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Discover LudwigThe word 'defalcation' is correct and usable in written English.
You can use it to refer to an act of misappropriation or misapplication of funds. For example, "After the financial irregularities were discovered, the bank sued the former director for defalcation of funds".
Dictionary
defalcation
noun
The act of cancelling part of a claim by deducting a smaller claim which the claimant owes to the defendant.
Exact(3)
Another, about the meaning of the word "defalcation" in the Bankruptcy Code, must have made Justice Stephen G. Breyer, its author, wonder what he had done to deserve the assignment.
"There has been no indication of theft, embezzlement or defalcation," Pipevine said.
"There has been no indication of theft, embezzlement or defalcation," PipeVine said, reiterating a statement it made on Tuesday.
Similar(1)
"While the United States government is immune for legal liability for the defalcations alleged herein, it is not free, nor should it be, from posterity's judgment concerning its failure to accomplish what was its task," the judge wrote.
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Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com