Know Your Audience: Tips for Church Financial Reporting

First, there is the general membership. Members use financial statements to help them reach certain conclusions on the status of the church. For example, if the church is doing well financially, members will generally place more confidence in the abilities of the church’s leadership. They are more apt to attend church activities, handle jobs for the church, and give for special needs. Further, knowing that the church is financially strong takes pressure off indi­vidual members for financial support.

When the opposite financial condition exists, membership confidence and support may be lacking. You might hear a lot of grumbling. Members might be torn between giving money to help the church survive and with­holding their money from the group who has mismanaged it. Uncertainty causes confusion; confusion causes anger. As in sports, people like to be asso­ciated with a winner. Thus, knowing how the church is doing and whether the church can pay its bills is pivotal to the membership.

A second audience is composed of the finance committee, administrative board, program leaders, pastors, and, in large churches, full-time business administrators. These groups need detailed information both to manage cur­rent operations and to plan for the future. As a consequence, the financial state­ments provided to these groups should be much more extensive than those provided to the general membership. And if the church retains a certified public accountant to conduct a full-fledged yearly audit, the financial statements will be prepared according to generally accepted accounting principles.

The third audience for church financial statements is composed of banks that have loaned the church funds, trustees who are responsible for the repayment of capital to bondholders (those who hold church bonds issued to finance church expansion or modernization), the IRS, and the church’s higher denominational authority. Each of these users will specify the form and content of the financial statements that satisfy its particular needs.

For a thorough look at the key financial issues all churches face, check out Church Finance.