Three Options for Auditing the Finances of Your Congregation

From time to time, I get asked about ways to audit the finances of a congregation. Here’s a brief overview of three possibilities. It has been adapted from an original uumoney post by Don Mohr from the UU Congregation  of Columbia, SC. Refer to the article, Three Options for Auditing the Finances, to read more.

Compilation 

The goal of a compilation is to take information that is on the general ledger and accumulate it into financial statements in the same format that would come out of a review or audit. The key sentence of a compilation report from the accountant reads, “We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.”

Review

The goal of a review is to provide limited assurance that financial statements do not have any known errors or departures from the accounting rules found in GAAP. The key sentence in a review report reads, “Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.”

Audit

The goal of an audit is to provide reasonable, but not absolute, assurance that financial statements are fairly presented in accordance with GAAP. The key sentence in an audit report reads, “In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of [organization name] as of June 30, [year], and the changes in its net assets and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.”

Shibboleths of Leadership

A shibboleth has come to mean the use of old words or phrases that form part of the specialized jargon of a group, and reveal their users as members of a group. Since many of us continue to cling to old ideas, Lance Secretan coined the term shibboleths of leadership.

He believes the practice, theory and teaching of leadership as been in a rut for years. He has noticed a herd mentality afoot. Consultants, professors, academic writers, and theorists work hard to deepen the existing paradigm, thus excluding new thinking.

He believes our attachment to shibboleths and theories often serve our need to be right more than the need to make the world better. This frailty of ego results in making work experience debilitating or many people whose common sense tells them that the philosophies and theories being practiced and promoted are inadequate and anachronistic. Yet, people are pulled along on the stream of fashionable shibboleths masquerading as wisdom, unable to change it all. The CEOs, leaders and HR practitioners responsible for training and development, often scan the environment for the most popular theories and books—obsolete paradigms and shibboleths—and not wanting to be seen to be out of step, they encourage the same obsolescence  themselves, reinforcing the inadequacy and providing validation for those still stuck in their old paradigms.

You can read the rest of Shibboleths of Leadership by checking out the article in Paradigms magazine.

To Rebuild church, Stop looking for Quick Fixes by Dan Dick

“To rebuild Church, stop looking for quick fixes,” speaks to congregations that try to meet fundraising goals by selecting the ‘perfect’ technique. The best possible technique will not guarantee success unless congregants really care about the church.

Dan Dick writes, “At what point do we finally wake up to the fact that there is no such thing as a lasting, transformative ‘quick fix’? The United Methodist Church has suffered through over 50 years of ‘church-in-box’ programs that have produced poor results at best.

Disciple Bible Study came closest to delivering transformation, but ultimately “popular” did not translate into “effective.” Literally thousands of people have had wonderful, meaningful, enjoyable Disciple experiences. However, a variety of independent follow-up evaluations indicate that there is a very low retention rate, that few people adopt sustained spiritual formation practices, and few report any transformed behavior in their daily lives. I hear about the handful whose lives were completely changed, and I do not devalue any such experience—but unless Disciple has been an integrated component of a comprehensive developmental process of spiritual formation, it remains a pleasant experience for the vast majority. ”

You can read the entire article on the United Methodist Portal’s website.

De-bunking Fundraising Myths – Part 12 (of 12)

We’ve all heard myths about fundraising.  These often lead us to do the exact opposite of what we should be doing to raise money.  We’ll be running a twelve part series de-bunking fundraising myths to take a close look at these false assumptions about giving.

This is the twelfth and final in the series, if you’ve missed the others you can go back and ready them (or you read all of them in the book Beyond Fundraising: A Complete Guide to Congregational Stewardship in Chapter 1: The Spiritual Roots of Stewardship).  We all feel the pinch during an economic downturn; however, this does not spell disaster for our faith communities.

As always, we encourage you to leave comments.


Fundraising Myth #12

Myth: A financially healthy faith community is one that receives all of its operating budget money from congregants’ annual financial commitments.

Truth: Not necessarily. Fundraising consultants suggest that annual financial commitments should represent at least 80 percent of the total operating budget, but there is one other important factor: the distribution of those financial commitments. A financially healthy church has an annual median commitment that is almost the same as its annual average commitment.

Turning challenges into opportunities

The following article is an update of our October 5, 2010 blog post. Vanco Services provides a variety of e.services and they are currently working with nearly 200 UUA congregations in 46 different states. Some churches use only one e.service® solution while others use an entire suite of solutions that includes online giving, direct debit giving (ACH), credit & debit card giving and remote check deposit.

We encourage you to contact Vanco to explore the possibilities for your congregation.

Author: Stephen Rose
Director of Marketing
Vanco Services, LLC

As a provider of electronic giving solutions to thousands of churches, Vanco Services, LLC is pleased to share insights we’ve gained over the past 16 years.

Special Challenges

Seasonal donation slump. Donations tend to track closely with the number of weekly worshippers, producing a seasonal donation slump in most congregations. A church’s operating costs and program expenses continue year round, but weekly check & cash offerings are erratic. Donations typically taper off after Easter and then drop—often precipitously—during summer months before recovering in the 4th quarter. Vanco data shows an average 43% decline in weekly giving by paper check from Easter to mid-summer. Even the most dedicated churchgoers miss services. Vacations, illness and weather (good and bad) all enter into the equation. In the fall of 2009, the flu—and even fear of the flu—depressed attendance at services. In recent winters, snowstorms also kept worshippers of all faiths at home in many areas of the country. One Greek Orthodox Archdiocese estimated that February 2010 snowstorms resulted in at least $1.4 million in lost weekly offerings.
Declining check use. Getting twentysomethings to attend services is one thing. Getting them to write a check is quite another. Many families no longer carry a checkbook and most young families never did. A growing number of households simply prefer to make electronic payments and contributions whenever possible. A December, 2010 study from the Federal Reserve reported that paper check use declined by more than 43% in the past decade. The same study showed that electronic payments increased by 276%. This shift in payment practices presents a stewardship challenge for every congregation. (more…)

De-bunking Fundraising Myths – Part 11 (of 12)

We’ve all heard myths about fundraising.  These often lead us to do the exact opposite of what we should be doing to raise money.  We’ll be running a twelve part series de-bunking fundraising myths to take a close look at these false assumptions about giving.

This is the eleventh in the series and we will run one each month (if you can’t wait to a year to read all of them you can purchase the book Beyond Fundraising: A Complete Guide to Congregational Stewardship and read them in Chapter 1: The Spiritual Roots of Stewardship).  Sending out a mailing is surely the easiest way to ask for financial commitments but is it the best way?

As always, we encourage you to leave comments.

Fundraising Myth #11

Myth: Because people don’t like to talk about money, annual financial commitments must be sought in an indirect way. It is best to send financial commitment forms through the mail and ask recipients to return them by mail. In this way, they will not be offended, embarrassed, or angry.

Truth: The more indirect the approach, the less money will be contributed. Personal stewardship conversations are most effective. Getting groups together is a less direct approach, but it can provide an occasional break from the stewardship conversations. Telephone calls and mail solicitations are the most ineffective ways to ask for money. If you are uncomfortable talking about money, the solution is to find ways to become more comfortable talk about it, not to avoid direct, personal conversations.

Replacement Reserve Fund

Has your congregation ever been faced with replacing the heating and cooling system, or the electrical system, or the plumbing system, or the roof?  Were you prepared? Did you have the money set aside for the work?

Here are some guidelines to prepare for the inevitable replacement of these systems:

Introduction. Because congregations are non-profit organizations, they generally do not pay taxes. As a result, leaders have little incentive to set up depreciation schedules for their various systems. Still, congregations must face the inevitable replacement of heating and cooling systems, the roof, the exterior paint and sometimes the electrical and plumbing systems
To address these issues in a systemic way, congregations are encouraged to create a maintenance reserve fund; the same type of fund that the business world uses to be eligible for depreciation under the tax laws. The fund enables congregations to create a long-range maintenance plan, as opposed to reacting to emergency situations.

Initial funding. There are at least two ways to start a replacement reserve fund.
1. A replacement reserve fund can be started immediately after the purchase of a new system, roof, or entire building. The congregation calculates the life expectancy of each component and creates a line item in the operating budget that is equivalent to the annual amount needed to replace the system.
2. A replacement reserve fund can be created as part of a capital campaign. Most congregations do not include depreciation money in their annual operating budget. As a result, the initial funding is often provided as part of a capital campaign.

Annual Funding. Whichever of the two methods is chosen, the key to success is the annual appropriation to the replacement reserve fund. The annual budget should include a line item for depreciation equal to the decline in the value of the depreciable assets as calculated according to the General Accepted Accounting Practices (GAAP). We recommend that money should be deposited in a separate account that already contains the initial funding and held until approved for expenditure. Interest accruing on the funds should be held in the same account.

Expenditures. Expenditures from the replacement reserve fund should be limited to the replacement of depreciable assets. In Unitarian Universalist congregations, expenditures can be recommended by the governing body and then approved at a duly called congregational meeting.

Adapted by Wayne B. Clark from a document written by David L. Rickard

De-bunking Fundraising Myths – Part 10 (of 12)

We’ve all heard myths about fundraising.  These often lead us to do the exact opposite of what we should be doing to raise money.  We’ll be running a twelve part series de-bunking fundraising myths to take a close look at these false assumptions about giving.

This is the tenth in the series and we will run one each month (if you can’t wait to a year to read all of them you can purchase the book Beyond Fundraising: A Complete Guide to Congregational Stewardship and read them in Chapter 1: The Spiritual Roots of Stewardship).  Hosting a great luncheon after a Sunday Service is the key to people’s pocket books, right?

As always, we encourage you to leave comments.

Fundraising Myth #10

Myth: As long as a fellowship event (to launch an annual budget drive or capital campaign) provides a free meal, people will attend the event and give generously of their gifts, call, and spiritual vocation. A beautiful brochure with a clever slogan and attractive logo will further increase giving.

Truth: A free meal is not enough. When people reserve time in their busy schedules, they expect more than just some mediocre food and an average after-dinner program. They want a well-planned event that includes an opportunity to interact with other congregants. They also want to have fun. Many fundraising consultants have determined the best entertainment involves the attendees. For example, a program of group signing is preferable to having the choir perform for the gathering. Nevertheless, keep in mind that the format and promotion of the event matter less than the message. A well-planned fellowship event, a beautiful brochure, and a clever slogan will add absolutely nothing to financial commitments unless a clear and compelling case for stewardship has been made.

De-bunking Fundraising Myths – Part 9 (of 12)

We’ve all heard myths about fundraising.  These often lead us to do the exact opposite of what we should be doing to raise money.  We’ll be running a twelve part series de-bunking fundraising myths to take a close look at these false assumptions about giving.

This is the ninth in the series and we will run one each month (if you can’t wait to a year to read all of them you can purchase the book Beyond Fundraising: A Complete Guide to Congregational Stewardship and read them in Chapter 1: The Spiritual Roots of Stewardship).  Does it make sense to publicize past due financial commitments to the entire congregation (of course, without breaking confidentiality)?

As always, we encourage you to leave comments.

Fundraising Myth #9

Myth: The church newsletter is a good place to include current financial commitment fulfillment information because it prods people to keep their payments up-to-date.

Truth: People usually know their fulfillment status of their annual commitment. If I am current with my payments, a public newsletter article bemoaning the sad state of payments may only cause me to be upset at others who are not up-to-date. If I have fallen behind, I know that I have fallen behind and don’t need a public reminder in the newsletter. It is find to spend monthly personal reminders to all donors, and it is a caring gesture to make pastoral phone calls to those who have fallen behind, but avoid public broadcasting. Besides, financial fulfillment rates are often 95 percent or more of the initially committed amount. A lower fulfillment rate indicates a problem that won’t be resolved in the monthly newsletter. It often reflects the impersonal way in which people were asked to contribute.

De-bunking Fundraising Myths – Part 8 (of 12)

We’ve all heard myths about fundraising.  These often lead us to do the exact opposite of what we should be doing to raise money.  We’ll be running a twelve part series de-bunking fundraising myths to take a close look at these false assumptions about giving.

This is the eighth in the series and we will run one each month (if you can’t wait to a year to read all of them you can purchase the book Beyond Fundraising: A Complete Guide to Congregational Stewardship and read them in Chapter 1: The Spiritual Roots of Stewardship).  Do we want to paint a picture of our congregation as a sinking ship?

As always, we encourage you to leave comments.

Fundraising Myth #8

Myth: If people only understood the dire financial straits of the church, they would feel guilty and increase their annual financial commitment.

Truth: In spite of Garrison Keillor’s notion that “guilt is the gift that keeps on giving,” nobody wants to throw money at a sinking ship. Emphasizing a financial problem may actually drive people away from the faith community. It is more effective to focus on the positive ways that annual contributions will be used once the money has been received. Have a discussion about the successes of current giving. Talk about how much money is being used and emphasize how much better the programs and ministries will be when the giving is increased. Again, people want to know what difference their financial contribution will make.