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In my consulting practice, I have found that many Pastor use the church credit card for business as well as some expenses that could easily be determined to be personal in nature. As a church financial secretary for 25 years, I fully understand the lure of providing the Pastor with a credit card so that his/her numerous needs can be met without the constant issuance of checks and receipt of expense reports forms.  Yet, the risks to the Pastor as well as the risks to the church far outweigh the perceived convenience.

The following are risks associated with personal use of a church credit card:

(1) Loss of tax-exempt status– Every 501c3 organization is established to benefit others and cannot exist to personally benefit any individual because of his/her position or level of influence.  The personal use of a credit card is a personal benefit and despite the repayment of any personal transactions, the availability of the card to the Pastor would be construed as private inurement.  This determination by an IRS official would result in the church losing its tax-exempt status.

(2) If the Pastor uses the church credit card for personal transactions and does not or can not repay the church for those transactions, these purchases as defined in Section 4958 of the IRS Code would be classified as excess benefit transactions.  The cumulative value would be taxable income but would also result in penalties of up to 225% of the actual value of the transactions. Section 4958 also states that board members who approved the Pastor’s personal use of the church credit card can be held liable for repayment and fined up to $20,000 each.

(3) Embezzlement– Unintentional and careless use of a church credit card frequently results in actual embezzlement.  This can occur without direct intent but if a Pastor stops to get gasoline on the way home knowing that he/she has a trip scheduled at the end of the week, the use of the vehicle for personal purposes in the interim period is an instance of embezzlement. An IRS agent would analyze each credit card transaction for its direct business purpose and use.  Without proper documentation, justifying every credit card transaction may be very difficult.  It has been documented that the lack of documentation, nature of the purchases and frequency of use and the lack of reimbursement to the church can and has resulted in criminal prosecution.

Cynthia Gordon-Floyd is a certified public accountant and founder of Willing Steward Ministries, LLC. Willing Steward Ministries (https://willingsteward.com) is a financial consulting and accounting firm for churches and other faith-based non-profits and specializes in Bible-focused financial practices, pastoral compensation issues, IRS compliance and other financial needs specific to churches. Cynthia is a graduate of Lake Forest College and received her Master of Business Administration in Accounting from DePaul University. She is a Steward and the Financial Secretary at the First AME Church of Manassas in Manassas, Virginia.