As a church leader, you’re likely worried most about reaching people in your city who need to hear the Gospel, growing your ministry impact, helping your staff develop, and a thousand other things that come across your brain and your desk each week.
But at any given moment, if you haven’t paid attention to key areas of church administration, all those worries could be torpedoed by a major crisis that could—if not destroy your church—derail your ministry to such a level that it can be incredibly difficult to get it back on track.
We at MAG Bookkeeping work with pastors and churches every day and uncover some major gaps in their administration and processes that are putting them at tremendous risk. We’ve outlined the five biggest ministry killers we see below:
It’s a sad reality, but the church is basically a perfect storm for fraud. Have you heard the line that “the best place to steal purses is in a church”? Same goes for your finances. Because you’re in the church environment, you often let your guard down and put too much trust in the people and processes you’ve known for years. Then you try to apply for a loan or have your records audited and discover thousands of dollars that have gone missing. As we’ve worked with churches, we’ve seen time and time again that not having proper money handling procedures and approvals comes back to hurt the church.
More than half the churches we work with had been handling their payroll incorrectly. And it’s not because they didn’t care or they didn’t try—it’s because church payroll is a really complex issue that most accountants and financial professionals don’t understand because they don’t deal with it regularly. But—and here’s the hard truth—the IRS doesn’t much care that your accountant didn’t understand church tax code or payroll. Your church can still get hit with massive penalties.
Misuse of Funds
If you’ve asked your givers to donate to a particular fund or campaign, that money can be used for that purpose—ONLY. It’s gone into what’s called a “restricted fund” and that word “restricted” is no joke. Unfortunately, there are some churches leaders who think that “restricted” is just a suggestion. We’ve worked with churches who’ve started a capital campaign, but a year later they’d spent the thousands donated for a new building on other activities. Now they’re left having to explain to donors just where that money went.
Lack of Rules
Quick—find your church’s by-laws. Yeah, we know that’s a random request that you’ve probably never been faced with before. But it matters more than you’d think. Your by-laws lay out who in your church is responsible for financial decisions, how those decisions are reviewed and approved, and where accountability falls when it comes to finances. If your church is named in a lawsuit, the courts immediately turn to the by-laws to figure out who’s responsible for what. If your by-laws aren’t clear—or worse yet, are non-existent—your staff and board members could land in some major hot water. And if those by-laws are non-existent, your church doesn’t have tax-exempt status on its own.
Again—we know you want to help people. We know your intentions are good. But intentions don’t count with federal regulators. Donations to your church are held to a pretty rigorous regulatory standard that doesn’t leave much room for interpretation.
As a church leader, you’ve got a thousand demands on your time. We get it. But the hard reality is that quite literally, “the buck stops here.” You are responsible for what’s happening with your church’s finances on your watch. That’s why we’re here—to help church leaders like you understand your financial responsibilities, and to give you a trusted option to help you manage those responsibilities so you can get back to what you’re really called to do.