Financial Ministry Principles For Today's Challenging Culture, That Can Reduce Financial Risks

1. The ideal financial budget anchors that can build a growing ministry which is sustainable over time.  Developing a balanced financial plan is critical with these in mind.

• Ministry programs 30%
• Salaries                 30% or less
• Debt service          30% or less
• Daily operations    10%

2.  A ministry missing financial balance functions much like a vehicle with a flat tire. A ministry missing financial balance will find it difficult to sustain its mission principles over time unless its flat is fixed. Flat tires develop very naturally as a ministry find it necessary to pull funds from one key area to maintain the growing demands of another.  

3.  A layered system of checks and balances is necessary to protect ministry funds and those that handle them, from possible accusations that can harm the most noble of ministry staff.  More layers develop the best quality of security and accountability.  For some ministries there is a lack of qualified persons to meet these positions. Each possible added person will less your risk.   

• The persons that collect the funds should be different from
• The persons that count received funds,
• The persons that deposit the funds,
• The persons that keep the books,
• The persons that write the checks,
• The persons that annually audit the books.

4.  When the ministry considers adding a building by purchase or construction. Review the Biblical principle of Luke 14:28 (KJV) Wise planning is critical to assure all is in order before a building is built or you may end up with a foundation missing a finished superstructure or lack the funds to maintain is daily operations. Critical elements to consider when developing your planning:

• Environmental issues that may need to be met for the property
• Community codes and govermental requirements for the property
• Room for reasonable growth without being land locked
• Cutting construction quality may result in a lifetime of growing maintenance issues.
• An adequate building that meets the expected use and attendance is critical for less risk missing this ractor can greatly increase ministry risk.
• Adequate furnishings and equipment to sustain the new building must be figured in
• Adequate cash flow to sustain not only the debt service but also the added daily expenses of the property's operation.
• Adaquate cash flow to sustain needed staff to meet the demands of the growing ministry. Most ministries will grow flowing a building purchase or construction program.
• Security risk factors should be reviewed and planned for the new property
• Potential disaster risk factors that could develop for the location or building should be reviewed

5.  A key person life insurance policy should be placed on key ministry personal when entering into a major financial commitment.  The untimely death of a pastor or other key person in a ministry at this time could present a critical financial loss.  I have found it normal for these ministries to experience a 25% to 35% decline in their finances and attendance with some much more as their attendees seek to deal with the loss in their own way. Some choose to avoid the loss by leaving, others in their discouragement and pain are left ministry immobile, instead of pulling together with each other. For more information on this subject please refer to page on our web site click here

6.  How to intelligently provide for your clergy and support staff.  A challenging area of the ministry that we find is often not dealt with in a balance manor.  This area of ministry can cause many lose ends, erroneous assumptions, misunderstandings, and unmet expectations that can develop growing problems for any ministry when there are missing agreed to written directives. For suggested principles click here

7.  Quality bookkeeping is critical for today's ministry.  Financial records in proper order can often make the difference in the interest rate you could qualify for by presenting a clear and correct picture of your financial position.  This also gives an indication of what the lending institution could expect in dealing with your ministry.  Properly developed financials will also lessen the risk of accusations and misunderstood income and expense paperwork.  Financial paperwork properly communicated and developed can also assist attendees in properly assissing the financial needs of the ministry and how they might be involved.  Anything less will always present the ministry with many developing issues that could result in missed opportunities and painful issues that could affect all areas of the ministry.

8.  Ministry reserves and financial safeguards if left out of the ministry plan can present some very unforgiving and possible destructive issues. We believe that outside professional investment advise is wise for these funds.  We believe it is wise to have several  safeguard financial funds placed into the budget and look at as an expense so that they are properly funded in a balanced manor for the ministry. This will insure they will provide the financial safeguard for their intended areas:

1. One that is equal to a minimum of six months of fixed and critical ongoing expenses although we feel twelve months best to financial income short fals that can happen to most any ministry from time to time.
2. One that allows for the proper matching of possible suggested maintenance requirements or the timely replacement of your property, equipment, and possible owned vehicles.
3. One that allows for anticipated future growth of the ministry

9.  Setting written and agreed to accountability limits for those that use provided cell phones, credit cards, cash funds, and checking accounts is vital in today's culture.  This helps to avoid accusations of misuse and discourages the development of an easy environment for dishonesty that might occur.

10. An annual financial review of ministry progress and goals is an important factor to place into the ministry calander.  Without goals and the ability to measure ministry progress against them, ministry direction and purpose can faulter.  This also brings a general accountability for both income and expenses that the ministry deals with and is projecting.  A quality review and communication of this information can greatly allow all in the ministry understand the ministry financial stengths and weakness and what should be adjusted or fixed.  

11. We believe an outside professional audit by a CPA firm that specializes in ministry organizations and understands their specifics, is important today.  A good audit should include a review of your financial procedures as well as the actual bookkeeping.  This draws a professional line "in the sand" of your financial records and provides a solid foundation for the following years. We suggest this should be done after major financial transactions as a major building project, treasure changes so the new one can start with a clean slate, or otherwise every three to five years. Internal audits should be done annually and reported to the ministry as a whole for review.

Embezzlement issues for ministries are on the rise today across all denominational lines, for large as well as the very small ministry as one of the most often reported  claims.  This happens usually because of the lack of checks and balances that have built in accountability procedures and proper audits in place.  How are your ministry procedures and safeguards?  

Rev (04/07)