Ten financial missteps of churches, Part 2
Earlier today I shared some mistakes consultants with Georgia Baptist Convention Financial Services see repeated in churches regarding finances. Here are the other five from that list.
Failing to file proper monthly, quarterly and annual forms and on-time submission – W-2, W-3, G-4, and 1096 are annual forms required by the church for payroll reporting. Not only does the church submit W-2 to staff or 1099 to contractors, but it must submit proper summaries (W-3. 1096, G-4) and copies(W-2) to government agencies. Submissions for 941 and 944 are also required and overlooked often. Remembering to file can be improved with church financial software which will provide reminders of deadlines and usually print the documents for the church or assist in filing on-line.
Having too many or mishandling designated funds – Designated funds have a place in the life of the church, but can cause significant financial crisis if not handled properly. Too many designated funds can debilitate the church’s ability to handle its daily operations as well as give misguided individuals capability to control the church with financial manipulation of their gifts. Love offerings and such can be intentionally set up as temporarily allowing designated gifts. These can also be handled with policies allowing the church to vote on gifts to be designated to different funds when the general fund exceeds a certain amount or percentage of the budget. When monies are set aside for designation by church vote, then the church also has the ability to vote to move them back to a more pressing need. This is not possible when given by individuals directly to designation. There are ways to write-off or close funds, but this method usually results in some sacrifice of trust or unity when people didn’t understand that possibility before-hand, even when properly documented.
Neglecting to safeguard the finances of the church by separation of duties – Churches tend to trust too much and often feel no one would steal from them. Unfortunately, non-profits (including churches) recorded the largest percentage increase in the number of embezzlements and other financial fraud during the recent two year economic downturn. Most reported cases are the result of not having internal controls with checks and balances that protect workers from temptation or false accusation. Too few doing too much gives rise to these situations.
Failing to incorporate the church – The church may not be a business in the sense of trying to make profit or increase shareholder equity. However, the church has to function in a world that has effectively made it a requirement to incorporate to protect the ministry and be able to allow its ministries to flourish. Individuals, not just the staff and leadership, are liable should the church be sued and it is not incorporated. If this wasn’t enough, many businesses such as banks and insurance companies will not make services or products available to churches when it senses the church is not a legal entity.
Failing to plan and communicate stewardship necessity – Churches that have money problems usually try to mask them rather than share them with congregation. Whether they are embarrassed or shy, the church should not be hesitant to give people a chance to respond to the needs of the church for financial support. However, even if the church is not experiencing financial struggles it should help its congregation worship through giving to spread the Gospel to the ends of the earth, supporting local, national, and international missions. Giving offerings is an act of worship that hopefully we don’t neglect to the point that it becomes forgotten, although the current climate would lean toward belief that many desire such. Giving of offerings is an act of worship that hopefully we don’t neglect teaching and participating in to the point that it becomes undesirable, although the current climate in society says that point may have already been reached.
