Dan Busby, president of the Evangelical Council for Financial Accountability and an Editorial Advisor for Christianity Today's Church Law & Tax Group, sat down with us to talk about trends he's seeing in churches, and which financial errors he sees most often. See what your church can learn from a man whose organization has accredited nearly 1,900 Christian churches and nonprofits in their governance, financial management, and stewardship/fundraising practices:
What areas do churches struggle most to stay above reproach in finances?
Churches generally struggle with the same few issues, over and over again. They play out in different ways, but the biggest questions they need to answer in order to assess the health of their financial administration are these three:
1. Does your church have fair compensation?
Is that compensation approved independently of the individuals who receive that compensation? You need to make sure that your staff members aren't directly or indirectly helping determine how much they will be paid. Another question in this area is, Is all of the compensation that is taxable reported as taxable? Or are you giving the pastors a pass and not reporting taxable compensation? How are fringe benefits being reported? Are they taxable, tax-deferred, or tax-free? Dealing with issues of financial reporting is a large task, but it's necessary to have guidelines in place in order to protect your pastors, your staff, and yourself.
2. Is anyone at your church challenging your senior pastor's expense report?
If the treasurer is a volunteer on the board, he or she might have a basis for challenging, but if the treasurer is a paid staff member, who is he or she to tell the senior pastor that the documentation is not adequate? It's critically important to have your pastor's expense report independently reviewed.
Use my trip (to Christianity Today) as an example for expense reporting. You know, I traveled here. So I'm going to turn in an expense report when I get back. I use my personal credit cards to charge everything for this trip. I'll get reimbursed for those expenses only if I can document the business purposes of all of the expenses on my trip. My organization is not on the line for this trip; I'm on the line. And after my expenses are reimbursed for this trip, my expense report goes to the chair of our board for approval. He gets to look at everything I spent, and everything I was reimbursed for. And so the independent review—which doesn't happen very often in any churches in America—the independent review of the pastor's expense reports is extremely important.
If you found this article helpful, subscribe to ChurchLawAndTax.com for access to more articles like this one.