Individuals in a church’s positions of trust, like directors and officers, can be tempted to steal money or other valuable assets of the church for their own purposes. Such thefts are a form of embezzlement, a crime under California law. A key feature of many cases of embezzlement is the lack of oversight or controls over individuals who have the opportunity to steal church resources. Churches can take steps to protect themselves.
What is embezzlement in California?
Embezzlement is the term used to describe a theft of money or property by a person who owes a fiduciary duty to the victim. Fiduciary relationships typically are defined by law, though they can also arise through contract. Generally speaking, people in positions of authority within a church—its managers, members of its board of directors, and its officers—owe the church fiduciary obligations, such as a duty of honesty and loyalty.
In a criminal prosecution for embezzlement, a prosecutor must prove that the defendant intended to defraud the victim of money or other assets that were under the defendant’s care or control as a result of the fiduciary relationship between the defendant and the victim. As an example, a church director who withdraws $20,000 from the church’s checking account and uses it to pay off a personal mortgage probably has committed embezzlement. Whereas if the director withdraws that money in cash and accidentally loses it, embezzlement may not apply (though a civil case of gross negligence might be warranted).
Strategies to defend against embezzlement
Victims of embezzlement are usually surprised when they discover that they have been defrauded. After all, the thief has taken advantage of a trusting relationship. Organizations like churches can take simple steps to reduce the risk that embezzlement will happen to them:
- Adopt a system of checks and balances. No one person should have unrestricted control over a church’s assets. Simply requiring two approvals for major transactions, like large withdrawals of cash, can be an easy way to reduce risk. Working with an outside accountant might be a good way to add a layer of control.
- Monitor and investigate. Regular reviews of a church’s financial condition should be conducted as a matter of good governance. A good process should uncover discrepancies and errors, even if they are small. Ultimately, it’s important to know how every dollar and cent is being used. If a problem is found, it should be investigated thoroughly by someone other than the person who may have committed the error, to verify that the error was simply a mistake and not something more.
- Encourage openness. Church employees should feel empowered to raise concerns. A culture of silence or deference to authority can encourage a thief.
The Church Law Center of California helps churches develop sound risk management practices. We are happy to help your church protect itself from embezzlement and other institutional risks. Call us today at (949) 689-0437 or reach out to us through our contact page.