The story of how one church handled an allegation of child sexual abuse.
What would your church do if it were faced with an allegation of child sexual abuse? This video depicts the story of how one church handled this situation. Experts add insights to this first-person story.
Interactive segment teaches principles of good supervision.
This fast-paced, interactive segment teaches principles of good supervision. It helps children and youth volunteers think through common scenarios of supervision.
Richard Hammar explains legal requirements for protecting children in your ministry.
Viewers receive more training by the most trusted name in church law—Richard Hammar. In this segment, he explains legal requirements for protecting children in your ministry, plus practical tips on how your ministry can meet the “reasonable standard of care.”
Teaches leaders how to interview a candidate, conduct a background check, and check references.
This segment creatively teaches leaders how to interview a candidate, conduct a background check, and check references. Participants will see and hear what the screening and selection process should look like.
Richard Hammar’s teaching session on the importance of proper screening and selection of staff and volunteers.
Richard Hammar, noted church attorney and CPA, and one of the creators of Reducing the Risk, presents a powerful teaching session on the importance of proper screening and selection of staff and volunteers. This segment provides a five-step plan for reducing liability.
Five experts who deal with different aspects of sexual abuse in the church.
This presentation features five experts who deal with different aspects of sexual abuse in the church, ranging from a psychologist who helped create his church’s child protection program to an insurance claims manager who understands the legal impact of sexual abuse allegations. By sitting in on this group’s discussion, viewers gain insight into the issues surrounding child sexual abuse in ministries today.
The true story of a victim of clergy abuse.
This segment presents the true story of a victim of clergy abuse. It should help sensitize leaders to the human cost of sexual abuse in ministry settings.
Children’s ministry director David Staal introduces churches to the problem of child sexual abuse in the church.
Children’s ministry director David Staal introduces churches to the problem of child sexual abuse in the church. This segment gets people invested in solving this safety issue by engaging them, heart and mind. It should be the first presentation that you view and show.
Pastoral succession plans help minimize disruptions, provide uninterrupted leadership, protect the church’s resources, and much, much more.
A prominent church with more than 25,000 members rapidly eroded into a congregation of less than 250 with dwindling finances—and its rapid demise traces back to a problem many churches unfortunately face today: the lack of a pastoral succession plan.
The absence of succession planning can cause severe problems for congregations and raise numerous legal issues. In the case of this megachurch, when the church’s founding pastor died suddenly, the congregation viewed his son, who was on staff at the church, as his heir. However, the church’s board did not feel he was prepared to be the senior pastor. A rift ensued, and the son of the deceased pastor was fired. The subsequent years of infighting and costly litigation over the church’s significant assets wasted invaluable resources and virtually destroyed the church.
This is just one among far too many examples of the devastating consequences churches suffer when they do not plan ahead for a transition in pastoral leadership.
According to the Evangelical Council for Financial Accountability’s most recent Nonprofit Governance Survey, 65 percent of all nonprofit boards self-report that they do not have a succession plan. As staggering as that figure is, this number would likely be higher if the survey exclusively asked church boards.
Dave Travis, CEO of Leadership Network, fittingly defines succession as “the intentional transfer of authority and leadership from one primary leader to another.” The need for new leadership can come very unexpectedly, such as in the case of a death, resignation, sudden illness, or termination of a leader. Whatever the reason for a change in senior leadership, churches need a succession plan for at least five reasons:
While denominations generally have a clear process to guide local churches when a vacancy occurs, there is a difference between what’s on paper and what often happens. What I have seen in practice is that the “replacement” leader provided by the denomination often brings out the worst in fellow Christians. I have even seen local congregations of a denomination change the locks to the church building to keep out the new pastor sent by the national office. Like independent congregations, churches that belong to a denomination need a succession plan, and they would be wise to coordinate that plan with denominational leadership.
In their book The Elephant in the Boardroom, Carolyn Weese and J. Russell Crabtree outline several questions to help start the process of creating a succession plan:
Ideally, the senior pastor initiates the succession plan discussion. However, sometimes the church board makes the first move. Regardless of who initiates, the church should engage a competent attorney with experience representing churches. Along with a strong legal understanding of succession, the attorney should also know how to apply biblical principles to church leadership, governance, and pastoral transition. Prior to hiring, ask the attorney to explain the Bible-based principles that guide his or her understanding of succession planning. Moreover, an attorney with experience in this area should be familiar with the legal parameters that such a plan can (and cannot) include.
It has often been said that the only certainties in life are death and taxes. In large part, the church has managed to avoid the latter, but the former has had its hand in the demise of too many ministries. Consider what actions you need to take to ensure that your church is best positioned for continued success by having a properly prepared succession plan.
Erika E. Cole is an attorney who works exclusively with churches and is a founding partner of The Law Offices of Erika E. Cole LLC.
Understand how to manage church employee resignations with this guide covering resignation timing, retraction rules, employment policies, and board member liability. Ensure clarity and compliance in your church operations.
Q: A church employee provided a letter of resignation to our church board. A few days later she changed her mind and asked the board to disregard her letter of resignation. What should we do? When is a resignation effective, and can it later be revoked?
Note the following ten points regarding resignations:
1. Most employees hired for an indefinite term are “at-will” employees who can resign at any time, subject to the conditions summarized below.
2. Employees hired for a specified term may be unable to resign prior to the end of their employment term, and, if they try, they may be subject to damages in a lawsuit brought by their employer. Clearly, this is something to be discussed in advance to avoid wasteful litigation.
3. An at-will employee’s unilateral right to resign may be limited or restricted by an employment contract that provides otherwise.
4. An at-will employee’s unilateral right to resign may be limited or restricted by an employer’s policy manual that provides otherwise. For example, some manuals require a specified number of days of advance notice before a resignation will be effective.
5. If an employee has an unconditional, unrestricted right to resign, his or her resignation is effective whether it is “accepted” or not.
6. It is a good policy for employees to present a resignation in a written, dated, and signed letter that is confirmed in an email.
7. Even if an employee has an unrestricted right to resign, be aware that suddenly walking off the job may impose a burden on an employer that in some cases leads to a negative reference.
8. Some courts have ruled that an employee cannot rescind or retract a letter of resignation. It is entirely up to the employer to decide whether to accept a rescission or retraction. So, employees should assume that a letter of resignation cannot later be rescinded or retracted.
9. Employees who are being investigated for misconduct sometimes resign as a way of preempting the disciplinary process. Like any resignation, such resignations generally are effective immediately and preempt the disciplinary process unless the right to resign is restricted by an employment contract or employee manual. This principle is illustrated by one of the leading cases addressing the discipline of church members. In 1989, the Oklahoma Supreme Court issued a ruling that remains the definitive analysis of church discipline. Guinn v. Church of Christ, 775 P.2d 766 (Okla. 1989).
The court reached the following three conclusions:
The discipline of church members (i.e., persons who have not withdrawn from membership) is a constitutionally protected right of churches.
Discipline of persons who have effectively withdrawn their church membership is not a constitutionally protected activity, and churches that engage in such conduct can be sued under existing theories of tort law.
The constitutional right of a church member to withdraw from church membership is protected by the First Amendment guaranty of religious freedom unless a member has waived that right. One way to do this is by a provision in a church’s bylaws, or other governing document, prohibiting members from resigning their membership when under discipline. This strategy may prevent members from preempting the disciplinary process by resigning their membership.Similarly, an employer may seek to restrict the ability of employees to resign their employment if under investigation or discipline for wrongdoing. While in many cases employers would be pleased to accept the resignation of employees under investigation for wrongdoing, that is not always the case, and so employees should understand that their right to resign may be restricted by an employer policy or contractual term.
10. It is common for church board members to resign their position when they relocate or become incapacitated. However, church bylaws usually do not address when and how such resignations occur. This is an important and frequently overlooked issue, since board members generally remain liable for the actions of the board until their resignation is effective. If the timing of a resignation is ambiguous, then this can expose a former board member to continuing liability. To avoid this, a church’s bylaws should clarify precisely when a board member’s resignation will be effective.
What should churches do if a minister’s housing allowance request exceeds their salary? Find IRS-compliant solutions here.
Last Reviewed: January 18, 2025
Q: We just hired a pastor, and he is purchasing a new home with a very large down payment. This will make the cost of his housing higher than his salary. How do we handle that?
A church should only designate a housing allowance up to the minister’s yearly salary. This assumes the minister qualifies for a housing allowance based on IRS requirements. The allowance must also:
If the minister’s housing expenses exceed their salary, it is their responsibility to cover the difference through other means. However, the church cannot designate a higher allowance in anticipation of additional income earned outside the ministerial role.
Let’s consider an example:
The church can only designate up to $15,000 as a housing allowance. Even if the minister earns the additional $2,500 by working a part-time job, the church cannot include this external income in the designated housing allowance. Any additional income will be taxed like other payroll earnings, as it is not tied to the minister’s work at the church.
For a comprehensive guide to church compensation, consider Church Compensation: From Strategic Plan to Compliance.
A clergy housing allowance is a portion of a minister’s compensation designated for housing expenses, including rent, mortgage, and utilities, that is excluded from taxable income.
No, the housing allowance cannot exceed the total salary paid by the church, even if the minister incurs higher housing costs.
Eligible expenses include rent or mortgage payments, utilities, furnishings, and the fair rental value of the home. Non-housing-related expenses do not qualify.
No, only income earned through ministerial services provided to the church can be designated as a housing allowance.
Churches must carefully allocate housing allowances based on the minister’s salary and ensure compliance with IRS guidelines. Additional income earned outside the ministerial role cannot be included in the housing allowance. For further guidance, refer to Church Law & Tax’s resources.
Learn the legalities of mandatory tithing policies for church employees, supported by Supreme Court rulings. Understand requirements for payroll deductions, verification, and labor law compliance.
Last Reviewed: January 28, 2025
Q: Is it legal for a church to have a policy that demands or mandatorily requires employees give a portion of their income as a requisite for employment?
Yes, with some caveats.
In Corporation of the Presiding Bishop v. Amos, 483 U.S. 387 (1987), the United States Supreme Court approved the firing of a church employee who failed to maintain a temple recommendation for his local congregation of the Church of Jesus Christ of Latter-day Saints. The local temple could not recommend him for employment unless he was a member in good standing.
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To be in good standing, the local temple requires its members to prove that they have paid their tithes. Since the church employee failed to provide the temple recommendation, he was terminated.
The church may impose religious requirements on its employees, even those employees not involved in active practice of the faith.
In the Supreme Court case, the church employee was a janitor in a gymnasium owned and operated by a nonprofit organization associated with the church.
The church may not withhold the tithes from the employee’s pay without written permission from the employee.
If the employee refuses to consent to the withholding of the tithe, then the employee may be subject to discipline, including termination. Also, if the church withholds the tithes from the employee’s pay, it can only withhold the tithes after the withholding of payroll taxes.
If the church mandates that employees pay tithes, the church must pay the nonexempt employees for the time required to pay the tithes.
The US Department of Labor rules require employers to pay at least one-tenth of an hour for duty time and many state laws require payment of a minimum of two or more hours each time the employer requests the nonexempt employee to perform any task.
If the employee is not a member of the employer church, then the church may require the employee to request that the employee’s church provide a certificate to prove that the employee paid tithes to his or her home church.
Save time and money with electronic systems.
Automation eliminates as many manual tasks as possible, reduces human error, and streamlines various processes. To automate a financial task, a treasurer or financial manager identifies repeatable, logical, mundane tasks that are done on a weekly, monthly, or annual basis. Once identified, a financial manager works to find and optimize available technology to help reduce the time it takes to do these tasks.
Simple e-giving systems reduce the time it takes to record donations, and they import directly into a donor management system. This allows both you and your donor to see donation history in real-time. Consider asking donors to set up recurring online gifts, specifically during the summer months, when people go on vacations and giving to the church tends to take a dip.
An automated process can trigger an email to the appropriate church leader when someone stops giving. Then a church leader can call the donor who has stopped giving, and that may lead to an opportunity to minister to that person. Maybe the person lost a job, retired, became upset over a rumor, or is going through some tough financial times.
Budget reports can be automated. Most accounting software programs export budget information into Excel. Macros—special instructions containing a number of steps that you set in advance and then have Excel perform for you with one command—can convert your data to a simple email. This can give those who donate, or those who spend, a quick snapshot of what’s left in that project’s budget. With time saved through this system, you now have time to craft thank-you emails or letters that communicate vision and results to the donors.
Rather than paying your electric bill or mortgage with a paper check every month, set up a direct debit, and have the bills emailed to you. This makes it easy to save them electronically. With the time you save, you can explore ways to buy energy in bulk or refinance your mortgage and, subsequently, reduce your electric or mortgage payment.
A paperless audit trail can be implemented with electronic signatures along with pictures of the receipts. Rather than tracking down check signers to sign a paper check, use an electronic-signature check approval system to direct deposit to your vendors and staff or volunteers who need reimbursement.
One word of caution: Automation is not “setting it and forgetting it” in regard to the tasks that you automate. Always make time to review the automation.
For help automating systems and choosing appropriate software, see these resources and articles:
Learn how churches can improve decision-making and growth by leveraging data for financial reporting and metrics.
Last Reviewed: January 25, 2025
Norwood Davis is the chief financial officer at 12Stone Church—a thriving multicampus congregation in the Atlanta area. In the article “A Usable Metric for Any Church,” Davis, along with other financial experts, shared insights about collecting and analyzing financial and demographic data. In this article, we asked Davis to share the best ways to use this data for effective reports that help with financial decisions.
For churches in areas where wildfires are a constant concern, essential preparedness activities can reduce the chaos that comes with a natural disaster.
Below are three “just-in-time” actions your congregation can take if threatened by an active wildfire.
Don’t attempt these preparedness steps if they might put you and others at risk or go against evacuation notices or orders.
Wildfires can disrupt the ways we communicate. Power sometimes goes out, and cell phone towers can go down. This can make most modern forms of staying in touch with one another difficult. You may have also seen messages coming out of Gatlinburg asking residents in the general area to limit calls for a period of time to emergency calls only.
If you have time prior to the disaster, reach out to your congregation using your normal and most common means of communication with your church members to let them know how they might be able to stay in touch with the church, leadership, and each other.Grab or download the most up-to-date congregation contact list you have. If you don’t have a contact list, you might send an invitation to your members to share via a Google Form (or another service your congregation is familiar with) so they can share their emergency contact information with the church. You might also take this opportunity to ask them for alternative contact information or if they plan to evacuate and to where.
Common crisis communication strategies that can be used before a disaster strikes include:
Don’t just let your congregation know the mediums through which you’ll be communicating, but also let them know how to use the mediums through which you’ll be communicating going forward.
Encourage your congregation and community to follow evacuation notifications being issued by the authorities. Several communities have already begun evacuation messaging as some of the active large fires spread. Though many people are heeding this notification, not all are.
Are there members of your congregation who may not be reachable by local officials or who may be hesitant to follow the direction of local officials? If your church is located in a community where a sense of mistrust of governmental officials or authorities exists, you, the church, sharing the message can make a big difference. Research has shown that vulnerable communities, like minority communities, may be less likely to heed official warnings.
Sometimes who conveys the message is just as important as the message itself. Hearing the evacuation message from you as a church leader can make a big difference in calling people to action. Remember: a trusted message comes from a trusted messenger.
As best as you are able, facilitate transportation to those who need it. For example, maybe you can help connect those who need assistance with relatives or other people in your congregation who might offer transportation. Or maybe you could have a church bus that you could offer to transport people who have limited mobility in the event of an evacuation. If you are aware of local, state, or federal resources for evacuation transportation, you can communicate these resources, too.
The images of wildfires in Gatlinburg, TN several years ago offer a sobering reminder that sometimes our best efforts are futile in the face of wildfires. Sometimes wildfires are difficult to contain. But there are still some things you can do that have been shown to improve your odds for minimizing risk.
It only takes one burning ember to start a fire, which can spread well ahead of a fire and beyond the direct boundaries of harm’s way. To help reduce the risk posed by burning embers, the Insurance Institute for Business & Home Safety (see DisasterSafety.org for more) suggests taking actions like:
You may also think about retrieving important documents or possessions that would be hard to replace if destroyed by fire. Similarly, are there certain resources that may be helpful to retrieve so that you are more likely to have them available to facilitate worship or other key ministerial activities or rites once the wildfire is contained.
Finally—and this may go without saying—don’t forget the little things like locking your facility doors and setting the alarm (if you have one) to protect your facility from security threats like looting should your building stay intact.
Understand the limitations on restricted funds and how to handle donor-restricted gifts within the law.
Last Reviewed: January 24, 2025
Q: My church currently has a large surplus in its benevolence budget but a shortfall in its missions budget. The board is planning to transfer a substantial amount from benevolence to missions. But isn’t it illegal to use restricted funds for anything other than their intended purpose?
Churches often face financial challenges, such as surpluses in one budget and shortfalls in another. A common question arises: Can restricted funds be used for anything but their intended purpose? Understanding the limitations on restricted funds is crucial for complying with legal and ethical obligations while maintaining donor trust.
Every state except Pennsylvania has adopted some version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). This model law addresses various aspects of nonprofit financial management, including the handling of restricted funds. While UPMIFA provides a framework, the law allows states to modify its provisions, resulting in slight variations across jurisdictions.
Under UPMIFA, restricted funds may only be redirected if it is deemed “unlawful, impracticable, impossible to achieve, or wasteful” to fulfill the donor’s restriction. However, proving one of these criteria can be challenging. For instance, while canceling a building project might meet the standard, it is harder to justify redirection from a benevolence fund, as the need for assistance is ongoing.
Some state versions of UPMIFA differentiate the process for redirecting restricted funds based on the fund’s dollar amount. For certain amounts, a court order may be required. Additionally, other state and federal laws may apply, creating potential legal risks for churches considering such redirections.
If your church is contemplating redirecting restricted funds, take the following precautions:
For a comprehensive discussion of restricted funds and UPMIFA, consult chapters 1, 3, 6, and 10 of Church Finance: The Church Leader’s Guide to Financial Operations.
UPMIFA guidance may vary by state. For detailed legal information, visit the Uniform Law Commission’s UPMIFA page. Additionally, review nonprofit compliance resources from IRS.gov for federal considerations.
Learn how transitioning from business to church finance requires new skills, education, and a focus on serving others.
Last Reviewed: May 9, 2025
Jennifer Neal wanted to succeed—not just in her career, but also as a woman, a mother, and a financial controller at a multibillion-dollar company.
“I was desperately trying to make my mark and have it all,” she said.
But in 2012, her path shifted.
Her church began searching for a new finance director. Nine people reached out, encouraging her to apply. Ministry work had never been part of her career plans—but Neal felt a spiritual pull.
“It was like Jesus almost taking a two-by-four to my head,” she said. “The Lord was leading me to at least apply.”
After prayer and careful thought, she accepted the role at College Park Church in Indianapolis. Though the job came with a significant pay cut, it better suited her life at the time as a mother of three—and brought new purpose.
“It just [gave] me a great deal of satisfaction in my position,” she said.
But the shift from corporate to church finance wasn’t easy.
We spoke with church financial experts and editorial advisors to identify key insights for professionals making a similar transition. Here are five crucial things to know:
Switching from the corporate world to a church environment means adjusting your mindset.
“That transition in culture is often underestimated,” said Dan Busby, president emeritus of the Evangelical Council for Financial Accountability (ECFA).
Elaine Sommerville, a CPA specializing in nonprofits, agreed:
“People often come out of high-level corporate roles where there’s a clear, structured system. They expect churches to run the same way.”
But churches often operate with less structure. Neal had to adapt her expectations and learn to offer what she calls “extravagant grace.”
“You have to be more understanding,” she explained. “That person who missed your expense report deadline may have been up late helping someone through a crisis. And that matters more than my report.”
Churches follow a unique and highly regulated tax framework.
“You’ve got to learn the tax law structure, employment law structure, and benefits rules specific to ministries,” said Michael Batts, managing partner at Batts, Morrison, Wales & Lee, a CPA firm serving nonprofits nationwide.
Mistakes can have serious consequences.
“In the business world, overpaying someone might mean losing a deduction,” said Frank Sommerville, CPA and attorney. “In a church, it could threaten your tax-exempt status.”
Elaine Sommerville added:
“Many assume nonprofits don’t deal with taxes. But churches are heavily regulated in ways most people don’t realize.”
Unlike businesses, churches rely on charitable contributions. And those funds often come with strings attached.
“There’s no real comparison in the business world,” Frank Sommerville said. “A donor might give for a building project—or specifically to buy a piano.”
Churches must:
“You need systems in place to prove compliance with donor restrictions,” Sommerville emphasized.
Churches must carefully document every financial transaction—not just for legal reasons, but as a matter of integrity.
“We’re handling God’s resources,” said Busby. “We need a higher level of accountability.”
Tim Samuel, CFO at Bridgeway Community Church, trains pastors on this mindset.
“It’s not about trust—it’s about transparency,” said Samuel, who joined ministry finance in 2007 after a career in public accounting. “Every check needs documentation.”
He advises:
Many churches lack basic controls, said Elaine Sommerville:
“It’s common to find one person doing everything—receiving donations, writing checks, and reconciling accounts. But true internal control requires separating duties.”
The nonprofit world has its own rules, and mastering them takes effort.
“It won’t happen casually,” said Batts. “You need to be intentional—talk to professional advisers, read internal policies, and attend training events.”
Neal has embraced this approach. She frequently reads trusted articles and resources to stay sharp.
“I really wanted to be ‘successful’ in the world’s eyes,” she reflected. “But I’ve found a passion for helping further the kingdom of Christ.”
And even though she’s not preaching from the pulpit, she knows her work matters.
“I’m finding my niche—and I’m passionate about equipping others. That’s changed my whole attitude.”
We’ve used a combination of AI and human review to make this content easier to read and understand.
Tips for managing and maintaining church physical assets, from planning reserves to addressing key maintenance issues.
Last Reviewed: May 8, 2025
Kevin Folsom is the director of special projects at Building Solutions, a company offering technical guidance for real estate and facility development programs. The company’s services include building assessments and facility problem-solving.
Folsom previously served for seven years as director of campus operations at Trinity Christian Academy in Addison, Texas. Before that, he spent 25 years in a similar role at Dallas Theological Seminary. He is a longtime member of APPA, an association for higher education facility officers.
He spoke with Church Law & Tax about why churches need regular evaluations of their physical assets and how to plan financially for replacements and maintenance.
Many churches avoid thinking ahead about future maintenance needs. This often leads to trouble when costly repairs pop up unexpectedly.
“They say, ‘I’ll wait until that problem happens.’ We do the same thing with our houses,” Folsom says.
Instead of saving a small amount each year—for example, $500 annually toward a roof replacement—churches hope for insurance coverage or simply wait until the issue is urgent.
Church treasurers play a key role in helping pastors, boards, finance committees, and congregations understand the importance of funding future maintenance.
Here’s how they can make the case:
Folsom emphasizes that replacement planning is not optional:
“They have an obligation to God and the donors to be good stewards for ongoing reinvestment … to make sure they stay ahead.”
From the moment a building is completed, it begins to deteriorate. Components age at different rates:
Regular planning and funding ensure these timelines don’t catch churches off guard.
The biggest unexpected costs often involve:
These issues can be ignored for a while—unlike air conditioning, which typically gets repaired quickly when it fails.
Churches might:
But these signs often point to serious internal damage that gets worse over time.
Folsom recommends using standards from:
These sources provide expected life cycles for building components.
Key areas to monitor include:
Each has a different lifespan depending on the quality and type of installation.
“Set aside enough money each year so that when the life cycle reaches a point of renewal, you have the money there to do it,” says Folsom.
Waiting for visible decay usually leads to more expensive repairs.
We’ve used a combination of AI and human review to make this content easier to read and understand.
Finance Basics with Vonna
Three indicators you can check throughout the year.
When I present at church board meetings, board members often ask me, “How can we be sure our church is financially healthy?”
It’s hard to apply the same methods to all churches because each has its own unique circumstances and challenges. The measurements and ratios that could show a warning for one church may not be meaningful to another. However, there are some indicators I always review, no matter what the underlying financial condition of the church. These will prove helpful guides for your church in monitoring financial health throughout the year.
Cash is king. Your church must have enough cash on hand to operate today while also setting aside reserves for future months when giving may go down. A church without necessary reserves will be scrambling to operate in the short term, no matter what its other balances are.
One indicator of this is the Net Cash Availability measure, which is calculated as follows:
“Total Cash and Investments – Adjusted Current Liabilities (Current Liabilities Excluding Amounts Borrowed on a Construction Line of Credit) – Temporarily Restricted Net Assets”
The statement of financial position answers the question, “How much cash do we have?” but it doesn’t answer the question, “Whose cash is it, and how much of it can we spend?” The answers to those questions are typically very different; thus, net cash availability should be one of the most important measures your church leadership monitors. It uses the sum of total cash and investments less certain amounts the church may owe or need to spend for specific purposes due to donor restrictions. It calculates the amount of cash available for other uses, once the church has satisfied its current operating obligations and set aside appropriate funds for projects resulting from donors who have restricted their gifts’ uses.
I like to see that a church has at least one month’s worth of cash expenses on hand. If the amount is below that, it could be a warning: Any negative amount indicates borrowing from temporarily restricted funds and that immediate corrective action is necessary.
Another key indicator I look at is trends in giving compared to expenses. The first measure I use is Total Contributions per Giving Unit, which is calculated as:
The ratio of “Total Contributions – Accrual Pledges – Large One-time Gifts” to “Giving Units”
The second measure is Total Cash Expenses per Giving Unit, which is calculated as:
The ratio of “Total Cash Expenses (Expenses – Depreciation Expense)” to “Giving Units”
These measurements use the concept of a giving unit, which is a group of family members (or any recurring supporters of the church) who contribute jointly. This specifically excludes individuals who make smaller, one-time gifts, such as to a short-term missions trip. To identify only the regular recurring giving units, it is necessary to set a minimum dollar threshold: for example, giving units that contribute more than $250 annually.
The power of these measures comes when you compare them to each other. Have you ever wondered what the net position is between total contributions received and the financial cost per giving unit? The comparison takes the net between these two measures and gives the church the information to know whether the cash contributed by the regular givers is enough to cover the cost per giving unit.
When looked at individually, the contribution measure highlights trends in congregational giving habits between years. Keep in mind that during the period of a capital campaign, this figure may be inflated due to an increase in smaller gifts, which are not removed from the calculation.
The cash expense measure also highlights trends in spending practices between years. While the trends do not provide enough information to figure out the cause of over-spending, they do reveal any growing problems.
Finally, I know a church will not be healthy if this expense ratio is too high:
The ratio of “Personnel (Salaries + Benefits) + Mandatory Debt Service Payments (Principal + Interest Expense)” to “Total Expenses – Depreciation Expense”
The largest expense on the financial statements of most churches is salaries and benefits. This is understandable, as a church provides services performed by individuals, both paid employees and volunteers. Debt service payments—which are a reduction of a liability and not an expense—represent the second-largest outlay. Together, these items represent a majority of resource outflows from the local church.
So it is vital to continually watch these levels as a percentage of cash expenses. It is also important to promptly follow up on changes in trends to ensure you are continually maximizing your ministry resources.
This ratio, which can be split into two separate pieces, allows your church to look at two of its largest outflows and determine the portion of the operating budget that will be used. A growth cycle can often result in an amount of debt the church anticipates being able to pay off as more people are able and encouraged to attend, yet the church needs to be able to pay the bills and provide the services that will attract new people with the current budget. I get concerned when this combined ratio is not within 40 percent to 70 percent of total cash expenses.
Monitoring key financial data will help your leadership team assess your church’s financial health, identify areas for improvement, and be good stewards of your resources. The ratios and measures discussed above provide a good start.
How church leaders can navigate this still-developing legal issue.
Traditionally, a person’s gender was determined at birth. Today, some individuals assert that their gender identity differs from their biological sex. For instance:
On May 13, 2016, the Civil Rights Division of the US Department of Justice (DOJ) issued a letter to schools receiving federal financial assistance under Title IX of the Education Amendments of 1972. Key points include:
According to the DOJ:
“An educational institution controlled by a religious organization is exempt from Title IX to the extent that compliance would not be consistent with the religious tenets of such organization.” (DOJ Letter, 2016)
Although the DOJ letter does not apply to churches, it raised questions for many church leaders.
Are churches legally required to:
To evaluate their legal standing, churches must consider:
Some legal scholars compare public accommodation status to property tax exemption rules:
If charging a fee may trigger tax liability, it might also support a classification as a public accommodation. Free use, by contrast, likely does not—but this analogy is not definitive.
Can a church deny membership to a transgender individual?
These rulings give churches strong protection over discipline of members, but less clarity when it comes to nonmembers.
For theological and pastoral perspectives, see Christianity Today’s article
“Understanding the Transgender Phenomenon” by Mark Yarhouse, a leading Christian scholar on gender dysphoria.