Lovett H. Weems Jr. and Ann A. Michel of the Lewis Center explain the importance of systems that guard against financial impropriety. They outline six major touchstones that maintain sacred trust by creating an atmosphere of trust and transparency in stewarding a church’s financial resources.
Sadly, cases of pastors or parishioners who embezzle church funds are too often in the headlines. The implications of this misconduct are devastating. It syphons resources from the vital work of the church. It violates the trust of donors, deterring future generosity. And it compromises the already tarnished image of the church in public perception.
Fortunately, the vast majority of pastors, church staff, and lay leaders who work with church finances undertake their work with great integrity. Yet it is also true that churches often fall victim to financial misconduct because they blindly trust others in their faith community or naively assume bad or careless things can never happen in their church. Every church needs sound financial policies to ensure that all resources serve God’s mission.
1. Leadership
A dependable system of financial integrity relies on good people as well as good procedures. All those with responsibility for handling or managing church funds need clear instruction regarding proper procedures. Just as importantly, they need to understand their role in stewarding the congregation’s resources as a sacred trust. When pastors and other key leaders take these responsibilities seriously it is far more likely that the church as a whole will as well.
Leadership rotation is also important in maintaining financial integrity. When the same small group of people is responsible for finances for too long a time, they may lose perspective or become lax in their oversight. Bringing new leaders into financial leadership at specified intervals brings fresh eyes and new perspectives and helps guard against any malfeasance by the nominated leaders or others.
2. Internal controls
Internal controls are the policies and practices that govern the day-to-day receipt and disbursement of funds. Internal controls govern the counting and recording of offerings and other receipts, protocols regarding signing checks and issuing payments, and procedures for the regular reconciliation of accounts.
3. Separation of duties
A key principle underlying internal controls is the separation of duties. Separation of duties ensures that no one person has access to more than part of the receipt or disbursement processes, creating a form of checks and balances. By separating duties, a church lessens the likelihood of undetected simple errors and curtails the opportunity for misappropriation of funds.
4. Giving records and statements
Keeping accurate records of giving and sending regular giving statements to donors is an important way to ensure that all donations are recorded accurately and used properly. A giving statement serves as a receipt, not only for tax purposes, but to assure contributors that all their gifts made their way to the church’s treasury. It is especially important to keep track of cash contributions by encouraging donors to place their gift in an offering envelope on which they write their name and the amount of their gift.
5. Financial audits
The cornerstone of a church’s financial integrity plan is of course the annual financial audit. An audit builds confidence in the financial processes of the church, identifies potential risk areas, and offers suggestions for improvement. Most importantly, it protects both those who give and those who handle the gifts. And for smaller churches, there are options for conducting an audit that are less expensive than using a certified public accountant.
6. Transparent communication
There is good evidence that honest, open conversation about money and faith promotes generosity and enhances giving. But it is also conducive to maintaining financial integrity. A culture in which money is a taboo subject treated with the utmost secrecy is precisely the environment in which financial malfeasance can flourish and go undetected. Louis Brandeis once observed that “sunlight is the best disinfectant.” Transparency and regular communication regarding church finances shed light on a church’s financial practices and help assure that problems cannot lurk in the shadows.
In some churches, particularly smaller churches, there may be a tendency to think the standard rules of handling money need not apply. In such situations, attempts to introduce financial integrity standards where they have been missing can be interpreted as judgment on individuals. Such is not the case. In fact, anyone involved with the church’s money should insist that proper protocols are in place to protect themselves from temptation and the possible appearance of impropriety.
Related Resources
- NEW — Keeping Our Sacred Trust: Assuring Financial Integrity, an online course to prevent fraud and financial misconduct in your church lewisonlinelearning.org
- Protect, Sustain, Grow: Best Practices For Handling Your Church’s Money Video Tool Kit
- 7 Policies Every Church Needs for Trust and Transparency by Bonnie Ives Marden
