What are our goals?
Many ways to destroy the trust between the congregation and the leadership of the church—but financial mismanagement is a big one. Many churches do not give this area of ministry the appropriate attention.
• use volunteers that do not have the appropriate training
• the misperception that the government will never pay any attention
• mimic the practices of other churches without proper verification of correctness
Fulfill our Fiduciary Responsibility
As leaders in the church we have a fiduciary responsibility (the highest standard of care imposed at either equity or law) with regard for handling finances appropriately.
In order that the congregation will have confidence in church management.
When done well, the congregation gains a greater understanding of the financial position of the church, the link between finances and ministry, and their own role in the ministry.
Congregants understand and can support our vision and our direction.
The Guiding Principle: Being Above Reproach
“What is more, he was chosen by the churches to accompany us as we carry the offering, which we administer in order to honor the Lord himself and to show our eagerness to help. We want to avoid any criticism of the way we administer this liberal gift. For we are taking pains to do what is right, not only in the eyes of the Lord but also in the eyes of men. “ 2 Cor. 8:19-21
Evangelical Council for Financial Accountability (ECFA)
Seven Standards of Responsible Stewardship
The Donor's Bill of Rights
Financial Weaknesses in the Church (ECFA)
- Lack of executive committee minutes
Unclear if quorum present
Audit Review Committee not functioning
Conflicts of Interest
Poor Financial Statements/allocation of expenses
Poor CEO Appraisal/Compensation Review
Borrowing From Restricted Funds Without Plans for Repayment
Misuse of Donor-Restricted Funds
Housing Allowance Improperly Handled
Inadequate Board Oversight
Manage Internal Controls
Definition: Internal controls are measures employed by a church or non-profit organization to safeguard assets from waste, fraud, and inefficient use.
Various Types of Internal Controls
- Bank accounts
Characteristics of Churches with Strong Internal Controls
1. They prepare a written financial procedures manual
2. They adopt a clear organizational structure with understood roles and responsibilities
3. They segregate incompatible duties in accounting for, approving, and disseminating church funds
4. They receive an annual audit from a qualified CPA or CPA firm
5. They use computerized accounting software
Common Risk Factors for Financial Malfeasance
(Safe & Secure, by Jeffrey W. Hanna)
- Complacency shown by leadership/management
Low management expectations
No pre-employment background checks-bonding
Comparatively low employee compensation
Unorganized work environment
No written policies and procedures
Weak internal controls
No segregation of duties
Poor documentation for cash disbursements
One employee handling-recording bank deposits
No required vacations
Missed financial reporting deadlines
Late issuance of donor and/or payroll reports
Late financial statements and budget reports
Insufficient supervision of the accounting staff
No review of financial information by CPA
- Counting Procedures