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 the management and stewardship of parish financial resources. This crucial committee can have a significant influence on the sustained financial health and growth of parish assets. When mismanaged, this group can negatively affect the long-term financial viability of a parish – something no one wants to be responsible 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 capital campaign, do not assume weekly giving toward the general fund will increase when members are stretching to designate funds to a building project.
2. Creating A Budget
The finance committee assists in establishing the global budget based on revenue projections and allocates dollars to individual departments.
The individual department managers are responsible for creating their own budget estimates that are based on the parish strategy, associated department goals, and resources that are allocated to support department goals.
Allow individual department managers to prepare their 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 of funds and therefore requires monitoring.
The finance committee should be monitoring the budget every month by reviewing the actual dollars that came in, the actual dollars that went out and analyzing any variances.
Midyear adjustments may be made to the budget when projections fall short or unexpected expenses come up.
4. Emergency Funding
Even the best of budget planning can go awry when an unexpected major expense arises. To offset this, allocate a percentage of budget dollars to emergency funding. Set aside a percentage of revenue to an emergency fund bucket.
Create a definition for an emergency and don’t touch the funds unless a real financial emergency arises. Keep this fund growing year after year so that there will be financial resources available when those unanticipated emergencies arise. This safeguard can prevent an unexpected budget variance.
5. Financial Reporting
Systematic financial reporting helps the church see how it is performing and adhering to the budget. Create monthly or quarterly reports and keep parish leadership apprised of spending and budget variances.
If there is an effort to raise building funds, show dollars that are available for the project and what percentage of funds have been raised. If there is a focus to pay down parish debt, report on that also.
6. Responsible Stewardship
Parishes rely on the generous donations of its members to do what it does. Being good stewards of those funds is a primary responsibility of the parish council and finance committee. There should be a way to tie every expenditure to its support of this mission. Consequently, this team of dedicated people should challenge any spending that does not support the parish mission, vision, or strategy.
7. Safeguarding Parish Assets
The parish council, along with the finance committee are responsible for ensuring that there are proper financial controls of parish assets. This committee should be writing cash handling policies and auditing the process of anyone who handles parish money. This includes ensuring there are safe places to store cash, that no one is ever alone with money and that there is constant supervision of members, volunteers or employees who come into contact with cash donations. Unfortunately, embezzlement does happen at parishes.
8. Ensuring A Profit Margin
Profit margins are how nonprofit organizations grow their capital. Since nonprofit organizations can’t take profits out of the organization, they invest any dollars that are above expenses back into the organization.
Parish budgets should designate a percentage of income for a profit margin.
For instance, if a parish brings in $500,000 and budgets for a 5% profit margin, it will be saving $25,000 a year that can be reinvested into church facilities. Imagine what 10 or 20 years of growth could do with that safety net!
9. Debt Management
It is difficult to get a parish up and running without racking up some debt. However, a parish is limited in what it can do if it is debt-ridden. The finance committee should have a strategy for paying down debt, and that should be part of the budget. Paying down debt can come through capital campaigns that are designated for debit reduction, or it can be from aggressive debt payments. Either approach is fine, but the goal should be to get the church as close to debt-free as possible.
10. Member Financial Teaching
Parishioners are only as giving as their personal finances allow. The parish council can influence members by offering classes in personal finance, budgeting, and financial management. Help parishioners get a handle on their finances and giving will inevitably increase.
11. Manager Budget Training
Parishes that employ people to manage various departments within the parish should use the finance committee to help train church leaders on how to manage their budget, how to read and interpret financial reporting statements and how to address departmental budget variances.
A finance committee should be able to develop budget training and create a simple process to help managers become financially literate.
The parish’s finance committee is a financial think-tank for a church. Develop a finance committee that is committed to budgeting, monitoring and, controlling how church funds are spent and your parish will have the necessary resources to fulfill its mission, vision, and strategy.
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.