Here’s how to write a Master Finance Document for your church.
There are several components I believe are important and here they are:
1. The church’s approach must be based upon Scripture. 2 Corinthians 8:18-21 (read) fits the bill nicely and the essence of this scripture is to do what is right before God and man by:
a. Handling money in such as way as to protect against false accusations and
b. Giving careful consideration as to what the church body thinks of how its fiscal affairs are conducted.
2. All financial processes must include the Segregation of Duties Principle. [Wrote about that here.] [And here.]
3. The church needs to adopt the Transparency Principle. This communicates the church will conduct its fiscal affairs in an open/obvious way to the church.
a. Accountability. With Leadership comes stewardship. A steward is accountable. Decide who is accountable at each level and to whom.
b. Oversight. This is really an extension of Accountability, but at a minimum, establish lay-led Board(s) to provide this.
c. Reporting. What report formats will be issued to your church and when. What kind of meetings will be held and how often.
d. Address how people may ask questions.
4. Compliance
a. I’d advise creating/maintaining an Accounting Process Guidelines book.
b. State the Accounting Basis the church will follow. Cash, Accrual or a Hybrid Method. Will the church adhere to Not for Profit GAAP?
c. This one is really obvious, but should be included. The church needs to comply with all local, state and federal laws.
Now, here’s an area that may not be so obvious, but nonetheless is an area where churches can seem to be less than forthcoming – Compensation. Since 50% or more of the average church budget goes toward compensation, it pays to be upfront with your people here. Tell your people how Salaries & Benefits are determined. (I’m not saying disclose salary details, only to disclose HOW Salaries & Benefits are determined). I’m a proponent of being proactive. Unanswered questions breed dis-trust.
Once the Master Finance Document is finalized, make it available to your people. It’s being transparent.
In my next post, I’ll share more thoughts on the above. See that post here.
What have you done in your church?