An internal committee looking at governance in the Church of Scotland has warned that the religious group could lose its charitable status if it doesn’t improve its financial reporting and governance oversight.

The report by the Panel on Review and Reform was critical of the work of the presbyteries within the church, which are charged with ensuring financial probity and accounting compliance within congregations.

It said: “There have been cases of embezzlement in recent years where the delay by the presbytery to monitor accounts has allowed the situation to ‘fester’ with a resultant increased loss.

“There are presbyteries where the essential experience required to expedite the basic accounting function of the Church is simply not available.”

It adds: “At one end of the scale, there is a lack of consistency in the standards of administration within presbyteries, and at the other, a complete inability to carry out to an acceptable minimum standard the basic functions of supervision and governance.

“Should OSCR conclude (following upon a complaint or in regard to unacceptably and frequent late submissions of accounts) that the Church of Scotland is failing to exercise supervisory and disciplinary functions, the Church’s designated religious charity status and reputation could be at risk and the congregations concerned could forfeit their charitable status with a loss of tax and other benefits.”

The report proposes an alternative model incorporating a range of governance changes, including larger presbytery organisations.