"EDITED ONLINER DIALOGS"
TOPIC: Pastor in control of Church Finances ORIGINATED December 2004
TOPICAL OVERVIEW: See example that follows: The Pastor is in complete control of the Church's finances. He functions as if the XYZ Church is a small business he owns. This dialog speaks to some of the dangers therewith.
FILE: 2009-07 UPTD: March 09, 2012
From Onliner #1:
The Pastor is in complete control of all of the some $200,000 that flow through our Church .
From Jim Bramer
In what way is this control demonstrated? Let's suppose that Pastor Jones is the only staff member of XYZ Church -- all other Church workers are volunteers. I believe the following is unwise ?
1> Pastor Jones is in total control of the Church's finances, or he functions as if he were the owner and sole proprietor of XYZ Church since he authorizes all expenses and signs all checks.
2> No XYZ Church member is allowed to see the financial statements as they go only to members of the Board of Leadership -- who are not permitted to share this information with anyone. Approximately 1/3 of the annual Church income comes to him as Salaries/Benefits.
3> Pastor Jones' wife is the volunteer Board Treasurer which includes the usual tasks with respect to this responsibility,
4> She also does the counting/depositing of Sunday's offering and keeps track of who gives what/when, etc.
5> This Church does not have any written Finance policies, etc.
6> XYZ Church Leadership Board consists of Pastor Jones and Wife plus four local Business Men/Church Members.
7> Pastor Jones objects to any Church member knowing about the Church finances.
From Onliner #1:
Well -- most all of the above items apply -- except his wife is not the Board Treasurer and she does not make the weekly deposit and keep the Giving records. By the way, I am one of the Board members and am not comfortable with this arrangement.
From Onliner #2
This is a joke, right? No way should a Pastor function like this !!
From Onliner #3
Our situation is not as harsh as you have outlined above, Jim. But our Treasurer reports none of the Pastoral Expenses in the report that is published monthly. His reason is that the Pastor told him not to show it. Therefore, the report is omitting about 57% of the total expenditures from the report. That's the amount that goes to Pastoral Expenses.
From Onliner #4
The example above is very similar to how our church used to be. One pastor with complete control with a Church about 50-75 members. The board had no involvement in finances other than what the Pastor said needed to be done. They did not see expenditures or anything. Nor did they vote on what was considered salary vs. housing allowance. The pastor received his tax-free pay, then at the end of the year, when he completed his taxes with his accountant, he would draft his own 1099, allocating a portion to salary and a portion to housing allowance as he deemed fit.
When another board member and myself came on board, we began asking questions. Within 1 month the Pastor resigned, stating other reasons.
We have never found anything wrong, after an in-depth audit (and must assume no misappropriations took place), other than poor money handling policies. As a Board of Directors (non-spiritual part of the job) you are bound to IRS regulations. If you are not involved in determining housing allowance, reimbursement rules, benefit packets, etc. then that is all most likely taxable income. If it is not reported that way then your church could potentially loose it's 501(c)3 status. Remember, to be a non-taxable allowance, the governing board must VOTE on it, and a document of record maintained for audit purposes.
From Onliner #5From Jim Bramer
I am not an auditor or accountant, but from a "just looking at it" standpoint it is a set-up for fraud. The system does not protect the church or the pastor. There should be some oversight from a board. Pastor's wife as financial secretary sets up a big red flag. If it were his business then fine, but the shareholders are the members of the church and they need to be informed of where the money is going.
Suffice is to say ---- Pastor Jones should be heard with regard to Church finances -- especially with regard to what is spent for Church Ministry -- but he should be insulated by the Board of Leadership from this scope or type of financial controls. I trust the content of the following web links are helpful in correcting such a situation as described at this XYZ Church.http://www.bcidot.org/sitemap.html#6 Various Church Ministry Finance resources for a Church
http://www.bcidot.org/chu/5001-77.html Counting Issues
http://www.bcidot.org/chu/5039-01.html Internal Financial Controls at a Church http://www.bcidot.org/chu/5005-08.html Sample of Church Finance Policy Manual
http://www.bcidot.org/all/0041-01.html Ministry Fund Accounting
http://www.bcidot.org/all/0066-02.html Some Check Signing thots at any Ministry
As most of you know, at www.bcidot.org dialog by email with Onliners regarding Ministry Finance (MinFin) matters. Above are what we call "Edited Onliner Dialogs", or edited versions of actual dialogs with some of you; but we have honored your privacy and not used your name or that of your Ministry. Our purpose is to make topical MinFin information available to any interested Ministry Finance Team so we all can learn from these perspectives. Thanx - Jim Bramer, Retired CPA-Auditor - Proverbs 9:10
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