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Thursday, January 10, 2013

Ask The Matriarch – The Money Mystery

This week we’re looking at a question that I suspect most of us have faced in some form; I know it’s high on my list of “things that kept me awake in the small hours.”  So for those of us who were NOT accountants in our first careers –

Dear Matriarchs-

I need some practical help!  Our congregation's Annual Meeting is quickly approaching and I really don't understand the whole process of financial recording, bill paying and budgeting.  I've tried to get a handle on the monthly reports, but my background is in English literature!  We never covered this topic very well in seminary and I'm just at a loss.  The temptation is to trust the people who are doing the work and let it go, but that doesn't seem right.  There isn't any indication of a problem, it's just that the treasurer has designed his own program and nobody seems to understand how it works except him!  Our denomination requires an annual internal audit, but that hasn't happened for several years.  I need some suggestions on how to get through my first Congregational meeting without looking like a complete idiot and then for the longterm, how should a new pastor go about setting up "best financial practices?"

Thanks for your help,
Pr. Penny Farthing

And our first response, from Terri:
This is an excellent question. I learned nothing about church finances in seminary - everything I have learned has been on-the-job "training."

 In my experience every church has a slightly different way of managing and reporting their finances. Some church have very simple financial reports because they have no investments and function on a cash in-cash out basis. Reports of this nature are usually much easier to grasp, once one understands the reporting process used and how it presents the cash in and cash out. Churches may use Quicken or another Church Management resource. Other churches I have served that have multiple investments and a large budget are much more complicated. However I can usually find someone on staff or the volunteer treasurer who can explain to me the accounting system used and how to read the reports. After a few months of receiving reports they begin to make sense to me. If one does not have knowledgeable staff or volunteers to help one understand the reports then one should seek out an accountant who can do this. It may also help to use an accounting system for one's personal finances (Quicken, or something like that) to become familiar with how reports look and are tracked over time by the program.  Lastly, if the church uses a formal Church Management program it is usually possible to have a training session with company. The most important thing is to be proactive in learning the reporting system and becoming comfortable with it. They really are not as daunting as they seem at first.

Terri blogging at Seeking Authentic Voice
Kathryn offers advice:
This is a great question and applies to churches of all sizes since just about every place has a different system and so much depends on the people/person in charge of the reports/checkbook/information.

My first piece of advice is that you HAVE to keep at it. Even the attempt to understand it will be appreciated by the vast majority of Treasurers. Often those who 'do math' speak a different language, but don't even realize that they do. If we take the time to understand it, then it means that we are taking the time to understand them and it means we can help translate for other church officers and members who don't get it either. Ask questions - even if it feels like a dumb questions. I have asked some doozies, but the more you work at it and ask, the more you'll understand and be appreciated for the effort.

One thing that helped me when I was in a smaller congregation was taking the church budget and dividing it by 52. That made it plain for me to see how much we needed to 'bring in' every week in order to keep the church going. Yes, it sounds crass, but breaking it down into that smaller number helped me to see things the way the finance people do and in turn helped we find ways to help balance those unsexy heating oil/repair costs with the far more fun mission and ministry costs (hint: it's ALL mission and ministry).

Finally, choose your battles. The latest in computer software means that there is certainly an easier way to keep up with the financial side of church life than is currently being done. BUT, the way the Treasurer does it is a personal choice by them and they will take it that way if a suggestion to change is made. In some cases it may be worth it. However, in far too many - it's not.


And finally from “Soul Wiggles” --

I have a young woman shadowing me for a semester.  Yesterday she came in after I had just spent two hours with our finance task force.  Just yesterday I encouraged her to take accounting and business courses in college in preparation for ministry!  I took a graduate certificate course on pastoral administration that we referred to as a "mini MBA".   It was suggested in the course that if we did not have an excellent background in finance, that we seek out an expert in each congregation we serve, to work closely with us and explain the numbers, the trends, the reports, etc..  

The congregation I serve moved this year from a cash basis accounting system to accrual accounting, in an effort to be more transparent to the elected leaders and congregation.  It is a substantially different method of reporting, and caused us a lot of confusion until we met with a couple of CPAs and asked a lot of questions.  After 9 months we're starting to understand the difference and get a better handle on our finances.  I wish we had started the process with a CPA conversation!  

All of which is to say, I do not have a finance background, and did not even realize how much I did not know (not did anyone else on the executive team or council!) until we sat with the accountants.  I thought I had a pretty good handle on the reporting system, until I began to realize how different the two accounting systems operate.  

Soul Wiggles


Thank you, Matriarchs! Much to think about here, and much that is very helpful.  I like the advice to ask-ask-ask – and to draw on the wisdom of experts in or out of the congregation.  It was very helpful to me, I remember, to serve on the board of another community organization where the monthly financial reporting was very well done. 
And -- again from my own experience--there needs to be at least one person OTHER than the Pastor and OTHER than the Treasurer who understands the bookkeeping and accounting – Treasurers (and clergy) can get sick, have accidents, move away and even die in office—so it is imperative that a standby person have the appropriate training. 
What has your experience been in this area?  What did you find helpful?  And what mistakes did you learn from?  We look forward to your comments – and don’t forget that we also welcome your questions, which you can send to askthematriarch[at]gmail[dot]com.


  1. A couple of thoughts - usually (when I lead our Vestry retreat) I have our treasurer walk through how the financial reports work. It's a refresher for me an (old) Vestry members, and it's a gift to new Vestry members, who often are just as in the dark as their pastor! Second, "Reading Financial Reports for Dummies," which is quite readable. Remember - it is relatively straightforward: you have income (pledges, loose plate, income from rental of space, endowment income which may be restricted) and expenses (salaries and benefits, materials, building expenses including utilities and such, judicatory assessments, etc). Ideally expenses should be less than income. Do you have a finance committee? Don't be afraid to ask what I call "the dumb question." It may sound dumb to you but it really isn't...usually someone else in the room has the same question. Hang in there, and remember that more information is better than less.

  2. (Whoops. Needed to edit myself.)

    In my first call, I lived through the transition from one treasurer who was excellent at keeping the checkbook to another who had to clean up the mess the first treasurer left behind and re-record everything for the computer. (The retired treasurer could not, for instance, remember where she had recorded the electric bill, so she just made a new category the next time. The bills ended up in four different line items.) The unwinding of those complications in collaboration with the new Treasurer proved to be a gift to me, so my first piece of advice is "figure out who understands the financials, and have that person talk you through them." If there is no such person, that's a problem for the church, but do not lose hope. If there is a larger church in the area that employs a bookkeeper and uses the same program (say Church Windows), ask the pastor there if you can have a consult with the professional she/he employs. Ask around further and you may find you have a colleague who is naturally good at this aspect of ministry. He or she will be shocked! shocked! if you express interest, because most of our colleagues are, as the questioner pointed out, willing to stick heads in the sand.

    My second piece of advice is "teach yourself to talk about the money." I soon realized that many of the lay leaders holding fiduciary responsibility and authority had a hard time reading the reports, too, and were particularly perplexed by the "Budget Year-to-Date" line. (If I had a dollar for every time I've explained to a Trustee or Council member that Budget Year to Date is divided by 12 and does not reflect the ebbs and flows of the seasons, I could take you all out for a Starbucks to discuss this further.) I began to make it a practice to follow certain mundane portions of the budget, starting with things as simple as the electric bill. What were the monthly bills like? Did they amount to roughly a twelfth of the annual budgeted amount? If not, were there predictable seasonal factors? (Shorter days? Use of air-conditioning?) If I could explain it to myself, I could explain it to others!

  3. I would add that you need to dig into the question of the internal audit and find out why there hasn't been one - and make sure that they are put in place going forward. If its your denomination's policy, then it should be a no-brainer. You are likely to have someone in your congregation with the relevant skills. If you don't then a sister-congregation is likely to have someone. That also addresses the need to have someone other than the Treasurer, and the Pastor (because you will learn this stuff, really...) who knows their way round the books. (By the way, I have a liberal arts background and still count on my fingers when no-one is looking, but I ended up running a small company and needing to learn this stuff fast - which I did by asking TONS of questions of our admin person and our accountant - so really it can be done !)

    1. Yes, Alision, I agree - both internal audits (done by members of the church) and external audits (done by outside hired professional CPA's) are important. Most important to make sure the auditor understands how to do an audit for a church non-profit and how it is different from other businesses including other nonprofits. In particular be careful what is included in the "operational income" - many bequests and investments are assets not income, although they may produce a bit of income for the operation of the church.

  4. I wish I had had a copy of this question and all these responses a few years ago when I served on an advisory committee for Austin Presbyterian Seminary. When I advocated adding a course in basic finance to the curriculum I was greeted with appalled silence!

    1. And you were so right! In one of our classes, a pastor-professor mentioned the capital campaign going on at his church, and a student wanted to know what a capital campaign is. I suddenly realized that there was no place in seminary anyone was going to learn that, or related information, unless they happened to be interning at a church at the right time.

  5. As a tentmaker who runs a business part of the week, I have to point out that in most companies, the situation you described — a treasurer who has designed an accounting and reporting system that no one else can understand and therefore no one else can check — is a huge red flag. I suspect it's much more likely that he simply has designed one that he CAN understand, but why not use something that's accessible to everyone? I hear you saying that you're not comfortable with financials yet, and I agree with the suggestions above for mastering them, but if everybody's struggling, you aren't the problem here.

    One of the reasons people don't like to deal with the money aspects of church life really is that the financials often are poorly done by a volunteer who is out of his depth. Good stewardship requires a more transparent system so that everyone knows where the congregation stands financially and what needs to happen going forward. Although we may have a few more sources of income, most congregations have no more categories of expenses than the average household.

    Definitely get back on track with the audits and hold firm to the requirement that the congregation comply with all denominational policies. Since you haven't had one for several years, maybe this one needs to be by a professional. We have an accountant in our congregation, but we intentionally trade audits with another congregation who also has an accountant. If you bring in someone from the outside, perhaps that person can gently suggest a better system.

    Back to your question: Amazon has quite a few books on church finances and budgeting. I sort of remember that the Alban Institute does too, but I'm nowhere near my church office right now. Make it a group study with your leadership team (session, vestry, whatever) so that everybody is comfortable. Meanwhile, thank the treasurer often and publicly so that this isn't perceived as an attack on him. It's not. It really is a responsibility others should take up.

  6. Just to follow up on Suzy's point about the risks attached to accounts being done by the volunteer out of their depth (which may of course NOT be the case here, but I agree that lack of transparency should be a red flag).

    About 15 years back, my husband took on the presidancy of our daughter's day-care centre, which was run as a parental co-operative rather than a business. Not a church, but similarities in that we rented premises and employed staff, but with key roles such as treasurer handled by volunteer parents. Unfortunately the incoming leaders discovered that the outgoing treasurer had made a catastrophic accountancy error (basically he'd declared our cash reserve as income by accident then spent it all) meaning we ran out of money (as in couldn't pay our employees) and had to close. Sadly this was discovered too late - a second pair of eyes on the accounts a year earlier would probably have spotted it in time to deal with the situation. It was a truly horrible experience for all concerned, and not one that a church would ever want to go through. So really, audits matter.

  7. I second Alison in raising the flag about a required review/audit that is not happening. In recent years I was part of a motion from PResbytery REQUIRING a congregation to hire a formal auditor because they had not had a review done for several years (and because the financial reports we were getting from them made no sense--4 reports in 2 weeks with different numbers). It cost them much much $$$$. Better to keep it happening regularly than have to hire someone to do 4 years at once

  8. Just a word of encouragement, your folks have been through more vestries together before you. They likely know what kind of reporting to expect. I've always been surprised at my first vestries how all the anxieties I have never show up. It's usually over much more petty things. All the wisdom above is awesome! And will take a long time. You will be fine for your AGM. Hear people's questions and promise to seek answers. You will be great.

  9. Hi there - I second all of these and particularly the one about your learning about it as much as you can. Numbers dont to me either! another English major! Ask a lot of questions of the finance people and dont let them intimidate you with obfuscation - make them keep at it until you really get it. You are smart enough, this is just not your native tongue. Read a book if it helps, but I found it was better for me to take a course in Non Profit Finance Management (luckily local university has this!) so I could ask lots of questions. A community college course in basic accounting is still on my (unfun but important) bucket list.

    The dirty secret, as has been mentioned here, is that most people dont really get the finances, and most volunteers ARE over their heads. So, they often say confusing things because they dont really know what they are talking about, or they want to hide the fact that they know less than you think they know. And, people who dont understand the whole picture tend to zoom in on the little stuff that doesnt matter that much and get really worked up about it. So, this is a pastoral issue as well as a business one, as you help your people navigate the discomfort of feeling less-than-competent and/or overwhelmed.

  10. My experience of Congregation AGMs, is that the Treasurer presents the budget and financial report and answers any questions, so you are unlikely to be caught out there. As this is your first year, ask lots of ‘dumb’ questions, even intentional ones, such as – I notice our denomination requires an internal audit, when does that happen or who does it, or whatever. You could also ask the Treasurer what the benefit of their accounting system is compared to what other congregations use. Ask these questions early, as the longer you are there, the less likely they are to be perceived as you being in learning mode.
    Maybe one Leaders meeting/ Church Council you could have some time set in the agenda for people to talk about the finances and financial reporting, what they find helpful, what other information would help them to make informed decisions. You will need to ensure this is not seen as attacking the Treasurer. If your denomination has a clear list of responsibilities for Leaders/ Church Council then you could work through list with them, looking at everyone’s strengths and weaknesses, and think about appropriate training for the leadership group as a whole. I am often reminded by my husband that most people in the church don’t spend all week thinking about church issues the way the Minister does :)
    One thing that surprised me coming out of seminary was that people are usually happy for me to say, I don’t know, or I’ll look that up and get back to you – this applies to Biblical questions, theology, finances, and who is doing the flowers this Sunday.
    you asking questions may lead to a space where others also feel safe to ask questions, and not just about the finances.

  11. Friends, thank you for all this wisdom and comfort -- you are amazing -- we could among us TEACH the course on parish finance, and/or finances... I'm curious about how much our denominational policies, or "canon law," or congregational custom, allow or expect clergy to be involved in financial decision-making and management. Friends have ministered in places where they did not have authority even to co-sign church cheques, and were not consulted at all; others have been mandatory signers of EVERYTHING!

    It can be very helpful if the regional body in your church (presbytery, diocese, classis) can offer OTJ training to parish treasurers, too. Our diocesan treasurer did so for a number of years, and was a very present help to volunteers out of their depth.

  12. Absolutely go take a class - even one on "small business" at a local community college. Then ask your congregational person to massage the data into reports that you can use.

    Second, get that audit done. First internally to prepare for the external one. The treasurer should have a system that anyone who "speaks money" should be able to understand. And then be able to communicate it.

    I think that it is to our detriment not to be able to understand and then communicate the financial needs of our churches. It's good stewardship in the broadest sense of the word.


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