Tuesday, November 18, 2008

Responsibilities of the Church Board

This is an Article we extracted from Crown.org Library Article.

Location: Church Administration

Responsibilities of the church board
by Crown Financial Ministries

Although the authority and responsibilities of church boards are as diverse as the churches they serve, there are some responsibilities that should be consistent and typical for all church boards. These are establishing policy, financial reporting, compensation review, and budget approval.

Establishing policy
One of the primary functions of the church board, regardless of the denomination or size of the church, is the approval, revision, and implementation of church administrative and legislative policies.

These policies should be recorded in the board minutes at the first board meeting of each fiscal year. Any policy revisions or new policy adoptions should be recorded in the minutes of the board meeting in which the revision or new policy was adopted. Then they should be added to the existing policy guide within one week of the revision and/or adoption.

Financial reporting
The board of each church should authorize an independent annual audit, based on generally accepted auditing standards; and financial statements should be prepared, following generally accepted accounting principles.

The auditing firm should do the following.
  • Have a thorough knowledge of current accounting standards and understand nonprofit organization and church finance.
  • Routinely prepare value-added management letters for their audit clients.
  • Help the church reduce its audit fee.
  • Understand the individual church's accounting system.
After the audit has been completed and a financial report has been submitted, the board should review the audit and either adopt it or reject it, with explanations for the rejection.
If accepted, the audit report can be presented to the congregation. If rejected, the board should resubmit the audit with its explanations to the same auditing firm.
The board also should receive staff/department head-prepared monthly or quarterly financial statements that reflect all financial transactions, including income, of the department or ministry.

Compensation review
In most churches in America, the church board generally establishes the compensation package for the senior pastor. The pastor in turn sets the salary of all staff members.

An annual review of the senior pastor's compensation package is vital. The review should focus on all elements of compensation—taxable and nontaxable items, salary, benefits, expenses, allocations, housing and car allowances, retirement, bonuses, use of church property, and reimbursements. In addition, the board should use this time to review the pastor's performance, establish objectives, and set performance criteria.

At the first board meeting of each fiscal year, the entire detailed compensation package offered and accepted by the senior pastor should be entered into the board minutes.

Budget approval
Each department or ministry head should submit to the board for their approval a departmental or ministry budget for the coming fiscal year.

In larger churches these departmental budgets are submitted to a finance committee. From these various department budgets, a general organizational budget is developed and submitted to the board for their approval.

After approval, the budget is usually presented to the congregation for its approval.
The board controller or church treasurer is usually responsible for enforcing the budget, reporting, and presenting budgetary revisions as needed.

In some churches, the board is little more than a representative of the people to the pastor. In others, the board is the governing body in all areas of church business. Whether the church board is passive or active, it has responsibilities that are consistent and should be constant and non compromising.

Sunday, November 2, 2008

Financial integrity in the ministry by Crown Financial Ministries

Financial integrity in the ministry by Crown Financial Ministries

Pastors Finances
“Well done, good and faithful slave. You were faithful with a few things, I will put you in charge of many things” (Matthew 25:21). The few things that Jesus is talking about in this particular scriptural passage refer to money or finances. The many things refer to spiritual responsibilities. If pastors prove their honesty and integrity in temporal things—things that do not last, such as money—God then can trust them with the more important things, such as the spiritual well-being of people.

However, if ministers prove to be lacking in financial integrity, it is unlikely that they will have a consistent or spiritually auspicious ministry. If God cannot trust them with the lesser things of money, how can He trust them with the greater things of spiritually influencing the direction of people's eternal lives?

Administration of finances
One of the wisest choices pastors can make with regard to the finances of the church is to delegate handling and spending money to a business administrator, treasurer, or finance administrator. Although some pastors are good business people and good administrators of finance, God primarily called pastors to shepherd the flock of Christ, not to manage the finances of the church.

In addition, if pastors delegate paying bills, writing checks (pastors should neither sign nor cosign checks), collecting money, depositing money, and making large purchases to trustworthy financial administrators who have a reputation of honesty, they will eliminate suspicion and questions of mismanagement before the questions arise. Even though the pastor may not physically handle any of the money or write any checks, he or she is ultimately responsible for good stewardship and faithful management of the finances of the church. Pastors should insist on the following.

1. Each department should submit the next year's operating and expenditure budget at least three months prior to the end of the current fiscal year. Once the departmental budget has been approved, special permission must be granted by the appropriate administrative officials to spend more than has been allocated.

2. Each department and/or church ministry and/or outreach should keep accurate records of annual income and expenditures.

3. All departments that have substantial expenditures and/or income (an amount equal to or exceeding 30 percent of the church's overall income or expenditures) should have an independent audit (a separate audit in addition to the church's annual general audit).

4. The church should have an annual audit by a professional independent CPA, which will be made available to every member of the congregation at a regularly scheduled annual business meeting. This CPA should not be a member of the church; nor should any of the accounting firm's employees be members of the church or be related to any staff member, employee, or board member of the church.

Position of integrity
Because pastors hold a position of trust in the opinion of most members of a congregation, pastors must avoid situations that may tend to lead to mistrust or suspicions of financial mismanagement by the pastor. In order to avoid this potentially compromising situation, pastors need to consider the following.

1. Pastors should never take any money, collected for any reason, home with them. Nonetheless, other than petty cash, money should never be kept at the church for any reason.

2. Pastors should never deposit offerings into the bank. The finance administrator, business administrator, or a member of the board delegated by the business administrator should make deposits. Pastors should never touch, for any reason, any offerings taken for any purpose. They need to treat money given to the church like they would a red-hot stove—stay away from it.

3. Pastors should never cosign a note for the church. Pastors should never allow their names to be placed on the deed (or any proof of ownership) of any property owned by their churches.

4. Pastors should exercise prudence in giving gifts and benefits (graduation gifts, gifts to staff, and so on).

5. Pastors should avoid accepting tithes (especially if the tithe is paid in cash) from members or attendees. They should encourage the givers either to give their tithes at church or mail the tithes to the church. In fact, pastors should try never to accept any gifts on behalf of the church. They should encourage the givers to give the gifts to their church treasurers, financial administrators, or business administrators. If it is necessary for pastors to accept gifts on behalf of their churches, they should issue receipts for the gifts immediately upon the acceptance of them.

6. Pastors should avoid accepting honorariums in cash. Insist that all honorariums be paid by checks and paid to the order of their churches. This way, the church business administrators can rightly credit the honorariums as income to the pastors. If pastors must accept cash, the giver should receive a cash receipt for the amount of cash given. A copy of the receipt should then be given to the church business administrator.

7. Pastors should never solicit gifts, rewards, prizes, or benefits for themselves.

8 Pastors should, if at all possible, refuse all gifts, rewards, prizes, or benefits that compromise the integrity of the ministry.

9. Pastors should never borrow money from pastoral accounts for personal use. Likewise they should not use their church's credit cards or charge accounts set up for ministry use for personal use or benefit.

10. Pastors should not use church property or equipment without written approval from at least one board member, business administrator, or financial administrator.

11. Pastors should not expect reimbursements unless accurate records are submitted, along with a receipt confirming the expenditure and attesting to the fact that the expenditure was ministry related.

12. Pastors should not request an advance on their salaries unless warranted by an emergency and then only after submitting a request to the financial administrator or business administrator in writing and receiving approval of the advance in writing.

13. Pastors should never have the church's CPA or attorney prepare his or her personal income taxes.

One of the easiest, most hurtful, and professionally devastating traps for pastors to fall into is that of financial indiscretion. For this reason, pastors must avoid every appearance of compromise and even the slightest hint of financial impropriety regarding the finances of the church. However, by being faithful to Jesus' admonitions, seeking His guidance in prayer, and being cautious by staying far away from any financially compromising situation regarding church finances, pastors can minister freely knowing that they are not guilty of financial imprudence.