Financial Accountability in Church Administration

By January 2, 2011 How to Make a Budget

The American public generally has high expectations of religious organizations and churches. For the most part, donors and attendees recognize that enormous needs exist that the church is called upon to meet, and they usually want to respond adequately to help the church meet those needs.  However, they also want to be assured that the funds they give, many times sacrificially, are being used effectively and that the church is actively involved in ministering in a way that is pleasing to the Lord. So, there can be no acceptable alternative to financial accountability.

What is Financial Accountability?

Financial accountability is based on the principle of financial stewardship. A steward is one who occupies the position of manager of the owner’s possessions. He or she is required to exercise responsible care over funds and assets entrusted to him or her. 

Few stewards attain the position of honor and trustworthiness without submitting to a system of accountability, a system where clear explanations of all financial activity are detailed, recorded, and reported to donors, constituents, and/or attendees.

Because American tax laws provide special tax treatment of churches and religious organizations, churches are being, at the very least, deficient if not deceptive if they don’t fully disclose all financial actions and transactions.

Several organizations provide leadership and counsel in the area of financial accountability for churches and Christian nonprofit organizations. The Evangelical Council for Financial Accountability (ECFA) has established standards to regulate proper systems of accounting, board operations, disclosure of finances, and fair treatment of donors.

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Accountability by a Board

The importance of a church having an active board cannot be over emphasized.

Whereas neglect of financial accountability by a church board can lead to suspicion and mistrust, active involvement protects the integrity of the church, its leadership, and its objectives and ensures adherence of policies mandated by the board.

A church board should meet at least semiannually but preferably monthly. Meetings should be more than listening to the pastor’s or board chairperson’s reports and rubberstamping his or her recommendations.

ECFA recommends a church board of no less than five people, none of whom are staff members and/or department heads (except for the senior pastor who is generally recognized as a member in standing of the church board and all church committees, departments, and ministries) or related to each other by blood or marriage.

Recording Board Actions

The actions of the church board should be recorded in detail by written minutes. The minutes are then to be signed and dated by the board secretary and distributed to all members within a week after the meeting concludes. These minutes should be read at the next board meeting and approved as read or as corrected by the board.  The actions, responsibilities, authority, and functions of the church board can be greatly diversified from church to church.

In general, all church boards are responsible for approval and revision of church administrative and/or legislative policy; serving as the church’s administrator of financial accountability; authorizing an annual independent audit of the church’s financial actions and transactions; authorizing the church’s operating budget; authorizing any major church acquisitions (property, equipment, assets); and reviewing, revising, and/or authorizing the senior pastor’s compensation package.

Conclusion

Day after day, thousands of church employees and staff personnel work tirelessly and selflessly to fulfill the church’s obligations as established by Jesus, only to find many within the community casting suspicions on them due to the highly publicized mismanagement and deceptions of a few.

By establishing and submitting to a system of financial accountability, pastors, staff members, and churches can eliminate unnecessary suspicion of financial mismanagement and mistrust.

Originally Posted January 2, 2011