Faith is what draws congregants to your church, but trust is what keeps them around. However, Gallup’s Confidence in Institutions poll reveals that only 36% of Americans have a “great deal” or “quite a lot” of trust in the church or organized religion.
To maintain a thriving church community and organize internal operations, you need to ingrain financial accountability into your strategy. When your church has clear financial plans and processes, you can use funds responsibly and stay transparent with your congregation. Let’s explore tips for creating a culture of financial accountability in your church.
1. Establish clear governance.
Financial accountability starts with church leadership. Ensure everyone knows their roles in upholding financial management best practices by:
- Separating financial responsibilities. No one person should have complete control over your church’s finances. Distribute responsibilities amongst your team, ensuring different people handle different aspects of financial transactions. For example, you shouldn’t have the same person who records checks deposit those funds.
- Forming a finance committee. Consider creating a finance committee to oversee your financial strategy. This committee should consist of a chairperson to lead the committee, your church treasurer, and at-large members, with board members and your executive director or senior pastor providing context for resource allocation decisions.
- Mandating dual authorization. To further prevent fraud and mismanagement, require two staff members to sign off on financial transactions above a certain threshold. For instance, your treasurer and lead pastor might sign off on all transactions over $1,000.
Separating authority appropriately may require you to bring in external parties. For instance, you may hire an accountant to act as your finance committee chairperson to ensure they have the financial expertise needed to lead the committee.
2. Develop financial policies.
When you establish standards for different financial processes at your church, you empower your staff to act with confidence and in accordance with your expectations. YPTC’s nonprofit financial management guide recommends starting with the following policies:
- Gift acceptance policy. While accepting monetary gifts is fairly straightforward, diversifying your revenue streams may require soliciting in-kind donations. This policy helps donors understand the gifts your church can and cannot accept and the specific circumstances or conditions under which you’ll accept different types of gifts, so they can contribute useful items. For example, you may note that for canned food drives, all contributed items must be unopened and not expired.
- Conflict of interest policy. A conflict of interest policy protects your church’s integrity and helps you maintain trust and transparency with your congregation. Potential conflicts of interest can arise when leadership, board members, and other key stakeholders have outside financial interests or relationships that intersect with the business of running your church. This policy defines what constitutes a conflict of interest and indicates how you’ll handle these situations.
- Expense reimbursement policy. There may be situations in which staff, board members, volunteers, or other congregants incur expenses on your church’s behalf. For example, perhaps you want to reimburse a staff member who buys supplies for a local community service project your church hosts. Ensure you reimburse them appropriately with a policy that outlines the types of expenses you can reimburse, the process for submitting reimbursement requests, and the timeline for processing these requests.
While all nonprofit organizations should implement these policies, you may also enact church-specific financial policies. For instance, if your church has a benevolence fund, you may create a policy describing how to record and distribute these offerings.
3. Standardize documentation and reporting.
Consistency in financial operations makes it easier to pinpoint errors and keeps everything organized for easy reference. Streamline your financial processes by:
- Compiling financial procedures. In addition to the financial policies discussed earlier, your church should also document miscellaneous fiscal policies and procedures that guide your team on other financial operations. This documentation might cover policies and procedures for internal controls, asset management, financial reporting, and risk management, for example.
- Training staff on your chart of accounts system. Your chart of accounts lists all the accounts your church uses to record transactions in its accounting system. The main categories of a chart of accounts are assets, liabilities, net assets, revenue and support, and expenses. Based on your church’s needs, you’ll also create sub-accounts under each of these categories with corresponding codes. Inform relevant team members about your coding system to keep your records consistent. For example, if your expenses fall under codes 7000-9999, you might have a subcategory for worship ministry under 7100-7199, with worship music licensing as 7110.
- Conducting regular financial statement audits. To boost financial integrity, accountability, and transparency, work with an independent nonprofit auditor. They can confirm your church follows U.S. Generally Accepted Accounting Principles (GAAP) by reviewing your financial transactions and reporting. Additionally, they can test your internal controls, identify any weaknesses, and provide recommendations for improvement.
Standardization becomes even more important as your church grows. The more staff members you have, the more diligent you must be to ensure everyone follows the same set of financial procedures.
4. Promote financial transparency.
Congregants want to know that you’re using funds responsibly and working diligently to fulfill your mission. By keeping them informed, you’ll demonstrate transparency and build trust with your community. Involve congregants in your culture of financial accountability by:
- Sharing regular financial updates. Incorporate financial updates into your newsletter to continuously inform congregants about your current financial position. Make these updates more accessible by repurposing key takeaways from your financial statements into simple charts and graphs that display necessary information in a digestible format.
- Publishing audit results. After conducting an audit, share the results with your community. This step confirms that your church undergoes regular audits, showing a commitment to financial integrity and process improvement. It can also highlight the ways you’ve improved your financial accountability and internal controls over time.
- Communicating any challenges. True transparency means being honest, no matter the situation. Congregants will appreciate your vulnerability in sharing financial hardships. For instance, perhaps a recent mission trip fundraiser didn’t hit its goal. Opening up about these challenges enables you to better rally support, so you can resolve these issues as quickly as possible.
Every community member will have their own preferences about how often they’d like to hear financial updates from your church and in what format. After testing out some financial transparency strategies, send your congregation a survey to collect feedback so you can align your approach with their needs.
Financial accountability is truly a team effort. From your pastor to your treasurer to your board, everyone should understand the importance of proper financial management and transparency, following your internal procedures as closely as possible. If you need help refining these policies to ensure they guide your team appropriately, consider working with a nonprofit controller who has experience supporting churches and other religious institutions.
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