This is the time of year that every non-profit organization is after your last charitable giving dollars. From "Giving Tuesday" to "Christmas" and through December 31, you'll hear pleas for money. Some statistics show that non-profits receive 50% of their donations from October through December. It could be that folks want to get caught-up on tithes to their church or companies may see that they are going to have a year-end surplus; but whatever the reason, 'tis the season for giving to charities.
There are several things to keep in mind as you consider giving a year-end gift:
1) Make sure your tithes and offerings to your local church are caught-up, before considering your gift to para-church organizations.
2) If you choose to give outside your local church, look to other local charities.
3) Make sure the organization you desire to donate to is credible. Many aren't.
4) Research, or at least ask, how much of your money the organization will use for "administrative fees."
5) If you are giving above your tithes to a church, ask for a list of current ministries or projects to help you determine how you want your money used. You could request that it be used generally for missions, summer camps, etc. If you don't request an area for use, the church may just "bank" it.
6) Look for genuine need. I've learned never to give beyond my tithes and missions giving to a church that is debt free. Debt-free churches without a "front-burner ministry project" will usually be arguing over how to increase staff salaries or how the most influential people want to spend your money.
7) Make sure the recipient will use your donation as you request, because non-profits are NOT required to do so. Technically, the donor is not permitted to dictate "how" the donation is to be used if a tax deductible letter is given. BUT any organization with integrity will try to use the money as the donor has requested.
8) Look for sustainability in the organization.
Final thoughts to consider BEFORE you donate:
1) If you are desiring a tax deduction, you should verify the groups 501(c)3 status before you give. This can be done by simply going to GuideStar.org, a nonprofit database, and enter the name. If the organization isn’t a 501(c)(3), move on, because your donation might not be tax-deductible.
2) Research and examine the non-profit’s IRS Form 990 tax return and/or the organization's annual financial audit statement. If the organization doesn't file a Form 990 or cannot provide you with an financial audit statement, I would encourage you to give your donation elsewhere. The Form 990 can be retrieved from the organization or from organizations like GuideStar.org.
Finally, remember that money isn't always the most desirable gift for a non-proft. Often, to volunteer your time is the greatest gift that you can give.
Showing posts with label Church Finance. Show all posts
Showing posts with label Church Finance. Show all posts
Sunday, December 11, 2016
Tuesday, December 06, 2016
Church Finances #3 - Financial Policies & Procedures - A MUST!!!!!
As mentioned in my previous blog post, transparency is the key to maintaining integrity with the congregation; but other factors also play into the equation. I am a BIG advocate of accountability in every area of church ministry, but especially finances. Too often, people say "we don't have time to do all of that"... or "the church isn't a business"... or "we trust our people." those are EXTREMELY foolish comments, so please save yourself the embarrassment and don't say them out loud. Remember the "7-P's" - Proper Prior Planning Prevents Pitifully Poor Performance. By taking the time to develop and implement a few simple and preventative steps, you may save your church a lot of money, embarrassment, heartache, and a tarnished testimony.
So, I would recommend that every church implement the following steps to maintain transparency, accountability, and integrity with regard to finances.
1) Develop clear financial policies and procedures outlining every aspect of how money is handled in the church. Conduct self audits at random times throughout the year to see if the processes are being followed.
2) Have an outside party (third-party CPA) perform an annual audit of all financial records. Make the results of the audit public to the congregation. Any church that would refuse to do an audit is most likely hiding something!
3) Present an annual zero-based budget for congregational approval and allow at least 2 weeks for the congregation to ask questions prior to approving it.
4) Present an annual year-end report showing income and expenses, as well as, starting and ending balances in each fund. This should include an annual report of how much money is held in savings accounts, investments, and emergency funds.
5) Demand segregation of duties for those handling the finances. This includes: Receiving, depositing, recording, reconciling, and distributing funds.
6) Require 2 signatures on all church related checking accounts.
7) Do not use gimmicks or raise excess funds. Present the need and keep the people informed as to the status of the fundraising.
8) Mail quarterly or bi-annual giving statements to all contributors. This will motivate those who fall behind on their giving, but it will also serve as a confirmation of receipt for those who use online banking or mail-in their tithes and offerings.
9) Protect the Pastor by restricting him from access to financial information and handling or any money.
10) Many churches are closing their onsite business offices and hiring outside CPA firms to handle all church accounting. This has been shown to slow-down the spending and provides a greater level of protection to the ministry. At the very least, have your church's CPA do a quarterly financial statement. This adds credibility and an extra layer of protection.
11) Set spending limits for individuals and committees.
12) Be transparent by printing the weekly or monthly giving amounts. This can be in the church bulletin, prayer sheet, verbal announcement, etc. Don't ever be viewed as "hiding" the financial reports.
For additional ideas regarding church finances or ideas for developing financial policies and procedures see these helpful sites:
1) LifeWay - A Model Church Financial Policy
2) Guidestone - Church Financial Policies
3) FreeChurchForms.com - Church Policy Manual
4) Church Law & Tax - Finances
5) Interactive Guide to Church Finance - AG Financial Solutions
At Emmanuel, we worked with our CPA (Moore, Beauston, and Woodham) in the development of financial policies and procedures for our church and Christian school, so I'm not advocating something that I don't truly believe in. You can also find many other local churches that see the value in having written financial policies by doing a quick Google search. Many local churches have their financial policies listed online and they can be used as guides. I would encourage every church member to ask your pastor or church finance committee to see a copy of your church's "Financial Policies and Procedures Manual." You may be pleasantly surprised to find that you have one, or you may be the catalyst God uses to bring accountability and protection to your local assembly.
So, I would recommend that every church implement the following steps to maintain transparency, accountability, and integrity with regard to finances.
1) Develop clear financial policies and procedures outlining every aspect of how money is handled in the church. Conduct self audits at random times throughout the year to see if the processes are being followed.
2) Have an outside party (third-party CPA) perform an annual audit of all financial records. Make the results of the audit public to the congregation. Any church that would refuse to do an audit is most likely hiding something!
3) Present an annual zero-based budget for congregational approval and allow at least 2 weeks for the congregation to ask questions prior to approving it.
4) Present an annual year-end report showing income and expenses, as well as, starting and ending balances in each fund. This should include an annual report of how much money is held in savings accounts, investments, and emergency funds.
5) Demand segregation of duties for those handling the finances. This includes: Receiving, depositing, recording, reconciling, and distributing funds.
6) Require 2 signatures on all church related checking accounts.
7) Do not use gimmicks or raise excess funds. Present the need and keep the people informed as to the status of the fundraising.
8) Mail quarterly or bi-annual giving statements to all contributors. This will motivate those who fall behind on their giving, but it will also serve as a confirmation of receipt for those who use online banking or mail-in their tithes and offerings.
9) Protect the Pastor by restricting him from access to financial information and handling or any money.
10) Many churches are closing their onsite business offices and hiring outside CPA firms to handle all church accounting. This has been shown to slow-down the spending and provides a greater level of protection to the ministry. At the very least, have your church's CPA do a quarterly financial statement. This adds credibility and an extra layer of protection.
11) Set spending limits for individuals and committees.
12) Be transparent by printing the weekly or monthly giving amounts. This can be in the church bulletin, prayer sheet, verbal announcement, etc. Don't ever be viewed as "hiding" the financial reports.
For additional ideas regarding church finances or ideas for developing financial policies and procedures see these helpful sites:
1) LifeWay - A Model Church Financial Policy
2) Guidestone - Church Financial Policies
3) FreeChurchForms.com - Church Policy Manual
4) Church Law & Tax - Finances
5) Interactive Guide to Church Finance - AG Financial Solutions
At Emmanuel, we worked with our CPA (Moore, Beauston, and Woodham) in the development of financial policies and procedures for our church and Christian school, so I'm not advocating something that I don't truly believe in. You can also find many other local churches that see the value in having written financial policies by doing a quick Google search. Many local churches have their financial policies listed online and they can be used as guides. I would encourage every church member to ask your pastor or church finance committee to see a copy of your church's "Financial Policies and Procedures Manual." You may be pleasantly surprised to find that you have one, or you may be the catalyst God uses to bring accountability and protection to your local assembly.
Monday, December 05, 2016
Church Finances #2 - Transparency Regarding Church Money
As we continue our discussion about church budgeting, "transparency" would be the next key word. Like all other areas of the church, you don't have to continually share all of the details that people don't care about; but when a member asks a question about church finances, there shouldn't be any secrets. Keeping people in-the-loop with regard to general financial issues is critical to maintaining the trust of the congregation. I've found that people will give freely, if they trust those overseeing the church finances. I can't remember one year during my pastorate that we ever experienced a budget shortfall. I feel it was because people were always informed and financial reports were readily available to any member who would simply ask. After saying that, let me clarify that I think it is unhealthy for the congregation to have to "vote" on every expenditure, but I also think there needs to be transparency and good communication from those spending the church's money.
The Bible does not say anything about the early church having expense reports, budgetary meetings, or finance committees. What it does reveal is a pattern in which the church entrusted a leader(s) with the finances, and then those leaders managed the finances. In Romans 15:25-28 and 1 Corinthians 16:1-4 we find accounts of churches taking up a collection and then giving the money to Paul and others for distribution. So, without explicit instructions, there is freedom of process; but we should require a high level of accountability. Churches have been plagued by embezzlement and fraud by staff and volunteers; and financial scandals have destroyed or damaged countless churches. These events may not have been 100% preventable, but most occurred due to lack of transparency and lack of accountability.
Peter J. Reilly states, "The strongest voice I have noted for church financial transparency is that of Reverend Frank Benson Jones. In his book 'Stop The Prosperity Preachers,' he argues that lack of transparency is one of the things that draws the wrong type of people into ministry. He believes that if the profits were removed, only prophets would remain." He goes on to say, "Most charities are subject to some level of transparency, but not churches. That leaves it up to the members to demand transparency. If you meet resistance from the leadership, maybe you might consider that rather than a sheep who is being fed, you are one that is being shorn." If you encounter leadership operating in secrecy, be sure there is a problem...they ARE covering something up!"
The Bible does not say anything about the early church having expense reports, budgetary meetings, or finance committees. What it does reveal is a pattern in which the church entrusted a leader(s) with the finances, and then those leaders managed the finances. In Romans 15:25-28 and 1 Corinthians 16:1-4 we find accounts of churches taking up a collection and then giving the money to Paul and others for distribution. So, without explicit instructions, there is freedom of process; but we should require a high level of accountability. Churches have been plagued by embezzlement and fraud by staff and volunteers; and financial scandals have destroyed or damaged countless churches. These events may not have been 100% preventable, but most occurred due to lack of transparency and lack of accountability.
Peter J. Reilly states, "The strongest voice I have noted for church financial transparency is that of Reverend Frank Benson Jones. In his book 'Stop The Prosperity Preachers,' he argues that lack of transparency is one of the things that draws the wrong type of people into ministry. He believes that if the profits were removed, only prophets would remain." He goes on to say, "Most charities are subject to some level of transparency, but not churches. That leaves it up to the members to demand transparency. If you meet resistance from the leadership, maybe you might consider that rather than a sheep who is being fed, you are one that is being shorn." If you encounter leadership operating in secrecy, be sure there is a problem...they ARE covering something up!"
Sunday, December 04, 2016
Church Finances #1 - Determining Church Salaries
Talking about money is one of the issues that is usually taboo in a church. Either people are consumed with watching every penny -- usually those are the people who don't give much; or others don't even want to see a financial statement. I feel that both extremes are wrong, but they also come into play regarding church salaries. I remember going to Bible College and Seminary excited about how much I would learn about ministerial work, only to find that upon entering my first vocational ministry position, I still had so much to learn (an continue to). In college & seminary I learned theology and we had some debates about methodology, but we often did not discuss the practical points of pastoral ministry. One of those items was church finances, specifically how to determine salaries for church employees. If pastors have questions and may not have received much training in church finances and budgeting, then how can we expect lay-volunteers (often deacons and lay-elders) to know what to do regarding setting church salaries? So, with this being the time of year that many churches are working on their budgets for the upcoming year, I want to take a moment to offer some insight regarding setting church salaries.
One of the most helpful resources that I've found is the "Compensation Handbook for Church Staff" by Richard R. Hammar. This is a tremendous resource and based on national survey results, the compensation profiles are classified by part-time, full-time, church size, income budget, geographical setting, etc. Each position’s compensation levels are presented based on personnel characteristics including: years employed, denomination, region, gender, and educational training. In addition, compensation profiles are broken down by categories so you can easily determine: Base salary, Retirement, Health insurance, Housing allowance & parsonage, Life insurance, Continuing education, Auto expense, etc. The book can be ordered at the Church Law & Tax Store or on Amazon.
Another good resource is the local or state headquarters for your denomination. Most will have a questionnaire for you to complete (often online) regarding some of the same items mentioned above: church setting, budget, attendance, education, years employed, etc. They will input that data and provide a report for you. Again, you will need to determine whether that report is based on your local, state, or national data and adjust accordingly; but it will give you the average pay for the positions requested.
While information regarding state and national compensation levels is important, the local factor should also be investigated. Church staff compensation definitely varies by community! What do the other churches in your local community do with regard to compensation? A couple of years ago I called the other churches in our community that were close to our size and had confidential conversations regarding staff compensation. I found out that we were paying our staff at the top level for our community and above the median household income. In addition, I discovered that we were one of only a couple of churches that were covering full medical benefits for our employees. Thanks to the healthcare changes, 100% medical coverage seems to be a thing of the past in most businesses. We were also providing full mileage reimbursement, while most only offer a percentage (ranging from .32-.44 cents per mile). My point is that local compensation information is essential when setting staff salaries and will give you a true perspective of what is fair and comparable for your community. Every church should want to be fair and desire to take good care of their employees.
Another factor for discussion is how to determine an annual raise for church employees. I have a strong business mind, but also a heart for people. While opinions will differ, I personally don't think it is appropriate to give annual raises, just for the sake of giving a raise. Sadly, I've found that church staff are often lazy and need incentives to increase their productivity. Offering raises based on productivity is fair and can also be motivational. If the Worship Director doesn't grow the choir, introduce new songs, establish new vocalists and groups, recruit new musicians, lead anyone to Christ or bring any new families into the church... then "why" is he being paid at all? Even more so, "Why would you give him a raise?" The same is true of the Pastor, Youth Director, or any other ministerial position. The biblical principle in 1 Timothy 5:18 is that a workman is worthy of his hire (wages). As in any business, employees should be rewarded for going above and beyond. If you reward poor performance, you set a precedent and can never expect more. So, when considering pay increases for church staff, consider productivity as a gauge to determine raises.
What percentage of your church's annual budget should be going toward salaries? The simple rule of thumb is that salaries should be around 50% of the church's annual budget, but not much more. I don't advocate revealing individual salaries to the congregation, as that would cause unnecessary division with the congregation and even between co-workers if they knew one made more than another (as is often the case). I do, however, advocate that the congregation be made aware of the total budget percentage (or lump sum) going toward employee compensation. I am a strong advocate for accountability in every area of ministry, especially church finances.
Last but not least, make sure your church is well versed in the IRS rules for church staff compensation. Like it or not, the church is a business. Too many churches exhibit zeal with no knowledge when it comes to compensation. Utilize all available resources, hire a CPA firm, ask questions, and don't be too proud to ask for help. Churches should set the example for transparency and accuracy in all financial matters.
One of the most helpful resources that I've found is the "Compensation Handbook for Church Staff" by Richard R. Hammar. This is a tremendous resource and based on national survey results, the compensation profiles are classified by part-time, full-time, church size, income budget, geographical setting, etc. Each position’s compensation levels are presented based on personnel characteristics including: years employed, denomination, region, gender, and educational training. In addition, compensation profiles are broken down by categories so you can easily determine: Base salary, Retirement, Health insurance, Housing allowance & parsonage, Life insurance, Continuing education, Auto expense, etc. The book can be ordered at the Church Law & Tax Store or on Amazon.
Another good resource is the local or state headquarters for your denomination. Most will have a questionnaire for you to complete (often online) regarding some of the same items mentioned above: church setting, budget, attendance, education, years employed, etc. They will input that data and provide a report for you. Again, you will need to determine whether that report is based on your local, state, or national data and adjust accordingly; but it will give you the average pay for the positions requested.
While information regarding state and national compensation levels is important, the local factor should also be investigated. Church staff compensation definitely varies by community! What do the other churches in your local community do with regard to compensation? A couple of years ago I called the other churches in our community that were close to our size and had confidential conversations regarding staff compensation. I found out that we were paying our staff at the top level for our community and above the median household income. In addition, I discovered that we were one of only a couple of churches that were covering full medical benefits for our employees. Thanks to the healthcare changes, 100% medical coverage seems to be a thing of the past in most businesses. We were also providing full mileage reimbursement, while most only offer a percentage (ranging from .32-.44 cents per mile). My point is that local compensation information is essential when setting staff salaries and will give you a true perspective of what is fair and comparable for your community. Every church should want to be fair and desire to take good care of their employees.
Another factor for discussion is how to determine an annual raise for church employees. I have a strong business mind, but also a heart for people. While opinions will differ, I personally don't think it is appropriate to give annual raises, just for the sake of giving a raise. Sadly, I've found that church staff are often lazy and need incentives to increase their productivity. Offering raises based on productivity is fair and can also be motivational. If the Worship Director doesn't grow the choir, introduce new songs, establish new vocalists and groups, recruit new musicians, lead anyone to Christ or bring any new families into the church... then "why" is he being paid at all? Even more so, "Why would you give him a raise?" The same is true of the Pastor, Youth Director, or any other ministerial position. The biblical principle in 1 Timothy 5:18 is that a workman is worthy of his hire (wages). As in any business, employees should be rewarded for going above and beyond. If you reward poor performance, you set a precedent and can never expect more. So, when considering pay increases for church staff, consider productivity as a gauge to determine raises.
What percentage of your church's annual budget should be going toward salaries? The simple rule of thumb is that salaries should be around 50% of the church's annual budget, but not much more. I don't advocate revealing individual salaries to the congregation, as that would cause unnecessary division with the congregation and even between co-workers if they knew one made more than another (as is often the case). I do, however, advocate that the congregation be made aware of the total budget percentage (or lump sum) going toward employee compensation. I am a strong advocate for accountability in every area of ministry, especially church finances.
Last but not least, make sure your church is well versed in the IRS rules for church staff compensation. Like it or not, the church is a business. Too many churches exhibit zeal with no knowledge when it comes to compensation. Utilize all available resources, hire a CPA firm, ask questions, and don't be too proud to ask for help. Churches should set the example for transparency and accuracy in all financial matters.
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