Three Most-Often Missed (or Messed-Up) Practices in Church Finance

February 14th, 2018
This article is featured in the The Vile Practices of Ministry (Feb/Mar/Apr 2018) issue of Circuit Rider

Churches are humorous. Believing our own press, we act as if we are a minor sector of American society with declining influence. Our attention is diverted by stories of aging parishioners, the exodus of the “nones” and “dones”[1] and shrinking budgets, while the $418 billion donated through the 300,000+ congregations in America escape our notice.[2] Income of that scale cannot be ignored. Generosity of that magnitude demands sound financial management practices as good stewards of the Gospel.

Sadly, some congregations engage in unsafe fiscal practices. At times, these risky behaviors show up as a result of naive leaders who equate caring for the church’s finances with balancing their own bank account. If it works at home, it must be good practice at church, too. At other times, risk escalates as those who know a higher financial management standard is required in the congregation succumb to the “We’ve always done it this way” or “We can trust this person” sirens. To strengthen your congregation’s financial integrity, consider the following common risky behaviors to avert and some best practices to embrace in their place.

Avert Masking the Numbers — Embrace Appropriate Transparency

The day of unquestioning faith in institutions, even religious ones, passed decades ago. Donors expect to know where their contribution is going and how it is being used. Without regular updates with vivid testimonies of the impact their giving is having, donors tend to withhold and/or redirect their money.

AdMinistry: The Nuts and Bolts of Church Administration (Abingdon Press, 2017)

Quarterly contribution reports foster giving consistency, especially when they include a story of what difference the tithes and offerings are making. Provide easy access to regular updates on how overall giving is matching the church’s ministry goals. Shun fundraising tactics like “We are running out of money and need your help now!” Those only underline poor management and poorer communication. Instead, clearly demonstrate how the congregation’s elected officers are working to keep expenses below income while inviting greater sacrifice for Christ’s mission through the church whenever offerings wane.

Avert Even The Appearance of Fraud — Embrace Separation of Duties

St. Matthew’s Church Treasurer, Robert, had been in the congregation for fifty years. He was dearly loved and trusted, always present for worship and finance meetings, always personable and ready with a budget report. He advocated for good money management practices like collecting the offering with at least two unrelated (not of the same family) people. After worship, Robert would help count the monies, fill out the deposit slip and lock them in a secured bank deposit bag. He then took the deposit bag to his house until the next day since the church did not have a safe and was too far from the local bank to make the deposit immediately. (By the way, taking deposits home for any reason is beyond foolish. Drive the few extra miles to make the deposit the same day. Also, sealable, tamper resistant Kevlar deposit bags are best for deposits.)

Unfortunately, after more than twenty years as church treasurer, last year’s annual financial audit revealed some discrepancies. Robert had been writing fraudulent checks during most of his tenure. He had been so diligent in handling the counting and deposits that no one suspected that he would forge St. Matthew’s Church checks to cover his personal expenses. Neither did they suspect he would have a duplicate key to the bank deposit bag that allowed him to skim some cash while “correcting” the deposit slips to hide his theft. St. Matthew’s Church could have embraced some basic safeguards to make such fraud much more difficult.

Utilize an offering log to track any donations from the moment they drop into the offering plate (or arrive electronically or by mail) until they are finally deposited into the church’s accounts. Two unrelated persons perform each function and sign the log to document the money transfers. Your insurance company and auditors will bless you for this due diligence. Here is an example:

Avert Overlooking Tax Requirements — Embrace Regular Filings and Payments

Naturally, separation of duties also means the person who writes the check never signs the check. The person who enters other financial information should never be able to sign checks either. Ideally, if the check is for more than $500 or $1000, two signatures would be required. 

Churches are not exempt from paying local, state and federal taxes, especially on payroll. United Methodist clergy are to receive a W-2 per the Internal Revenue Service. They are considered self-employed for social security and Medicare tax purposes (IRS Publication 517). Therefore, while the church may not be required to remit payroll taxes on the pastor(s), it is legally bound to submit tax payments to local, state and federal authorities for non-clergy staff members like administrative assistants, custodians and other non-ordained staff, e.g., choir or youth directors.

The same principle applies for property taxes. While places of worship are exempt from property taxes, most educational and recreational spaces are not. Be sure to check with your conference treasurer to ensure compliance with property, payroll and other tax issues. No congregation wants to face the consequences of delinquent taxes.

Let me add a quick word on the October 2017 clergy parsonage exemption ruling. Twice in recent years there has been a challenge to a clergy tax benefit that permits appointed pastors to exclude a portion of their salary from federal income tax. “When reporting gross income for federal income tax purposes, clergy can exclude a portion of their income designated by their church or salary paying unit as a "housing allowance" under Section 107 of the Internal Revenue Code (IRC).”[3] At the moment, the exemption is still in effect, pending possible appeals. Be sure to monitor the GCFA website ( for updates.

The Church, as the Bride of Christ, merits our full attention and wise financial stewardship. Hundreds of millions of people in the U.S. entrust hundreds of billions of dollars in mission through their local congregations. As faithful managers, safeguard the financial practices necessary to ensure healthy ministry for the sake of world and to the glory of God.  


For further reading: AdMinistry: The Nuts and Bolts of Church Administration by Thomas F. Tumblin and The E-Giving Guide for Every Church: Using Digital Tools to Grow Ministry by Richard Rogers.

[1] See the Pew Research Center report at See also the Huffington Post commentary at

[2] This is an overview of a larger project, “The Socio-economic Contribution of Religion to American Society: An Empirical Analysis,” a 2016 study by Brian J. Grim (Georgetown University) and Melissa E. Grim (Newseum Institute), published in the peer-reviewed journal, Interdisciplinary Journal of Research on Religion, Volume 12, Article 3.

[3] Quoted from the tax packet site ( at

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