Church Management: Financial Policies & Practices

1. Management & Leadership
in Ministry
Local Church
Financial Policies & Practices

2. Church Financial Policies & Practices
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.”

3. 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’.

4. 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.

5. 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)

6. Finance Committee 6 Members
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)

7. Physical Handling of church Finances
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.

8. 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.

9. 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.

10. 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.

11. Bill Paying Policies & Practices
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.)

12. 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.

13. Reporting 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

14. Mid. Level: Teen Ministry
September Financial Report
Yr.to date Yr. to date
September Actual Budget Actual Budgeted
Expense Expenses Expenses Diff. Expenses Expenses Diff.
Food $35.60 $50.00 +14.40 $356.00 540.00 +184.00
Teaching
$67.00 $35.00 - 32.00 $875.00 $655.00 -220.00
Supplies
Guest
$75.00 $75.00 0.00 $250.00 $300.00 +50.00
Speaker
Appreciation/
$ 0.00 $15.00 +15.00 $75.00 $250.00 +175.00
Gifts
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

15. High Level Bd. Report: General Operating Budget June 1 to Sept. 30, 2012
Sept. Sept. Sept. Yr.-to-Date Yr.-to-Date Yr.-to-date
Sept. INCOME Actual Inc. Budget Diff. Actual Inc. Budget Diff.
Offerings $6546.00 $7200 -654.00 $25,800.00 $28,100.00 -2,300.00
Investments/
$250.00 $300 -50 $2,100.00 $1,200.00 -900.00
Interest
Other (tickets,
$350.00 $100 +250 $1,556.00 $200.00 +1356.00
sales)
TOTAL INCOME 7146.00 7600.00 -454.00 29,456.00 29,500.00 -44.00
Sept. Sept. Sept. Yr.to date Yr. to date
Sept. Expenses Actual Exp. Budget Diff. Actual Exp. Budget Diff.
Ministries &
$ 350.00 $ 450.00 + 100.00 $1230.00 1600.00 +370.00
outreach
Salaries $2400.00 $2400.00 - 0.00 $8750.00 $8750.00 - 0.00
Gen./Office
$1950.00 $1850.00 -100.00 $8250.00 $7300.00 - 950.00
Admin.
Missions $ 500.00 $650.00 + 150.00 $2100.00 $2500.00 + 400.00
Facilities/
$2400.00 $2400.00 - 0.00 $9500.00 $9600.00 + 100.00
mortgage
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

16. Reporting Policies & Practices
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.

17. Reporting Policies
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.

18. 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

19. Investment Policies & Practices
see: Matt. 25:27
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).

20. Financial Files/Data Storage Policies & Practices
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

21. Tracking Income/ Expenses Policies
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.

22. 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.

23. Receipting Policies & Practices
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.

24. 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.

25. 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.

26. Borrowing 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.

27. 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.

28. Financial Data Input/Access Policies
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

29. 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.)

30. Rebate & Fund-Raising 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.

31. 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.