Is it legal for a Pastor to give secret loans.

by Kerry Lynn
(USA)

1. Is it legal for a Pastor to give a secret loan without any board knowledge to someone in the church using church funds?

2. Is it legal to re-appropriate money within the church?
Example: Someone writes a check and designates it to missions but the church puts the money into payroll or building.

Comments for Is it legal for a Pastor to give secret loans.

Click here to add your own comments

Oct 19, 2014
Loans from a Church Can be Illegal
by: Vickey

I am not touching the legality of your pastor making "secret" loans. That is an internal issue.

However, I will emphasis that some states do not allow nonprofit organizations to loan money to employees or members of the organization. In those states it could possibly be a criminal offense. Check your state laws.

If it is legal in your state, there could be possible legal and/or tax issues such as private inurement involved. All churches should consult with a knowledgeable attorney before making any loans with church funds.

Regarding the second question in your post, see this previous post:
https://www.freechurchaccounting.com/legal-question-about-fund-accounting.html

Oct 20, 2014
Pastor making secret loans
by: MarcusNTexas

While this may not be illegal, in the church where I serve as treasurer, it would not be possible or allowed since I and the Stewardship Committee would have to be involved in the matter, therefore, it would not be a secret. Should the pastor make a loan from his own financial resources and then seek to be reimbursed from the church's funds, it is doubtful that either I, as treasurer, or the Committee would agree to make the reimbursement UNLESS we learned that the loan was made in a clearly documented "life or death" situation and no other option was available at the time the pastor made the loan and the matter was of such urgency that neither I nor members of the Committee could be consulted in advance.

Oct 21, 2014
Kerry Lynn
by: Anonymous

Thank you both for the feed back. I did go and read the previous post very informative. Marcus, you do not know what a breath of fresh air it is to hear you say that you would not do something uni-laterally and that there is a committee or board of stewardship. Accountability is the key. This happened in a church with NO ACCOUNTABILITY. The person who was given the loan actually 'controls' the church. He is in a position where he can make sure the pastor gets what he wants even if it is detrimental to the church and in return he is allowed to control and abuse the members of the congregation. So sad.

Oct 21, 2014
Accountability/Abuse
by: Kerry Lynn

Marcus,
Also there was someone who did have to sign for the loan. They were told to do so. In that particular church for them to refuse to do so, they would be 'blacklisted' and be labeled rebellious and not be in good standing. They would have felt like they were sinning. When I went to them to confirm that what I had heard was true, they told me that they had to go to God a number of times for cleansing.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Church Accounting FAQs.

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)



Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.