It wasn’t that long ago that trust was something given to specific organizations like a church. People trusted churches with their children, their spiritual development, and, yes, their finances. Sadly, that is no longer the case, not just because we live in ultra-suspicious times. Scandal, cover-up, and greed, often fueled by pride, ego, and a lack of accountability, have slowly eroded the trust. Now, churches must earn trust, especially when it comes to handling money.
Churches desiring to gain and maintain fiscal trust must commit to financial transparency. Even though talking about money is often difficult for many church leaders, it is essential to keep communication open and honest, submit the finances to a third party for review, and provide periodic updates.
Provide An Annual Financial Report
At a bare minimum, every church should provide an annual report summarizing the fiscal year that just ended and the budget for the upcoming fiscal year. Churches can use the fiscal year-end report as more than a vehicle to present the P&L and Balance Sheet; it’s a tool to reinforce the mission, cast vision, and celebrate all God is doing in and through the church. For your church’s next fiscal year-end report, consider adding these metrics:
Financial Recap
Walk the readers through the steps the church used to arrive at the reviewed fiscal year. Were there events that caused changes in the church’s operations, like staff expansion or reduction, building projects, or some other circumstance (think pandemic) of note? Use the financial recap to demonstrate the key performance indicators (KPIs) used to evaluate compensation and the increase (or decrease) to the ministry budget. As tempting as it is to use financial jargon, avoid it. Instead, explain the process in everyday language.
- Donations by Designation: Churches often have multiple giving designations in addition to the general fund, like benevolence or capital improvement funds. Show how much was given to each fund for the fiscal year.
- Donations vs. Budget: Showing the total amount donated to the general fund and how the total compares to the amount budgeted gives one facet of the financial picture – but it’s incomplete.
- Spending vs. Budget: Another crucial element in the church’s financial picture is how the actual spending compares to the budget. This adds another aspect to the finances – but not everything.
- Income vs. Spending (Cash Flow): This piece of the financial puzzle is the most helpful for non-financial readers of the report. This report shows all income (donations, designated giving, rental income, bookstore income, coffee shop, etc.) and the total spending to provide a year-end cash flow.
Non-Financial Recap
Even though this is an annual financial report, it should contain other non-financial contextual data. Here are a few examples of areas that provide additional insights into the report.
- Attendance: Churches whose mission is akin to the great commission grow by trying to reach those who don’t know Jesus and teaching them how to become Jesus’ followers. Tracking attendance is one way to measure the success of the church’s outreach efforts. Comparing the breakdown of adults, youth, children, and total attendance to prior years provides a clear picture of the church’s growth and areas that may require assistance.
- Giving Units: Another metric that indicates growth, not directly related to attendance, is giving units. When a giving unit (individual or family) decides to give back to God a portion of their financial resources through the church, it’s a sign of spiritual growth and should be tracked and reported.
- Ministry Successes: Highlighting ministry success shows the reader how their investment pays dividends. Succinctly describe the events that happened and the results. Tell how giving to the church impacted the local and global community.
Upcoming Fiscal Year Budget Breakdown
- Provide the upcoming fiscal year budget with both the amount and percent of change from the prior year in major areas like compensation, operations, ministries, etc., In addition, provide context and show the percentage of each category to the total budget and how that compares to healthy church metrics.
Obtain an Annual Financial Review from a Third Party
Churches desiring to gain and maintain financial trust should willingly submit their financial records to an independent party to ensure accuracy and demonstrate accountability. Hiring a third-party CPA, preferably one that is not affiliated with or related to the church or church staff, adds credibility and ensures best practices.
Give Periodic Updates
Churches don’t need to wait for the annual report to give financial updates. There are plenty of ways to keep the congregation abreast throughout the year. Here are a few examples:
- Weekly Emails: Most churches send some sort of weekly correspondence to their church with upcoming events and ways to join the church’s mission. Add a section on the email that provides weekly financial updates on giving and how it compares to the budget.
- Blog Posts: Churches with an online presence can add a periodic (monthly or quarterly) financial update, giving the congregation a deeper dive into the church’s finances. Blog posts are a great way to seek interaction with the congregation.
- In-Person Meetings: Nothing beats a face-to-face meeting during capital campaigns or financially trying times. People need to hear the tone of voice and see the expressions on their faces to fully experience the situation’s impact.
There is no magic button to hit when it comes to building trust, especially financial trust. Churches looking to build and grow trust within their congregation can start by providing comprehensive and easy-to-read annual reports, submitting their financial records to a third-party CPA for review, and continuing to provide updates throughout the year.
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