Does your parish finance committee do what is necessary to sustain a vibrant ministry? Parishes elect or assign members to serve on a Finance Committee.
This team of people is responsible for themanagement and stewardship of parish financial resources. This crucialcommittee can have a significant influence on the sustained financial healthand growth of parish assets. When mismanaged, this group can negatively affectthe long-term financial viability of a parish – something no one wants to beresponsible for.
Church Finance Committee Duties and Responsibilities
1. Revenue Projections
It is difficult to budget without having a realistic idea of how much money will be available. Take a realistic approach to project revenues by analyzing historical giving, attendance patterns, and average member donations.
If your church is in the middle of a capitalcampaign, do not assume weekly giving toward the general fund will increasewhen members are stretching to designate funds to a building project.
2. Creating A Budget
The finance committee assists in establishingthe global budget based on revenue projections and allocates dollars toindividual departments.
The individual department managers areresponsible for creating their own budget estimates that are based onthe parish strategy, associated department goals, and resources that areallocated to support department goals.
Allow individual department managers to preparetheir budget estimates. This simple step will result in greater accountability,more accurate reporting, and increased reliability.
3. Budget Review
A budget is simply an itemized allotment offunds and therefore requires monitoring.
The finance committee should be monitoringthe budget every month by reviewing the actual dollars that came in, the actualdollars that went out and analyzing any variances.
Midyear adjustments may be made to the budgetwhen projections fall short or unexpected expenses come up.
4. Emergency Funding
Even the best of budget planning can go awrywhen an unexpected major expense arises. To offset this, allocate a percentageof budget dollars to emergency funding. Set aside a percentage of revenue to anemergency fund bucket.
Create a definition for an emergency anddon’t touch the funds unless a real financial emergency arises. Keep this fundgrowing year after year so that there will be financial resources availablewhen those unanticipated emergencies arise. This safeguard can prevent anunexpected budget variance.
5. Financial Reporting
Systematic financial reporting helps thechurch see how it is performing and adhering to the budget. Create monthly orquarterly reports and keep parish leadership apprised of spending andbudget variances.
If there is an effort to raise buildingfunds, show dollars that are available for the project and what percentage offunds have been raised. If there is a focus to pay down parish debt, report onthat also.
6. Responsible Stewardship
Parishes rely on the generous donations ofits members to do what it does. Being good stewards of those funds is a primaryresponsibility of the parish council and finance committee. There should be away to tie every expenditure to its support of this mission. Consequently, thisteam of dedicated people should challenge any spending that does not supportthe parish mission, vision, or strategy.
7. Safeguarding Parish Assets
The parish council, along with the financecommittee are responsible for ensuring that there are proper financial controlsof parish assets. This committee should be writing cash handlingpolicies and auditing the process of anyone who handles parish money. Thisincludes ensuring there are safe places to store cash, that no one is everalone with money and that there is constant supervision of members, volunteersor employees who come into contact with cash donations. Unfortunately,embezzlement does happen at parishes.
8. Ensuring A Profit Margin
Profit margins are how nonprofit organizationsgrow their capital. Since nonprofit organizations can’t take profits out of theorganization, they invest any dollars that are above expenses back into theorganization.
Parish budgets should designate apercentage of income for a profit margin.
For instance, if a parish brings in $500,000and budgets for a 5% profit margin, it will be saving $25,000 a year that canbe reinvested into church facilities. Imagine what 10 or 20 years of growthcould do with that safety net!
9. Debt Management
It is difficult to get a parish up andrunning without racking up some debt. However, a parish is limited in what itcan do if it is debt-ridden. The finance committee should have a strategy forpaying down debt, and that should be part of the budget. Paying down debt cancome through capital campaigns that are designated for debit reduction, or itcan be from aggressive debt payments. Either approach is fine, but the goalshould be to get the church as close to debt-free as possible.
10. Member Financial Teaching
Parishioners are only as giving as theirpersonal finances allow. The parish council can influence members by offeringclasses in personal finance, budgeting, and financial management. Helpparishioners get a handle on their finances and giving will inevitablyincrease.
11. Manager Budget Training
Parishes that employ people to manage variousdepartments within the parish should use the finance committee tohelp train church leaders on how to manage their budget, how to readand interpret financial reporting statements and how to address departmentalbudget variances.
A finance committee should be able to developbudget training and create a simple process to help managers become financiallyliterate.
The parish’s finance committee is a financialthink-tank for a church. Develop a finance committee that is committed tobudgeting, monitoring and, controlling how church funds are spent and yourparish will have the necessary resources to fulfill its mission, vision, andstrategy.
ParishSOFT Accounting includes the accounting functionality parishes and churches need to properly steward their finances. As you consider various accounting software options, keep in mind that software which isn’t specifically geared towards non-profit organizations may not have all the GAAP required features that you and your auditors need. Also, if you prefer an all-in-one ChMS and accounting solution, you have the option to integrate with ParishSOFT Family Suite and ParishSOFT Giving. Contact us at a 866-930-4774 x 6 to speak to our sales department or register for an upcoming product demonstration and see the software in action for yourself.