Most Churches Remain Optimistic About Their Financial Outlook in the Coming Months

Still, around a third of all churches express uncertainty or pessimism as they look toward 2021.

Cash donations to churches from January through September of this year were higher or holding steady for 58 percent of all churches when compared to giving in same period in 2019, according to a study of giving during the pandemic recently released by the Evangelical Council for Financial Accountability (ECFA).

This finding tracks closely with the giving trends noted in two studies conducted this past summer by the National Association of Evangelicals and the Lake Institute on Faith and Giving. The ECFA study surveyed 559 churches, along with 730 nonprofits, including both ECFA members and nonmembers, and was conducted from late October to early November.

This positive trend in giving is rather remarkable when considering that many churches had not been holding in-person gatherings due to the pandemic and the overall economy had been taking a beating and the unemployment rate continued to rise. On top of that, two-thirds of all churches in the study were actually optimistic about their financial outlook for 2021.

“Despite incredible challenges, 2020 has seen remarkable resiliency and significant forward motion among ECFA members and other like-minded ministries,” says ECFA’s vice president of research and equipping Warren Bird in the study’s report. “We were impressed by their strong optimism that God will continue to provide the funding needed to fuel gospel-motivated ministry.”

Along with giving, the study also covered a number of key areas related to church finances during the pandemic. Overall, the various findings in the ECFA study were similar for churches with the largest annual income ($10 million or higher) and the smallest annual income (under $500,000).

Staffing levels held their own

When it came to staffing during the third quarter of the year, 16 percent of churches reported a staff increase, with 67 percent reporting they were keeping their current staff size and 17 percent said they had to reduce staff. As they anticipated their fourth quarter, 9 percent of churches expected staff reductions, with 77 percent saying they would maintain current levels and 14 percent planning to add staff.

A surprising and hopeful finding was that plans in 2021 to increase staff bumped up to 28 percent, with 57 percent keeping staffing levels the same. Still, 15 percent were anticipating a reduction in staff.

Non-staff expense adjustments and positive plans for 2021

As the third quarter books closed, 36 percent of churches reported they had either increased or maintained non-staff expenses, while 64 percent had either postponed or reduced budgeted expenses (e.g., expanding a program or facility) or some type of service they would normally provide. Then, looking forward to the fourth quarter of the year, 53 percent of churches sought to increase or maintain such expenses while 47 percent anticipated either postponing or reducing such expenses.

However, the outlook for 2021 appeared brighter for 63 percent of churches as they anticipated either increasing spending or maintaining current spending; on the downside, 37 percent made plans to either postpone or reduce expenses.

ECFA’s Bird believes, however, these various adjustments to non-staff expenses are positive signs for many churches.

“Churches largely retained their staff, but cut or postponed other expenses during the summer,” Bird told Church Law & Tax. Additionally, Bird said that many pastors have told him that “with their facilities closed or minimally used for many months, their operational costs have been lower. Thus, cutting and postponing is not always something they were forced to do.”

Further, “the 64 percent that cut or postponed were speaking only of July through September, while 47 percent say they’ll cut or postpone for October through December, and 37 percent say that they’ll cut or postpone in 2021. That’s movement in a healthy direction.”

What about cash reserves?

Of those churches surveyed, 81 percent reported their cash reserves weren’t touched during the third quarter of the year. As those churches looked forward to 2021, however, with the continuing effects of the pandemic undoubtedly in mind, a little over half (54 percent) believed their reserves would still go untouched, with 41 percent saying they would most likely use some and 5 percent said they would use all of their cash reserves.

A good number still struggle

While two-thirds of those churches surveyed expressed optimism, a third were either uncertain or pessimistic about revenue going forward. And while 58 percent said donations were the same or higher from January through September, 42 percent reported giving was lower during that time period.

Regarding those struggling churches, ECFA’s Bird offered these insights:

Our research shows that those who were financially precarious going into the pandemic have especially felt it hard. Often the financial challenges are symptoms of underlying issues that can be addressed in healthy ways, such as clarifying God’s vision for this season in the life of the church, prayerfully discerning realistic steps to implement the vision, empowering and supporting more lay leaders, and mobilizing more people in the congregation for ministry.

Those churches that end up unable to weather this ongoing financial storm, Bird said:

A small percentage of churches may decide that they cannot make a comeback after the pandemic. Rather than closing, they might consider a merger. Church mergers are not only on the rise, but a much higher percentage of them are finding a whole new chapter of ministry as they partner with another church to begin the cycle of new life in Christ all over again.

Bottom line: In the coming months a number of churches will most likely be forced to make difficult decisions as the pandemic lingers into the early months of the new year.

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