Avoiding Financial Trouble: 3 Critical Church Budget Errors Made by Elder Boards
When it comes to church finances, elder boards play a key role in keeping things on track. They’re like the financial watchdogs, making sure every dollar is used wisely for the good of the church and its community.
However, protecting church finances requires wisdom and experience, qualities that some elder boards unfortunately lack. Let’s take a look at three specific ways church elder boards can hurt their church’s finances rather than help them.
Church Budgeting Problems Every Elder Board Should Avoid
1. Placing Inexperienced People Over Finances
One of the cardinal sins in church budget management is entrusting financial oversight to inexperienced individuals. While enthusiasm and dedication are admirable traits, they do not substitute for the nuanced understanding of fiscal matters that seasoned professionals possess.
Imagine steering a ship through treacherous waters without a skilled navigator; similarly, inexperienced board members may unwittingly lead the church budget astray.
On the other hand, having seasoned veterans on the board brings a wealth of knowledge and expertise to the table. These individuals can offer invaluable insights, identify potential pitfalls, and chart a course towards financial stability. Moreover, their proficiency in financial matters enables them to ask the right questions, spot discrepancies, and ensure transparency—a cornerstone of effective fiscal governance.
2. Not Creating a Finance Committee
Another common misstep is the failure to establish a dedicated finance committee within the elder board structure. Without a designated body focused on financial matters, crucial decisions regarding budget allocation and resource management may lack the depth of strategy and scrutiny they deserve.
This oversight gap leaves the church vulnerable to inefficiencies, misappropriation, and even financial mismanagement.
By creating a finance committee, elder boards can mitigate these risks and unlock a host of benefits. This specialized group can provide oversight, conduct thorough reviews of financial reports, and offer strategic recommendations for a secure fiscal future.
On top of these benefits, the committee also serves as a forum for collaboration, fostering accountability and collective responsibility among board members.
3. Not Establishing a Finance Audit Committee
Lastly, elder boards must recognize the need of establishing a finance audit committee to safeguard the integrity of church finances. Without an independent body tasked with conducting regular audits, the risk of financial irregularities and fraud looms large. These kinds of oversights not only jeopardize the financial health of the church, but they can also erode trust and integrity within the congregation.
In contrast, a finance audit committee serves as a safeguard against budget misconduct or outright fraud, providing an additional layer of scrutiny and accountability.
By conducting comprehensive audits, this committee can identify potential vulnerabilities and ensure compliance with regulatory requirements. Moreover, the transparency afforded by regular audits fosters confidence among stakeholders, reinforcing the church’s reputation as a responsible steward of resources.
Pro Tip: Keep Your Finance Committee and Audit Committee Separate
Many elder boards are tempted to combine their church’s finance committee with their audit committee. However, many denominations and church accounting companies will insist on keeping them separate as they serve separate, distinct functions.
The finance committee focuses on the day-to-day financial operations and strategic planning. It oversees budget preparation, monitors cash flow, reviews financial policies, and advises the elder board on financial matters.
The audit committee, on the other hand, is primarily concerned with conducting independent audits of the church’s financial records and practices. It ensures compliance with accounting standards, assesses the accuracy of financial reporting, and evaluates the effectiveness of internal controls.
Separating these committees enhances transparency, accountability, and the effectiveness of financial oversight, in accordance with best practices in organizational governance.
Give Your Elder Board the Best Professional Help Available
Avoiding these budget blunders is crucial for the financial health of any church. It’s important for pastors and church leaders to make sure their elder boards are equipped to handle finances responsibly.
The best way to do that is by partnering with experts like Finch Accounting. Finch provides each of their church clients with a team of seasoned accountants and analysts. They also send monthly reports with important financial statements and metrics.
With their help, your church can navigate financial waters with confidence, ensuring that every dollar goes towards making a positive impact
Partnering for Ethical Financial Stewardship
In the face of these ethical challenges, executive pastors can benefit immensely from partnering with accounting experts who specialize in nonprofit and religious organizations. These professionals bring not only financial expertise but also a deep understanding of the ethical nuances inherent in church finance.
By collaborating with accounting experts at Finch Accounting, executive pastors can ensure that their church’s finances are managed with the highest standards of integrity and transparency. From establishing a deep understanding of your church’s finances, to conducting thorough accounting reviews and reports, their team can provide invaluable support in fulfilling the duty of stewarding God’s gifts.
Schedule a quick no obligation call today and discover why churches around the country partner with Finch to steward their finances.
Corey has 10 years of professional experience in financial planning and analysis. His previous areas of focus involved helping launch the Financial Services department of a large government contractor, where he developed the various reporting and budgeting systems.
Corey also actively manages Shorebird, a Registered Investment Advising firm that focuses on Financial Advising, Planning, and Investment Management for clients. He is also an adjunct finance professor at the University of California, Riverside for their graduate-level programs.
Corey received a B.A. in Business Administration at the California State University, San Bernardino; a Masters in Business Administration and a Masters in Finance from Indiana University’s Kelley School of Business.
Jonathan has more than 7 years of professional experience in corporate taxation and strategy with both public and private companies. His industry experience includes entertainment, church finances, medical device, and technology. Jonathan is also an adjunct professor at the University of California, Riverside (named a Best Business School by Princeton Review and named a Best Undergraduate Business School by Businessweek) and speaks at conferences on topics such as leadership and management.
Jonathan is a graduate of the University of California, Riverside and an MBA candidate at UCLA Anderson School of Management. He is a licensed Certified Public Accountant (CPA) in California.
Jonathan previously worked at PricewaterhouseCoopers, LLP where he specialized in corporate taxation.
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