We United Methodists share many things. We trace our heritage back to John and Charles Wesley and the Holy Club at Oxford University in 1729. Through our connection, we unite to carry out ministries throughout the world – good deeds so diverse that no single congregation could achieve them.
I have observed another commonality of our United Methodist churches. We all could do a better job in managing our finances. We’re in good company, because churches of all denominations (and most not-for-profit organizations) are similarly afflicted.
My experience with this is twofold. Professionally, I am a certified public accountant at Mitchell, Emert & Hill. My firm audits a few United Methodist churches (including the Holston Conference), churches of other denominations, and not-for-profit organizations. Personally, I am the chair of the finance committee at Washington Pike United Methodist Church in Knoxville, a church of approximately 750 members. I am told that the finance committee chair is a church job few others want, but I consider myself to be blessed to serve in this position. In fact, I’ve been a finance committee chair for 17 years.
Some of the following situations I
have experienced firsthand. Others I have seen, and some I have only
heard about. Here is my list of 10 mistakes that many churches make in
administering their finances.
1. Cloaking financial information in secrecy
Some finance committees operate as if they are guarding the formula for
Coca-Cola. While many experts agree that most in our congregations
would be overwhelmed by examining every detail of the annual operating
budget, the option should be available. The finance committee should
meet regularly, and the meetings should be publicized and open to all
church members. Of course, individual donor records must be protected
to maintain confidentiality, but in a Christian community, the way we
spend our church budgets should not be secret or guarded.
2. Overlooking the business of the church
I frequently hear people say, “The church is not a business,” and that
statement is true. Businesses exist to create a profit or increase
stockholder value. But there’s no denying that there is a business
element to church activities. Churches are not insulated from problems
with human resource issues (in fact, a large portion of most church
budgets is personnel costs), the Internal Revenue Service, insurance
companies, copyright laws, and banks. For instance, if a church asks a
bank to make a loan and to trust the church members to make full and
timely repayments, the bankers will surely want to know how the church
manages its financial affairs. Certainly, a church is first and
foremost a place of worship and refuge. However, the business functions
of a church are necessary to allow these ministries to flourish.
3. Allowing a select few to be financial decision-makers
These persons should not always include the pastor, finance chair, and
treasurer. Congregations must zealously guard against letting all key
leadership positions be held by a small group. Preventing this type of
situation is not always easy, since not all congregants can or will
commit their time for church service. But it’s essential to try. At
Washington Pike, for example, I ask the lay leadership committee to
keep the finance committee diverse. I intentionally invite members with
opinions that differ from mine to serve on the finance committee. A
variety of opinions will lead to more effective decision-making and
more buy-in from the congregation.
4. Failing to plan ahead
I did not think ahead about what to write here. (OK, that was a joke.)
But the lack of both short-term and long-term planning is no joke. Most
finance committees plan no more than one year at a time, using
multi-year planning solely for endowments and multi-year capital
campaigns. This short-term thinking will trap you (and keep you) in a
crisis-management mode. Consider adding some long-term planning as you
begin work on the next year’s annual budget.
5. Having a deluge of “special” offerings
Professional fundraisers are known to suggest special offerings for
programs and ministries not included in the operating budget. Special
offerings can be an effective way to raise some extra funds, but be
careful that you do not overuse this tactic. Your congregation may grow
weary and resentful, giving less to other needs. And in connection with
that ...
6. Relying on too many “other funds”
In some churches, more money is received in and spent by the “other
funds” than the actual operating budget. While many of these funds
represent cherished and beloved ministries (pipe organ, mission,
pantry, etc.), they should be monitored as closely as the operating
budget. Often, these special funds are ignored by finance committees
and governing boards, when some could be (and should be) incorporated
into the budget. However, some donors give more if they know the funds
are designated for specific purposes, so be careful in evaluating which
funds to close.
7. Avoiding financial talks with the congregation
I recently spoke about finances during our morning worship at
Washington Pike. I speculated that many in the congregation were
thinking, “Oh no, not another finance talk. That’s all they talk
about.” Then, I reminded them that it had been 10 months since I last
spoke of our finances. Some may believe that discussing finances twice
a year is too much. However, I believe that congregations should
receive frequent information about the church financial status, warts
and all. Give parishioners a chance to rejoice in the good news – and
to join in worrying about the bad news. People can’t help when they
don’t know their help is needed. And related to that ...
8. Failing to connect money with ministry
Finance people love numbers. Accountants also love trends, projections,
and percentages. Other folks – well, not so much. Rather than offer a
batch of boring numbers, tell your finance story with vivid images.
Talk about how lives have been changed as a result of ministries funded
by their gifts. This portrayal of programs and ministries should make
members more eager to give. Use numbers, but only sparingly. Tell the
stories of changed lives.
9. Neglecting the segregation of accounting duties
A well-designed system of internal accounting control is a must. These
“checks and balances” ensure a high level of integrity within your
church’s financial program. Don’t burden one or two people with
performing all accounting functions. There should be rotating teams of
money counters (none of whom maintain the giving records). Invoices
should be reviewed and approved by a staff member (large churches) or
committee chairs (small churches) before being paid. The treasurer and
finance chair should carefully review all monthly deposits, written
checks, and monthly financial reports. Finance committee members should
review monthly reports and challenge any item that raises questions.
Even with several sets of supervisory eyes, errors may still exist (and
fraud is always a possibility). Church finance leaders must exercise
due diligence to reduce the risks to a very low level. “Too many cooks
may spoil the broth,” but that old saw does not apply to finances.
Maybe we should use the phrase, “The more, the merrier.”
10. Underestimating generosity
Maybe this is more of a stewardship issue, but it directly affects
finances. Many church leaders are shy and embarrassed when discussing
finances. Why are we hesitant to give people a chance to provide
financial support to an organization for which they care? There is an
amazing level of affluence in many of our congregations (a quick look
in the parking lot will affirm that). We are in the midst of the
largest transfer of wealth among generations in our nation’s history.
Don’t be timid about asking folks to give. Ask and ye shall receive.
Don’t ask, and ye are taking your chances.
Richard W. Hill, CPA, is a shareholder with Mitchell Emert & Hill, CPAs, and a lifelong member of Washington Pike UMC. His e-mail address is richardhill@mehcpa.com.