is the case when a church believes an individual has improperly used church funds. When a committee or other personnel know church money is missing, it has two options about reporting to the IRS. One, if the individual makes restitution through a notarized repayment schedule, no reporting is necessary. However, if the individual chooses not to admit wrong doing and refuses to make restitution, the church is required by law to report the income. Some use Form W-2 or Form 1099-MISC. However, the best option is to use Form 3949A.
I recently helped a church walk through this process. The pastor told me that he never thought it could happen to them and that he spent sleepless nights praying and wondering what to do. After performing a two-year review of all financial documents, I met with the pastor and Finance Committee to recommend a four-tiered process of financial accountability. A congregation that implements and follows this process virtually eliminates the possibility of a misappropriation of funds.
Every congregation should do all it can to protect the funds given for the work of the Lord’s kingdom. No one is immune from temptation. If your congregation does not have a four-tiered system of financial procedures, you should consider implementing one immediately. Protect your church and the funds given for ministry and missions.
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