Many church boards have two main areas of focus: the faith-based aspect of governance and the business and stewardship aspect. It’s important for your church to balance the two. Too often, we see church boards that are strong in one area but challenged in the other. Some churches are dominated by mission but lack proper fiscal management. Others are strong operationally, but lack leadership support for the “why” that drives the church’s vision and mission.
Although I’ve served as an executive pastor, a role in which I was concerned with both the spiritual and business sides of the church, the observations in this article focus on the business and stewardship aspects church boards must monitor.
Who is monitoring your church’s finances?
When talking with a new church client through my work with the accounting firm CapinCrouse, I want to find out who is monitoring the church’s finances. Sometimes it’s an elder. Sometimes it’s a subset of the full board. All too often, it’s no one.
I have seen churches rely heavily on the bookkeeper or executive pastor to monitor finances, but when that individual produces or receives the financial information, they lack either the time or expertise to use it strategically.
Unfortunately this means boards don’t always have useful financial information on which to base their decisions. The challenge in these situations is that the internal reporting structure provides neither accurate nor necessary information to paint a true picture of the church’s financial health. Without that, the board can’t take appropriate action.
Your church should invest in hiring competent accounting personnel to ensure the basic records are well maintained and accurate. It is also key to train the accounting staff on what information the board needs and how to prepare it accurately and on a timely basis.
What financial information should your board monitor?
No matter who the hands-on designee is, however, ultimately it’s the board’s duty to monitor the church’s financial situation because it holds the fiduciary responsibility for oversight.
So what financial areas should your board monitor? While this isn’t an all-inclusive list, the board should be responsible for:
Protecting the overall health of the church by continuously analyzing financial condition and trends
Maintaining adequate levels of reserves
Safeguarding investments
Ensuring internal controls are in place to prevent fraud and protect assets
The board should also pay careful attention to various financial ratios and measurements, seeking to answer questions like these:
Are we using our financial resources as efficiently as possible?
How does our church compare with similar churches?
What financial indicators should be monitor, and how?
Are we financially healthy?
Written by Rob Faulk - Part ONE
Photo by John Schnobrich on Unsplash