Posted in balance sheet, expense, For the Board, fundraising, giving, income, leadership, mission, money, online, operations, organization, planning, stewardship, tax status, Thank You, website, tagged church, church operations, finance, financial health, fundraising, leadership, ministry, money, nonprofit, operations, planning, staff, stewardship, website on December 8, 2011 |
Earlier this week Guidestar posted the results of a survey that asked nonprofits about their fundraising and operations for 2011. Here are some of the highlights:
- 41% of Charities saw an Increase in Giving for the first 9 months of 2011 over 2010 (28% had less income & 31% no change)
- 65% of nonprofits saw an increased need for their services– over the past 9 months compared to 2010
- Approximately 50% of charities have some financial stress – income, cash flow, # of donors, non-donor income
For more information, visit Guidestar’s website
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Posted in administration, audit, balance sheet, expense, finance, For the Board, income, leadership, ministry, money, operations, resources, stewardship, tagged church operations, finance, financial health, fundraising, giving, ministry, money, nonprofit, operations, planning, staff, stewardship on November 29, 2011 |
Unlike most commercial businesses, which have a common standard by which to rate their financial operations and health, churches struggle to identify healthy financial norms.
Part of the reason for this struggle has to do with the following reasons:
- Churches are faith based organizations
- Church are contextual
- Churches are organized by mixed polity (denomination or independent)
- Churches are exempt from many IRS and government reporting requirements
- Churches vary in size, financial support, and ministry
- Churches don’t usually follow GAAP (General Accepted Accounting Principles)
- Churches are run by volunteers
However, while all of these factors cause incongruity, there are a number of common ratios and principles that many churches share related to income, expense, debt, membership and worship attendance. I have highlighted a few of these in some of my earlier posts (please see: Financial Rules: Ministry Distribution), but another resource is a new financial database that was created by Capin and Crouse, CPA. (more…)
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Posted in administration, audit, balance sheet, expense, finance, income, money, operations, tagged church, church loan, church operations, finance, financial health, money, online giving, operations, staff on August 17, 2011 |
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Many churches rely on volunteers to keep their financial records, with mixed success. I recently was working with a church for a loan application, and after seeing their financial reporting, I suggested, “You might want to consider hiring a nonprofit bookkeeper.”
The pastor’s response, “Where would I find one that I can trust?”
I didn’t have a perfect answer for the church, as I was not located in their region of the country, but I did suggest that the church could check with a few CPA firms or other churches in the area for a suggestions. In addition, I found a great article on the nonprofit website Blue Avocado, which offers a free test that churches or other nonprofits can use to see if the bookkeeper really knows their stuff.
Here is a sample question, from their blog post “Nonprofit Bookkeeping Test”:
Which of the following are typically included in the bank account reconciliation?
a) Bank service charges
b) Outstanding checks
c) Deposits in transit
d) All of the above
To view, or take, the full test, click the link above the question.
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Posted in audit, balance sheet, finance, giving, income, leadership, mission, money, operations, value on June 2, 2011 |
Many churches and nonprofits have savings and endowment funds, but in many cases, these funds are under utilized and poorly managed.
For example, I visited a church recently that had over $150,000 sitting in a savings account at a local bank, earning around 0.25%. That means each year the church is only earning $375 in interest.
In comparison, if the church had invested in any combination of money market funds, cd’s, or the stock market, it could have earned a significantly higher amount- at worse, a $150,000 in a money market account would have paid closer to $1,125 .
So let’s say that a church does decide to better balance its portfolio…where should it begin?
Well, there is no single answer, but here is a list of items to start the process:
- What is our short term and long term objectives for this money?
- What is our current financial position and health?
- What is the future of our mission/ministry?
- Where the funds designated for a certain use? (more…)
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Posted in administration, balance sheet, church extension, disclosure, education, expense, facility, finance, leadership, loan, ministry, money, operations, organization, research on May 31, 2011 |
Last week in a meeting someone asked, “How much money should a church keep in its emergency savings account?” and it got me thinking…. what a great idea for a blog post.
In personal finance, most financial advisers will tell you to keep between 3-6 months of expenses in a rainy day or emergency cash savings account. The reason being that if something catastrophic happened to you (such as your house burns down or you lose your job), you then have some money available to help you recover.
It makes sense…and so what about the original question.
Well, as it turns out, most financial church leaders would also advise nonprofits to keep around 6 months worth of expenses in a cash equivalent or emergency savings account. The same idea applies, and the purpose of this money is to cover general operating expenses in the event of an emergency. This way the church knows it has money set aside to help cover payroll, mortgage payments, and other expenses.
Now let me be clear, this money is not to used for operations, and it should be set aside in a separate account (protected).
In best practices, this money is usually invested in an account that is very safe, accessible, and that offers limited risk. Some churches will invest this money within their church denomination’s extension fund (like Church Extension), a money market account, or a savings account. It is not smart to put this money in a stock account or other investment vehicle that has risk or that takes multiple days to transfer.
Beyond the general 6 month rule, the following other factors can be considered:
- Is there a way to use this money to help the church’s financial goals?
- Does the church have a large amount of debt that may cause this amount to be higher? (more…)
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At a recent Church Finance conference that I attended, I participated in a seminar that discussed the various audiences that churches have for reporting their financial information. The discussion began by listing some of the groups that receive financial data both inside and outside the church.
At first, the obvious groups of the church’s governing structure were listed:
- Church Board (council, synod, etc)
- Church Officers (president, moderator, chair, treasurer, financial secretary, etc)
- Church Staff (pastor(s), administrators, etc)
Then, after a short pause, the additional groups were added:
- Affiliated Ministries (schools, daycare, homeless shelter, food pantry, etc)
- Sub Groups within the church (Sunday school leaders, Fellowship Chair, Elders’ Chair, etc)
- Denominational Offices (national/general Offices, middle judicatories, etc)
- Banks or Lenders
- Government (federal, state, municipal)
After listing each of these groups, we went back through to discuss how each group would use the financial data, why they would want it, and in what ways we could provide financial data in a vehicle that would be easy to understand based upon the needs of the audience.
For example, a sub committee or group within the church may only wish to know the detailed information about their budget and expenses each month, while a bank may wish to know more about the general income and expense of the church quarterly. And in both cases, the information provided and the manner to provide it is very different.
Beyond just the type of reports that churches can create, we also discussed how a dashboard can be another helpful way to report and track specific goals or areas. Dashboards also give readers (viewers) an easier method to understand financial information, if they are not sophisticated financial readers. One good example of a dashboard is from the Indianapolis Museum of Art, check it out at http://dashboard.imamuseum.org/
So if you are a church leader or a person tasked with financial reporting, take a moment to think about who your various audiences are and how you can change your reporting methods to assist the leadership of your organization. After all, we have all been in meetings where we provide all kinds of useful financial information that just gets tossed in a pile, because our audience can’t read it.
Photo Credit: audience for “Prediction Markets: Tapping the Wisdom of Crowds”
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Posted in balance sheet, finance, loan, value on June 22, 2010 |
>For many people and churches, finance and accounting seems to be a separate language…and that is very okay (We all can’t be experts in everything. I always have to ask my wife to help me with my spelling). However, even as a financial newbie, there are some basic terms and items that you should know.
One of these terms is ‘Balance Sheet.’ Simply stated, a balance sheet shows the net worth or value of an individual or organization. On one side of the report is a list of an organization’s Assets (think cash, stock, equipment, etc) and on the other side is a list of the organization’s Liabilities (debt) and Equity (worth of company).
So why is it called a “Balance Sheet?” My accounting professor would tell you that it gets the name because the two sides of the report balance. Assets = Liabilities + Equity.
Still confused? No problem, below is a picture showing what a simple balance sheet might look like (click on the picture to zoom):
Thus, the purpose of a balance sheet is to show the value of an organization, and it can be a helpful tool to assist church leadership as they consider their investment options or if they can afford a loan.
For more information about Balance Sheets, or the other 3 important financial statements, feel free to check out what the textbook says. McGraw- Hill Text Book.
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