Local Church

Financial Policies & Practices

Management & Leadership

in Ministry

Every Church needs to have policies and standardized practices, which outline ‘how’ the finances of the church are handled.

1) To protect the church from theft.

2) To protect the reputation of those who physically

handle the finances of the church.

3) To give confidence to parishioners, that their

contributions are being properly managed.

4) To satisfy the requirements and expectations of

the denomination and “Revenue Canada &

I.R.S.”

Church Financial Policies & Practices

Every Church needs to have …

1) A safe, bolted to the floor OR at least a

lockable filing cabinet, OR as a bare minimum, a

desk with lockable drawers in the church office.

2) Church accounting should be done at the church

office, preferably not from someone’s home.

3) ‘Offering Count’; ‘Payment authorizations forms’ &

‘Church cheques/checks’ all require 2 signatures.

4) Those who count the offerings (offering tellers)

should not be related to one-another, and always

operating in ‘pairs or threes’.

Church Financial Policies & Practices

5) Every church needs a “Finance

Committee”. The financial

accounting should NEVER be

overseen by one person. (Typically the

chairperson of this committee is the

annually/biannually elected treasurer of the

church.)

6) Every church needs to have cheques/checks

which are numbered sequentially & stored in a

secure location.

7) Church Financial management software

should only be installed on computers in the

church office, not on ‘home computers’ (Buy

good software & get training for members of

your Financial committee)

8) Finance Committee meets monthly to monitor

& report the status of church finances (They

issue a monthly written report to the Church

Board and Sr. Pastor).

9) An annual ‘audit or review’ of the books (use

an outside accounting firm (A review is usually

sufficient not a formal audit)

Ideally a Finance Committee consists of …

- Treasurer (elected by church business mtg.

Oversees everything; reports monthly to Church Bd.)

- Head Offering Teller (min. team of 3 people, max.= ?)

- Offering Envelop Secretary (weekly records donors’

individual financial contributions)

- Cheque writer (issues cheques/checks to pays bills)

- Bank Reconciler (double checks the wkly. offering

teller report vs. actual bank deposits; AND double

checks payment authorization forms vs. actual

cheques written)

- Book-keeper/Data entry sect. (enters financial info.

into computer)

Finance Committee 6 Members

1) Two ‘unrelated’ people always count the ‘offerings’. The data

is recorded onto 2 “offering teller” sheets. These offering

teller sheets are signed/dated by both people who count the

offering. The offering teller sheet records both: the total

amount of the donations AND the break-down of which

church accounts the offerings were donated to (i.e. how

much was donated to the: General Operating Fund; Building

Fund, Missions, etc.) Prepare a bank deposit slip.

2) Sunday offerings are immediately deposited into the

church’s bank account, using the bank’s ‘overnight deposit

bag slot’ OR into the church safe. No one is to ever take

cash or cheques, home.

Physical Handling of church Finances

3) A copy of the ‘offering teller sheet ’ is given to the church

treasurer, and the other copy given to the person who

reconciles the monthly bank statement. The empty

‘offering envelops’ are given to the offering

envelop/recording secretary.

4) The offering envelop recording secretary keeps a record of

the donations made by each person in the church (for

income tax receipt purposes). The offering secretary (or

bank reconciler) double checks the ‘deposit slips’ against

the ‘monthly bank statement’ each month, to ensure that the

amount which was counted was actually deposited into the

church account/bank.

Physical Handling of church Finances

5) Petty cash that is given to Ministry leaders is

recorded as an outgoing expense, and will only

be replenished as receipts are provided for ‘how,

where, why and when’ the money was distributed. Most

Petty cash advances, do not exceed $100-$200. Ministry

leaders MUST furnish ‘receipts’ for the usage of their petty

cash and ensure that their petty cash is kept in a secure

location.

6) Money received mid. week by Ministry leaders (i.e. sale of

Sun. school books, or ticket sales, fund-raising events, etc.)

must be counted & recorded in duplicate (1 copy to

treasurer and 1 copy to ‘offering envelope secretary, if the

money is receiptable). Give the money to the church

treasurer as quickly as possible, for deposit purposes.

Physical Handling of church Finances

7) As a rule of thumb, the pastoral staff should try

to avoid any direct contact with a donation made

to the church (i.e. being given a donation for the

church while visiting a parishioners home). Just too many

things can happen to cause suspicion of ‘what happened

to the donation’ … or of ‘influence peddling’. If you are

given money, put it in a sealed envelop & have the donor

sign the envelop, across the sealed area.

Physical Handling of church Finances

1) Church cheques/checks require 2 authorized

signatures (The Church Board approves up to 4-5

Individuals, who have church cheque signing authority.

(Note: their signatures are ‘on file’ at the bank)

2) “Payment authorization” forms require 2 signatures (the

ministry leader & a supervisor/pastor/ treasurer).

Payment authorization forms need to be filled out for

both ‘one time’ purchases AND/OR an ‘annual form’

for ongoing, monthly expenses (i.e. utilities, missionary

support, etc.)

3) The Finance Committee needs to pre-authorize ‘who’

has authority to charge items at a store (Christian

bookstore, or Office Supply store, etc.)

Bill Paying Policies & Practices

4) The Finance Committee needs to authorize who may

have a ‘church credit card’. Those authorized to use

the church’s credit card MUST attach their receipts

directly onto the monthly Visa Statement, along with an

explanation of each purchase. Give the Visa Statement

to the treasurer each month.

5) Church related expenses will be paid WITHIN 30 days

of the purchase.

Bill Paying Policies & Practices

DEFINITIONS: Detailed Report: Line items included

(i.e. monthly costs for utilities, photocopying,

office supplies, advertising costs, etc.) Lots and lots

of detail.

Mid. Level Report: List total expenses by ‘ministry

department’ (i.e. total monthly expense of the teen

ministry, but not every expense spent by the teens)

High Level Report: List grand totals (total income vs.

expenses by 5 major categories: General Operating

Expenses, Missions, Building, Savings/Investments,

and Debts/mortgage)

A few simplified examples are provided on the following pages

Reporting Policies & Practices

Mid. Level: Teen Ministry

September Financial Report

September

Expense

Actual

Expenses

Budget

Expenses Diff.

Yr.to date

Actual

Expenses

Yr. to date

Budgeted

Expenses Diff.

Food $35.60 $50.00 +14.40 $356.00 540.00 +184.00

Teaching

Supplies $67.00 $35.00 - 32.00 $875.00 $655.00 -220.00

Guest

Speaker $75.00 $75.00 0.00 $250.00 $300.00 +50.00

Appreciation/

Gifts $ 0.00 $15.00 +15.00 $75.00 $250.00 +175.00

Rentals/Lease $16.90 $30.00 +13.10 $65.00 $75.00 +10.00

TOTAL: 194.50 205.00 +10.50 $1621.00 $1820.00 +199.00

High Level Bd. Report: General Operating Budget June 1 to Sept. 30, 2012

Sept. INCOME

Sept.

Actual Inc.

Sept.

Budget

Sept.

Diff.

Yr.-to-Date

Actual Inc.

Yr.-to-Date

Budget

Yr.-to-date

Diff.

Offerings $6546.00 $7200 -654.00 $25,800.00 $28,100.00 -2,300.00

Investments/

Interest $250.00 $300 -50 $2,100.00 $1,200.00 -900.00

Other (tickets,

sales) $350.00 $100 +250 $1,556.00 $200.00 +1356.00

TOTAL INCOME 7146.00 7600.00 -454.00 29,456.00 29,500.00 -44.00

Sept. Expenses

Sept.

Actual Exp.

Sept.

Budget

Sept.

Diff.

Yr.to date

Actual Exp.

Yr. to date

Budget Diff.

Ministries &

outreach $ 350.00 $ 450.00 + 100.00 $1230.00 1600.00 +370.00

Salaries $2400.00 $2400.00 - 0.00 $8750.00 $8750.00 - 0.00

Gen./Office

Admin. $1950.00 $1850.00 -100.00 $8250.00 $7300.00 - 950.00

Missions $ 500.00 $650.00 + 150.00 $2100.00 $2500.00 + 400.00

Facilities/

mortgage $2400.00 $2400.00 - 0.00 $9500.00 $9600.00 + 100.00

TOTAL EXPENSE 7,600.00 7,750.00 + 150.00 $29,830.00 $29,750.00 - 80.00

Income/Expense - 454.00 - 150.00 - 304.00 - 374.00 - 250.00 - 36.00

1) The Finance committee receives & reviews a

detailed financial report from the Treasurer, each

month.

2) The Church Board receives & reviews a ‘high level’

report each month, from the Finance committee.

3) The Congregation receives a weekly report of the

income in the church bulletin each Sunday (income vs.

anticipated income).

4) The Congregation receives a high level financial report,

at the annual business meeting … with a detailed report

available to those who specifically request one.

5) Ministry Leaders receive a monthly Mid. Level or

Detailed Report, specific to their ministry expenses.

Reporting Policies & Practices

6) Church files annual reports with the

government and denomination. Prepared by the treasurer,

but signed by pastor.

7) Typically ‘salaries’ are all grouped together, rather than

reporting individual salaries. Due to confidentiality rules, it

may be best to report also “salary ranges” for the

office/pastoral staff of the church.

Senior pastor = $35,000 - $45,000

Assistant pastors = $28,000 - $34,999

Office staff (full time) = $26,000 - $31,000

Office staff (part time) = $10.00 - $12.50 / hr.

Reporting Policies

8) Some local churches, annually

report the ‘donations’ to the congregation, by

showing the breadth of financial support of the

church. Thus, the report can look like this:

$1 - $99 = 25 donors

$100 - $499 = 22 donors

$500 - $999 = 34 donors

$1000 - $3000 = 17 donors

Reporting Policies

1) A church should instruct their treasurer to

invest ‘excess’ money into ‘instruments’ which …

- are easy to liquidate (cash in) i.e. 2 to 4 wks. notice.

- have a guaranteed interest rate, rather than a widely

fluctuating interest rate (i.e. not high risk).

- is invested with a highly reputable investment firm or

bank (rather than someone’s friend or uncle).

- and the interest from these investments should flow

back into the same accounts, from which the investment

money came (i.e. interest from building fund money,

should go back into the building fund, not the General

Operating budget).

Investment Policies & Practices see: Matt. 25:27

1) All church financial files (paper or electronic) are stored

at the church, not in people’s homes, nor on home

computers.

2) All financial paper files are kept in a locked filing cabinet

& in a secured area of the church (locked room).

3) Church financial data is kept on file for 7 years, then

destroyed (requirement of IRS and Revenue Canada).

Many churches keep General Ledgers/Salary records

much longer than 7 years, for reference purposes.

4) No personal/donor information will be shared with any

other organization (except as required by the

government and/or the denomination).

5) Only the lead pastor & finance committee members

have access to data about individual donors/donations

Financial Files/Data Storage Policies & Practices

1) Generally speaking it is far superior & safer

to have all income flow through one treasurer and

one set of books, than through multiple people

and the financial books of various ministries. The

only way to accomplish this, is for all ministries to

be financially supported through the “General

Operating Fund” of the church, rather than each

ministry trying to be self-funding/ managed.

2) The exceptions to this rule: Donations tend to be

greater for “Building Projects” and “Missions” if

the income and expenses can be tracked in

separate accounts.

Tracking Income/ Expenses Policies

3) Special Projects: It is easier to generate

income for ‘special / specific projects’ than for the

“General Operating Fund” (raising money for the

purchase of a new church piano, or equipment for

the Nursery). Those donations should tracked

separately, but still flow through the “General

Operating Fund”. It is very important that the

congregation be told ‘up front’ that: Income

received in excess of the monies needed for a

special project, will be used to cover other church-

related expenses.

Tracking Income/ Expenses Policies

Revenue Canada & I.R.S. require that:

- A verifiable and clear paper trail must exists between a

donor and their donations to the charity (i.e. you can not

issue a ‘charitable donation’ receipt, based on the word of a

donor that they put a $20 bill into the offering plate). There

must be either a canceled cheque or a dated and marked

‘offering envelop’ to prove the donation.

- A donor can not ‘direct’ how their donation will be used by

the charity. Donations must be freely made, and then fully

released for the charity to decide how and when it is used.

(i.e. a person can not donate $1000 and tell the church to

use it to buy a chair). The church must first decide that it

needs ‘chairs’ and then donors can contribute towards that

expense.

Receipting Policies & Practices

Revenue Canada/ I.R.S. require that:

- A donor can not receive a charitable donation receipt for a

donation they made to the church IF they specifically

benefited by that donation, for example: no income tax

receipt can be issued for purchasing a ticket to a dinner meal

… unless the receipt is for the difference between the ‘cost

of the meal’ and the value of the ticket (i.e. Ticket costs $25.

Meal & entertainment actually costs the church $12/person.

Receipt can be issued for $13.).

- Likewise a parent can not make a receiptable donation to a

church in support of a scholarship that their child is the sole

beneficiary of that scholarship. Donors can not identify a

specific beneficiary (person) for their donation.

Receipting Policies & Practices

Revenue Canada/I.R.S. require that:

- A donor can not receive a charitable donation receipt

for the ‘value’ of an item or service that has not been

independently substantiated (i.e. donation of a t.v. …

the church needs to have an independent verification

of the ‘value’ of that t.v. in order to provide a receipt).

- A church should not issue an charitable donation

receipt for ‘services rendered’ (i.e. Electrician/ Plumber).

Pay the person for their services. If the person wants

to write the church a cheque for an equal amount, this

satisfies Revenue Canada. BUT the donation must be

freely given, not coerced.

Receipting Policies & Practices

a. The Rule of Thumb is … a church should not borrow any

more than 3 to 4 times its annual income level.

b. It is a VERY bad idea to lend money from one church

account, to another account. Some experts advise it is

actually an illegal activity to borrow money from the

Building Fund, to pay General Operating expenses, unless

you have received congregational approval to do this

(you are using donor monies, other than for the purpose for

which they donated it). If you borrow money internally,

there MUST always be a reasonable plan to repay the

money, with INTEREST, in very short order.

Borrowing Policies & Practices

c. Before taking a bank loan, try to borrow from...

- people inside the church (perhaps ‘interest

free’, or for a lower interest rate)

- the denomination (Wesleyan Investment Foundation or

the district office, etc.)

d. Borrow only for the purchase of assets which typically

appreciate in value, or for mission critical repairs

(emergency furnace repair), not for bills related to normal

operating expenses, such as salaries.

e. The church should always aim to repay loans on or before

the scheduled due date, both for the purposes of a good

witness, and good stewardship.

Borrowing Policies & Practices

a. Electronic church financial records should

be backed-up daily and a copy stored off site (i.e.

secretary takes copy home each evening or

electronically stored in a ‘cloud site’).

b. One computer is used to input and update church

financial data. At least 2 people (but not more

than 3) are fully trained to input and update

information. This computer is ‘password’ protected

and kept in a lockable room.

c. Access to the church financial records is restricted

to a ‘need to know’ basis ...especially information

related to donors and donations

Financial Data Input/Access Policies

d. In larger churches, the I.T. person can set up

controls so that ministry leaders can access

their own ministry’s actual year-to-date expense

report vs. budget …by means of ‘networking’

the church computers.

e. The church’s financial computer should not be

connected to the internet (virus, spam, hacking,

etc.)

Financial Data Input/Access Policies

a. The church relies upon the Biblical principles of

Christian stewardship as the primary means of funding

the ministries of the local church. While most

evangelical churches would not use ‘bingos, gambling

& lotteries’ as a legitimate means of fund-raising; most

evangelical churches are not opposed to using ‘funding

raising’ events to supplement the ministries of the

church where the donor receives ‘value’ for their

donations (i.e. bake sales, car washes, etc.)

b. The church will annually apply for all appropriate

government rebates (i.e. GST, PST) and use their tax

exempt status for reducing the cost of purchases for

‘worship expenses’. This is good stewardship.

Rebate & Fund-Raising Policies

c. The church will also avail itself of government

monies which are available to fund such things as

‘handicap access’ improvements, and underwriting the

hiring of summer students, etc. The church however

will not accept government money, which allows the

government to adversely dictate/influence/compromise

the ministries of the church.

Rebate & Fund-Raising Policies