‘How you handle money honors God and the people we serve’
by Chuck Toney for the Presbyterian Foundation | Special to Presbyterian News Service
Receiving a gift of any size carries with it both spiritual and financial obligations for a church. Solid financial management is an act of faithful stewardship.
Such management requires policies, practices, and procedures for church finances that ensure that gifts are protected, maintained, and used for the purpose intended by the donor.
“How you handle money honors God and the people we serve,” said Joseph Moore, Ministry Relations Officer with the Presbyterian Foundation. “What we do with that which God has given us matters. It is core to the gospel of Jesus Christ.”
Churches need financial management structures that protect the gifts that have been given. It is not about distrust of the people in our church offices; it is about recognizing that there are “important financial management responsibilities for pastors, sessions, and church councils,” Moore explained.
The data on fraud and financial mismanagement in churches tell a troubling but informative story. Only 10% of churches experiencing financial fraud report it, and when they do, the average amount is $70,000. One-third of churches will suffer some form of financial misconduct. It is estimated that, worldwide by 2025, churches and nonprofit organizations will lose $90 billion to fraud.
So, what can churches do to prevent fraud and abuse? The first step is to understand how fraud happens. Moore and Mark Stauffer, Past President/Treasurer of a Lutheran Council, shared the Fraud Triangle: Opportunity, Incentive, Rationalization. “Too often, churches are easy marks because we think, ‘Oh, that’s never going to happen to us.’ Our policies should not be draconian, but they also shouldn’t swing too far to the other side,” Moore said. Churches can take action to minimize the opportunity and incentive points of the fraud triangle.
A simple but effective financial management practice is the Rule of Two — whenever cash and/or checks are being counted or mail is being opened, two unrelated people should be present. (Facetime or other virtual tools are acceptable if necessary.) Moore and Stauffer acknowledged that many churches have long-time volunteers (Mrs. Jones, for example) who have counted the weekly offering for years or helped with opening the mail and may be reluctant to apply this practice for fear of insulting those volunteers.
“It has nothing to do with Mrs. Jones,” Moore said. “It has to do with how we faithfully engage in the work and the stewardship that God has called us to do, including after a gift has gone into the offering plate.”
Setting the tone and policies
Sound financial management in churches involves several parties:
- Pastor — The pastor sets the tone that financial management is important and part of the responsibility as stewards of gifts.
- Session/Council — Governing bodies should conduct regular review of church finances, including year-to-date and month-to-date accounting, cash account balances, unusual transactions, and other tracking measures.
- Treasurer — The treasurer should have a good understanding of financial practices, prepare financial statements for the governing body, and review cash account reconciliations and staff expenses.
- Bookkeeper — The bookkeeper manages the day-to-day process of transactions and financial operations.
- Auditor — An outside auditor should conduct a regular, objective review of church financial practices.
These internal measures are preventive controls, Stauffer added, and are critical to the management and stewardship of gifts. There are also compensating controls that serve as double-checks after the fact to make sure that the money given is going where it should be going:
- Quarterly giving statements — These provide donors the opportunity to review the church’s record of their giving and reconcile it with their own records. It is also an opportunity for the church to include a thank-you message as part of stewardship.
- Electronic giving — Online giving provides the records and protection associated with secure credit/debit cards and bank accounts.
- Independent review — A third-party review of cash accounts and staff expenses builds trust that the money is being used appropriately.
There are three distinct types of funds which churches might receive that require special attention:
- Memorials — Memorial gifts are given to honor the memory and legacy or a person or people who have been meaningful to the donor. Memorial gifts are not usually restricted to a particular use; it is good practice for the church to determine a use of the money that reflects the life of the person being memorialized. Memorial funds should not be commingled with the operating budget but should be accounted for separately.
- Restricted gifts — These gifts are given in support of a specific purpose, program, or mission of the church. Churches have a moral, spiritual, and legal obligation to use these funds in compliance with the intent of the donor. Given that, churches should consider restricted gifts carefully. Not all gifts are appropriate for your mission and ministry.
- Endowments — Endowments are funds established to provide a long-term revenue stream for the church. The church spends only the interest earned off the principal.
There are several viable options available to churches for financial records management:
- An integrated electronic financial management system provides ease of records management such as membership, contributions, general ledger, financial reports, bill payment, and check writing.
- A cloud-based service offers advantages such as remote access; vendor responsibility for back-up, security, and updates; and reduced hardware needs.
- Outsourcing a financial records management vendor that serves churches and other mission-based organizations. It is important that the vendor who provides payroll services understands the unique pastoral compensation issues that are specific to churches.
Churches retain ultimate responsibility for the accuracy and reliability of all records.
All financial gifts, regardless of size or source, are gifts of and through God’s grace. As stewards of those gifts, we have a responsibility to manage those gifts in keeping with the intent of the donor as an act of worship that advances God’s kingdom on earth.
Chuck Toney is the founder of C. Toney Communications in Athens, Georgia. Chuck is an elder, usher, and lay reader at First Presbyterian Church of Athens. Send comments on this article to Robyn Davis Sekula, Vice President of Communications and Marketing at the Presbyterian Foundation, at email@example.com.
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