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Do you know where your church's money is? Do you know what it's being used for?

In the '90s, the Baptist Foundation of Arizona (BFA) sold over $530 million in investments to more than 130 churches and 13,000 individuals. The BFA invested primarily in real estate, something churches are often hesitant to invest in unless it is property used for ministry.

The BFA has since gone bankrupt, which means 130 churches stand to lose a lot of money.

However, had the churches that invested with the BFA had a written investment policy, it's possible they would have avoided throwing their money away.

If your church has any outside investments or is even considering having any, then you need to create an investment policy. This important stewardship tool is basically a clear, concise statement of investment objectives and parameters, and it's not just something for the megachurch with a multimillion-dollar endowment. For example, a resort-area church that saves offerings from the vacation season to pay expenses during the offseason and a small church saving diligently for a new building both need an investment policy. In fact, if your church has money set aside for anything other than immediate operating costs it should have specific guidelines concerning these funds.

A written investment policy provides several benefits:

1. It establishes a structured, disciplined process for investing church funds, which makes it less likely the church will find itself losing money in legal but inappropriately risky investments. Because the policy prescreens acceptable investments, the church is less susceptible to fraud.

2. A written investment policy provides continuity as leadership changes; and creates a climate of accountability for those making investment decisions.

3. If your church has a financial adviser, an investment policy gives that person guidelines within which to operate.

4. To church members, a policy indicates that their tithes and offerings are being handled responsibly. An investment policy also provides church leadership an easy way to say no when members approach them touting sketchy investment opportunities.

The first thing to do is to assemble a team to draft your policy. The team does not have to be large, but it should include those who will be involved in implementing and monitoring the policy, as well as individuals with financial expertise. Depending on the size of your church, the team could include a pastor, church administrator, treasurer, trustees, or church members who are CPAs or financial planners.

After you have your team, it's time to prepare a policy draft. There are three elements to include in an effective investment policy: the investment objectives of the church; a list of allowable investments; and a system of accountability to ensure compliance with the policy. An investment policy does not have to be a lengthy manual; it can be a simple one-page document.

Your objectives are the criteria on which investment decisions will be made. In defining your objectives you will need to consider safety, liquidity, and yield and then prioritize them. Typically, churches rank safety as their top priority.

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