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Sarah has been a church bookkeeper for 10 years. The church's senior pastor suspects that Sarah has been embezzling church funds. He confronts her with his suspicions, but she adamantly denies any wrongdoing. The pastor is certain that she is guilty, but is not sure what to do next. What steps can he take to establish her guilt?

Start by completing the following exercise to test your knowledge. Then read on for a summary of this topic.

1. Embezzlers rarely report their illegally obtained "income" on their tax returns, and as a result they may be guilty of criminal tax evasion.
   True or False
   
   
2. One way for church leaders to confirm suspected embezzlement is to inform the suspected embezzler that the church may be forced to turn the matter over to the IRS for investigation and possible prosecution.
   True or False
   
   
3. One way for church leaders to confirm suspected embezzlement is to have a local CPA conduct an audit to establish that embezzlement has occurred, and provide an estimate of how much was embezzled.
   True or False
   
   
4. A "certified fraud examiner" is an IRS agent specially trained to detect tax fraud.
   True or False
   
   
5. Church leaders often forgive persons who confess to embezzlement. In a church, this is usually the best option.
   True or False
   
   
6. A church board suspects a church employee of embezzling church funds. The employee denies any wrongdoing. The board suggests that the employee take a polygraph examination to prove her innocence. The church has violated the federal Employee Polygraph Protection Act.
   True or False
   
   

Responding to allegations of embezzlement

Church leaders often are unsure how to address suspected cases of embezzlement. The suspected embezzler is almost always a trusted member or employee, and church leaders are reluctant to accuse such a person without irrefutable evidence of guilt. Seldom does such evidence exist. The pastor may confront the person about the suspicion, but in many cases the individual will deny any wrongdoing--even if guilty. This compounds the frustration of church leaders, who do not know how to proceed.

Here is a checklist of steps that church leaders can take to help resolve such difficult cases:

(1) Confront the suspected embezzler

The pastor and at least one other church leader should confront the suspected embezzler. Inform the person that the church has evidence indicating that he or she has embezzled church funds. Seek a confession. Inform the person that if no one confesses, the church will be forced to call in a CPA firm to confirm that embezzlement has occurred, and to identify the probable embezzler.

Key point. Embezzlement is a criminal offense. Depending on the amount of funds or property taken, it may be a felony that can result in a sentence in the state penitentiary. This obviously would have a devastating impact on the embezzler, and his or her family. If the evidence clearly indicates that a particular member or employee has embezzled church funds, but this person denies any wrongdoing, inform him or her that the church may be forced to turn the matter over to the police for investigation and prosecution.

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