Remember all those courses you took on church budgets, capital campaigns and taxes in Bible college or seminary? Probably not, right? While you rightly focused on Theology I and New Testament II and Introduction to Paul’s Epistles, you didn’t get an opportunity to take courses on some of the more practical, day-to-day activities of a pastor, like developing and managing a church budget.
And, if you pastor a church with less than 300 people, you most likely don’t have the extra staff to handle these tasks—leaving you, the senior pastor, to tackle these on your own.
Or, maybe you’re a church administrator or someone else tasked with overseeing the church budget; these tips apply to you as well!
One of the critical components of any church budget is developing and applying internal controls. This is important for a variety of reasons, including that these rules protect not only the church, but they also keep individuals involved in the work from being tempted toward fraud.
Here are some tips to ensure that your internal controls are stringent:
A. Segregation of duties is critical. In an overall sense, being skeptical in a healthy way—or curious—is important. Do not ignore abnormalities or people being unwilling to accept help, for example.
B. Having at least two people count the offering and keeping those functions separate from cash disbursements (bills, payroll and so forth) is another important tactic.
C. Having two signers for checks or outgoing transfers is also helpful and common. There is much less likelihood for fraud if two signers are required.
D. It’s important in today’s world to consider how to do this for both traditional payments like checks, but also for electronic payments, which are common and are replacing more traditional payment methods.
E. Regular financial reports should be prepared and reviewed—certainly by leadership like elders and pastor(s), but also if there is someone in the church with a financial background who can “look over the shoulder” of those doing the work.
F. These should include a statement of activities (income statement) and a statement of financial position (balance sheet). Comparisons to budget and/or last year’s results can also be helpful (comparison to budget more so; comparison to last year is most helpful for churches where things are similar/stable year to year).
G. Many churches will either have an annual “internal audit” or “review” by people in the church with a financial background. Some churches will hire someone to help with this or with the monthly closing, reporting and oversight process.
H. There is usually reporting to the congregation regularly at business meetings through things published electronically, in newsletters or in bulletins. Generally, the more information available and the more regularly it is reported, the healthier the church and the fewer problems in that church.
I. Most churches manage on the “cash” basis and not on the “accrual” basis. This is simpler to administer and easier to understand; we call it the “what’s in the checkbook” method.
To read our latest eBook on the 7 Must Haves for Developing & Managing Your Church Budget, click herefor the free download!
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