From the book Mastering Church Finances
In terms of spending, the more control the board exerts, the less a ministry can respond immediately to current needs. The more freedom ministries have, the harder it is for the board to monitor exactly what's going on. Each church has to find the middle ground.—Richard L. Bergstrom
Each month the trustees faithfully gathered to pay the bills of Community Church. Each month they were greeted by the familiar stack of invoices and requests for reimbursements from church members. And each month they were faced with the same types of questions:
—Which ministry is this new tape recorder to be charged against?
—Who charged $139.50 at the Christian bookstore? Are these books for Sunday school or youth ministry?
—What was the $48.79 worth of groceries charged at Safeway used for?
—Where is the receipt for the supplies purchased for women's ministry?
—There's no budget for computer software; why did the secretary purchase this without prior approval?
—The copy machine expense is running at three times the budget. How are we supposed to pay for this?
An annual budget had been carefully worked out by the staff and the board and approved by the congregation—still, the trustees didn't seem to be able to monitor spending. They couldn't really tell how much each ministry was costing the church.
From time to time, someone suggested they use a purchase-order system, requiring each person making a purchase on behalf of the church to get approval. Unfortunately, that policy also happens to be effective at hindering ministry, making simple purchases time consuming and awkward.
For instance. Bob works as a sponsor for the junior high ministry. He wants to buy some prizes for the upcoming overnight. In Bob's church, everyone is required to have expenditures approved by the church treasurer prior to purchase.
Unfortunately, Bob works long hours in construction and can't get by the church to get a purchase order issued and signed before the event. He decides to turn in the receipt after the fact—and anticipates receiving a lecture from the church treasurer.
Every church has to find a way to avoid cumbersome reporting of purchases and yet accurately monitor expenses. Depending on a church's denomination and traditions, the solutions will look different. Still, here is how many churches have effectively accomplished both of these goals.
Develop the Budget Around Ministry Categories
After our financial crisis in the Colorado church, we decided to rearrange the budget according to ministry categories. Previously the trustees had arranged the budget around categories that made sense to them.
For example, the budget report listed major headings such as salaries, utilities, supplies, youth, evangelism, children's church, maintenance, Sunday school, and other.
The problem with this system, we found, was that it was difficult to attach responsibility to any one individual for a specific category of ministry, as we wanted.
So we changed the report so that all of the budget items relating to a ministry area were brought together.
For instance, in Christian education, everything that was spent for ce, including such items as postage for returning videos, literature for Sunday school, and puppets for children's church—items that were formerly scattered throughout the budget under postage, supplies, and children's church—were placed as line items under the ce budget.
This helped us see clearly how much exactly each ministry was costing us.
After the change, we also saw that church leaders felt more responsible for church finances: they knew what their ministry's financial parameters were and tried to stay within their budgets. This system, of course, had its own drawbacks. For instance, we found that it required a good deal more research and time to document where the money was being spent and which account to charge it against.
But in order to get the advantage of tracking expenses accurately, we felt it was worth the trouble.
Give Individuals Responsibility for an Area of Ministry
I worked with a church in the Northwest that went through a major restructuring of its ministry. Part of the problem in its past had been a fuzziness about the levels of responsibility and authority.
For example, if the youth leader wanted to spend money on an outreach activity, he felt he would have to clear it first with the pastor. If the leader of the women's ministry wanted to order Bible study materials, she might first call the church office. That put the pastoral staff, even the church secretary, in the position of approving each request. It was cumbersome, to say the least.
So I helped the church design a new structure, in which levels of responsibility and authority were delineated. In each program area, we gave the leaders (called "the program team") responsibility for both programming and budget within their area of ministry. They were also part of a larger "ministry team," which was overseen by a member of the governing board of the church.
For example, the youth ministry team was composed of the junior high program team, the senior high program team, and the college/career program team.
Thus it became easier to manage the financial affairs of the ministry. Lay leaders were involved more in the budgeting process. They would now come together with staff to prepare their program's budget based on program goals and objectives upon which staff and lay leaders together had previously agreed.
And once the budget was established, the ministry teams were charged with the oversight of their budget, with one person in particular responsible for monitoring finances.
The youth director, for example, was given responsibility for the youth budget. So, if the senior high Bible study leader wanted materials for a discipleship group, he came to the youth director to see where it would come out of the budget.
In the same way, the office administrator didn't have to ask permission of the board every time she needed to order a ream of paper or repairs on the copy machine. She simply looked at her budget, established the line item account number assigned to that, and ordered the material she needed.
But what if a ministry team wishes to change their priorities midway through the fiscal year? Suppose, for instance, that instead of spending $250 on film rental, the youth ministry team thought, because of input from the new youth officers, it should spend $250 on a week-long bike trek—a completely unbudgeted item. Should they be entitled to make that decision on their own? What other factors besides finances might need to be considered in this change of plans? The church board, for example, might have questions about safety and liability that go beyond the budget itself.
One executive pastor I spoke with warned that a board loses its authority to monitor ministry activities if it stops requiring ministries to report changes in their spending plans. Budget approval implies approval of the activities for which those monies are allocated.
Other pastors feel that as long as a ministry sticks to the overall bottom line figure of their ministry, they should have the freedom to make any changes they want.
It depends, then, on how much freedom ministries should be given and how much control the board wants. The more control, the less a ministry can respond immediately to current needs. The more freedom ministries have, the harder it is for the board to monitor exactly what's going on. Each church has to find the middle ground.
Appoint One Person to Monitor the Budget
Even though department heads might monitor the individual purchases, someone still needs to keep an eye on the entire budget, holding the department heads accountable for their choices.
Dick Stunden serves as the church administrator at Bethany Bible Church in Phoenix. As such, he is responsible for monitoring the church budget. The buck stops (literally) on his desk.
He works with each department of the church to develop a detailed annual budget. If a staff member spends more in his or her budget area, Stunden is the one to bring it to the department head's attention. If an unauthorized expenditure shows up for payment, Stunden will put a tracer on it to find out who spent it and where it is to be paid for out of the budget.
"The idea," he says, "is to find the balance between trust and accountability." Stunden's intent is not to exert undue control over expenditures. The budget, he explains, is a tool to hold everyone accountable. But the budget cannot foresee all problems. "I won't complain about an overage in one area of a department's budget," he says, "as long as they adhere to their bottom line."
One administrative pastor told me, "We have a cpa who actually writes the checks, and then I countersign them. Since we both oversee the whole budget, we can see right away if the request is inappropriate or out of line. We can catch it at that point."
The person monitoring the budget and/or the person signing the checks, however, shouldn't necessarily have veto power over check requests. That's better left in the hands of the individual program team leaders.
In particular, one veteran pastor notes, "The one person monitoring the budget should not be the church treasurer. The treasurer's job is to release funds as approved by the church budget and designated by the staff or layperson in charge. All too often, well-intended treasurers become uninvited watchdogs of church funds."
I was visiting with a pastor recently in his study when in walked an elderly woman, who proceeded to open his desk drawer in search for some keys.
He turned to me and said, "Dick, I'd like you to meet Gladys, our church secretary. She's also the church treasurer."
"Yes," replied Gladys. "I've been doing both jobs for thirty years."
After she left, I asked the pastor, "It sounds as if Gladys may have a lot of control over the church's finances."
"It is difficult to get anything approved without Gladys's approval," he conceded. "But she's been our most faithful worker in the church."
"I'm sure she has been," I replied. "But how do you wrest control of the church's purse strings from someone like that?"
"I don't know, other than to wait for her to retire," the pastor replied. "Fortunately, she is doing just that at the end of this year. Then I'll institute some defined policies that will make it more difficult for one person to obtain veto power over expenses."
Require Advanced Approval of Non-Budgeted Items
The annual budget cannot predict every expense that will be incurred throughout the course of the year. Plans change, opportunities arise, and emergencies occur unexpectedly:
—The college department decides to bring in a nationally known speaker for their spring break. The change in plans adds $500 to the cost of the event.
—The pastor decides he wants to go to a pastors' conference 900 miles away. His additional travel and expense is $1,000 more than budget allows for the conference.
—An exceptionally heavy winter snow adds $1,500 to the cost of snow removal from the parking lot.
—The breakdown of the copy machine requires an unbudgeted expense of $5,000 to replace it.
All of these are either unbudgeted items or represent expenses in excess of projections. Although each expense at the time may seem utterly reasonable, it is wise to get official approval before spending the money. What seems like a "clear need" or "an opportunity not to be missed" to one person or group may seem like a mere luxury to another. The safe assumption is this: If it's not in the budget, the jury is out as to whether it's a justifiable expense.
A church in a community where I once served ended up in foreclosure. A public auction for the church's property and buildings was scheduled for a Saturday morning at ten o'clock. How did it get to that point?
The church never had an opportunity to decide on expenses incurred beyond the budget. The pastor had a free hand in obligating the church for the many extra expenses that occurred during the building program. He thought, Well, we've got to have the building, so I guess we have no choice.
If he had taken some counsel, a few more choices might have occurred to him. As it was, when the building was finally completed, a congregation of eight-five giving units was indebted over a million dollars.
Fortunately, the denomination bought up the notes and saved the ministry of the church—but not before requiring the pastor to step down and leave town!
In addition, once permission to spend beyond budget is received, rather than changing the budget figures to reflect the overages, most churches find it best to leave the original budget figures in place. That way, when it comes time to plan the next year's budget, the finance committee can look at the original budget and compare it with normal costs, not the emergency costs.
Try to Reimburse People for Ministry Expenses
One of the hardest ministry expenses to track are those incurred by people who refuse to turn in their receipts to get reimbursed. They feel this is one way they can contribute to the church; besides, they feel it may be petty to ask for reimbursement every time they spend two or three dollars for the church.
Those two or three dollars, however, multiplied by many people and many occasions add up. And that makes for a number of problems:
—It makes it impossible to figure out how much it actually costs to run a ministry.
—It puts unfair pressure on those who follow in that ministry to do the same. That may make recruitment more difficult.
—It takes the control out of the church's hands for determining its financial priorities.
—The person spending the money may lose out on a tax deduction (if they itemize deductions). The church has no way of confirming their gifts.
I have mixed feelings, though, about such a practice. On the one hand, if a church is to track where its monies are being spent, it needs to develop a comprehensive church budget that includes these hidden costs that people cover out of their own pockets.
On the other hand, reimbursement procedures for some churches are cumbersome—it's too much trouble for small expenses. In addition, I don't know that a church really wants to take away people's spontaneous generosity.
Churches in this situation may have to accept the practice, and therefore, assume its liabilities. In small churches, this may be an ingrained habit that simply can't be broken anyway. It wouldn't be worth it politically to try!"
Or churches can ease reimbursement procedures, allowing people to estimate their expenses and turn in many at once. This saves people the trouble of saving small receipts and turning them in one by one. This generally works, however, for reimbursing only minor expenditures, for coffee, small stationary supplies, and the like.
Eliminate Charge Accounts That Can't Provide Receipts
In one church I served, we used a church charge account at a grocery store. That proved to be an unreliable means of documenting charges and thus recording how exactly our money was being spent.
Each month groceries showed up charged against the church's account. We couldn't tell, however, who charged what. The invoice indicated only the date and amount of the transaction. It was impossible to discern whether the items charged went to the youth program, the women's ministry, the fellowship committee, or someone's personal groceries. Some people would turn in their receipts faithfully, but others never did get into the habit.
This, apparently, is not an unusual problem. I recently spoke with a church administrator from another church facing a similar situation. He confirmed the dilemma: "And the pastor is the biggest culprit!" he told me. "He never remembers to turn in his receipts from the Christian bookstore."
In my church, we notified the grocery store that we needed a more specific accounting of what was being charged in the name of the church. When they told us they couldn't do that, we decided to close the charge account.
An alternative to charge accounts is to beef up the petty-cash fund. For many churches, issuing advances and requiring receipts seems to be a much better way to monitor their expenses.
Again the tension is felt, though. In a large church, this can become cumbersome, unless each department has its own petty-cash fund.
Just Say No!
If the budget is experiencing a shortfall, several key questions need to be asked:
—Is this month's downturn typical? If so, the problem may safely be ignored for a month or two. If not, ifs time to pay attention.
—Are income and expenses where they should be according to our projections? If not, why not?
—And if not, were the extra expenses approved? If not, the hole in the system must be plugged at once.
—If approved and over budget, what are we going to do about it? Have a special appeal or cut spending?
Sometimes, of course, a special appeal is out of order. A time comes in the life of many churches when slowing spending is necessary. There is no pleasant way of doing this, of course, but some ways make more sense.
When one church I served faced just such a shortfall, the finance committee went through the budget, item by item, marking each item with a red, yellow, or green highlighter.
Green items were to remain in the budget as scheduled: the utility bill, the mortgage, insurance payments, and staff salaries.
Yellow items meant exercise caution and spend only as needed: Sunday school materials, janitorial supplies, and advertising.
Red items were put on hold until the financial situation improved: staff conferences, continuing education, subsidies for lay training, capital expenditures, film rentals for youth programs.
All staff and lay leaders were then notified of the status of their accounts.
In difficult times, everyone must be willing to tighten their belts, and that often includes the pastor. And sometimes it's the example of the pastor that can help a church turn a corner.
A pastor in the Northwest confided in me that the quickest way to alert the congregation to the financial shortfall was for him to go to work part-time in construction. It was amazing, he told me, to see how quickly the shortfall was reversed once his parishioners observed him working away from the church office to make ends meet!"
Every church needs to be concerned about who spends the church's money and how exactly it is spent. That's what good stewardship is about. We may not have to require every individual making a purchase to fill out a purchase order for every purchase. But by wisely delegating authority, we practice good stewardship, and ministry can keep moving forward.
Copyright © 1992 by Christianity Today, Inc.
The Church Guide to Planning & Budgeting
Record Keeping - Basic Training
Secure Your Church Finances
Manage Your Church's Financial Future
Sign up for Safety Alert Newsletter.
Free Church Treasurer Update e-newsletter