What churches can do to win the confidence of lenders and givers

by Michael W. Michelsen, Jr.

Despite a booming economy that shows little or no signs of a slowdown, American churches are suffering from the lowest giving base in the nation's history since 1956.

Financial experts cite various reasons for why people are giving less to churches, including poor giving habits and lack of teaching on stewardship. Others say people are giving less because they've lost confidence in how the church handles money. Sloppy bookkeeping, unwise investments, overborrowing, and other evidences of poor money management are taking their toll.

Churches can win back the confidence of givers by becoming better money managers. Here are suggestions from various professionals on how to become a money-wise church.

That inadequacy usually affects how the church handles finances. Johnson says he receives calls from six to nine churches a day looking for financing, but few can provide reliable records. "In some cases, church bookkeeping hasn't changed in 40 years," he says.

One reason pastors lack financial acumen is that they were never educated in such matters. "Pastors are not trained to think financially," says Bob Welch, associate professor of administration at Southwestern Baptist Theological Seminary, in Fort Worth, Texas. Pastors aren't pleased with the inadequacy, however. According to Welch, the results of a recent poll among Southwestern alumni showed that 80 percent of the respondents expressed a desire to take church administration courses.

"A successful business has a core group working with the owner or owners," says Bethel. "That group usually includes a lawyer, an accountant, and a banker. Why should a church be any different? In a very real sense, the pastor of a church is the CEO of his company."

What makes this CEO's job difficult is that volunteers often take care of the church's financial records, Bethel says. Frequently those volunteers are not trained in giving financial advice. In addition, committees that handle church finances are comprised of people who serve only a few years. When their term is up, new people must learn the system. "If churches are going to operate this way, they should build systems so that new people coming in won't let things fall through the cracks," Bethel says.

Bethel's biggest challenge with churches is getting them to take a professional approach to finances. "If you don't have bankers and CPAs in a congregation, hire them," he says. "Get your books audited."

A sound financial reporting and review process is critical to a church, says Dan Mikes, national manager of the church loan department of Bank of the West, based in San Francisco, California. "At minimum, church leaders should meet monthly to review current operating revenues and expenses to compare them to the budget," he says.

He also recommends that the church require committee approval of capital expenditures or indebtedness above a certain dollar amount. "From the bank's perspective, a pastor who operates within this structure demonstrates his ability to communicate and orchestrate support for his vision," Mikes says. "When the committee is comprised of a majority of nonstaff, nonfamily active church attenders, the lender is more confident of the congregation's continued financial support."

Bank of the West generally recommends that churches with 400 or more adult attenders consider hiring a full-time business administrator. "The need is particularly strong when a growing church anticipates a construction project," Mikes says.

Another way churches lose money is to leap forward in exuberance rather than good sense. For example, Bruce Anderson, president of Donné Corporation, a church development and consulting firm in Napa, California, says a church leader recently told him that his church had just spent $465,000 for architectural plans for a building. "The pastor and congregants went to the architect with grandiose dreams," Anderson says. "What resulted was structurally impossible to build. The plans had to be thrown away—along with a lot of money."

Another way churches lose money is to buy on impulse rather than according to a plan. For example, a church custodian may come to his pastor, asking for money to purchase a $1.79 bottle of glass cleaner. The pastor gives the janitor $2 from petty cash and sends him to the store. But what does that purchase really cost? More like $10, if you factor in the custodian's hourly wage. Still more, if you add mileage. The church would be far wiser to buy cleaning supplies in bulk, taking advantage of discounts and free delivery.

Equipment purchasing is another example. When a church needs a vacuum cleaner, it can spend less money on a home-style vacuum rather than an industrial model. But that may cost more in the end, because the less expensive model will have to be replaced sooner.

Negotiating can significantly reduce overall costs. "Shop around for the best deal," Welch says. "And keep shopping. Just because you're getting a good deal on one purchase from a particular company doesn't mean they will offer you a good deal on something else. Take the option to look elsewhere before you buy."

A church that borrows must then diligently comply with the terms of that loan. Although an attorney should review any loan documents prior to signing, it is the church's responsibility to remain in compliance with the terms of the loan throughout the life of the loan.

"Often times the bank's review of a Certified Public Accountant's annual financial report will reveal that additional indebtedness or capital expenditure covenants have been violated," Mikes says. Although the lender may waive such a violation, the note about it will remain with the file and may have an effect on future credit requests.

When churches run short of money, they tend to return to the same well that they drew from before: the pockets of church members. They need to start thinking of other ways to fill income shortages.

"Churches have to find alternative sources of income if they really want to carry out their mission," Anderson says. "There are many excellent ways of doing this that don't touch the offering plate—but they have to look for them." Alternative sources can raise between 1.5 to 4 times the church's income without its having to ask members for money, Anderson says.

One way churches can raise money is to invest their money. That may require expert counsel, however, since some churches have lost a great deal of money by investing in questionable securities. "There are a lot of investment scams out there that cover themselves with the word Christian," Rolfs says. "Many are really just glorified pyramid schemes. They trap churches using the same techniques that catch ordinary investors every day: high returns and quick profits."

Stick with solid, proven investments. And repeat often the old adage "If it sounds too good to be true, it probably is."

"The money in our church isn't ours. It's God's," Newberg says. "It's also an act of worship on the part of people. Taking care of it is a big responsibility, but it's something that we have built into the culture of our church. That makes it easy to practice."

Each year New Life members receive a detailed statement of the church's finances, explaining what was taken in and how it was spent. Because it has such good control of its finances, the church has to do little fundraising. "We have found that when members trust the leadership of the church, they will be faithful in their tithing," Newberg says. "As a result, we have more than enough money."

Michael W. Michelsen, Jr. (Mikemichelsen@prodigy.net) is a freelance writer living in Riverside, California.

Helpful Resources

	Subcategories of Finance & Law
	Awards & Recognition Bonds Capital Fundraising Fundraising - Products Mortgages Background Checks Church Finance Insurance