HOW FINANCIAL HEALTH IS CRITICAL TO SUCCESS AND SUSTAINABILITY

One’s financial health is critical to success and sustainability. “One” being an individual, church, ministry, or institution – really any person or organization. We must do unto our church’s/ministry’s/institution’s financial health as we would have done unto us as individuals. Note as we would have and not what we do since as individuals, we sometimes do not have the healthiest financial status. Below are a few tips on how to ensure we make the best efforts to ensure an organization is in good financial health.

ESTABLISH POLICIES FOR TRUST AND TRANSPARENCY

Trust is fragile, says Bonnie Ives Marden, a leadership consultant and financial coach who works to equip clergy and laity for leadership development, team building, visioning, stewardship, and organizational development. And finances, if not handled correctly she says, can be a source of worry rather than security. She outlines seven policies for institutional trust and financial integrity that reduce confusion and conflict while at the same time encouraging generosity to support your mission. Those policies are:

1. Building Use Policy
2. Endowment Policy
3. Finance Policy
4. Gift Acceptance Policy
5. Memorial Fund Policy
6. Pastor’s Discretionary Fund Policy
7. Safe Sanctuary and Limited Access Policies

I believe all of these are effective and would add a Reserve Spending Policy to that list. The purpose of a reserve fund is to provide a basis for stability of the operations and administration of an organization through potential periods of economic uncertainty and fluctuation. To that end, it is a prudent practice to adopt a reserve policy to provide guidelines for funding levels and usages of reserve funds. The sources of funding might include unrestricted gifts, donations to support operations, budget surpluses, and contingency allocations within your organization’s annual operating budget.

QUESTIONS TO ASSESS YOUR CHURCH’S FINANCIAL HEALTH

Lovett H. Weems, Jr. says paying attention to various indices of your congregation’s financial health is a key practice in remaining economically viable and sustaining vital ministry. Lovett H. Weems, Jr. is senior consultant at the Lewis Center for Church Leadership, distinguished professor of church leadership emeritus at Wesley Theological Seminary and author of several books on leadership. He offers nine questions to help focus attention on important considerations related to your church’s long-term financial sustainability.

1. What percentage of your operating budget is funded through recurring and predictable sources of income?
2. How well are you estimating revenue and expenses?
3. What percentage of your giving comes from pledges?
4. How are people giving?
5. How much of giving comes from persons age 70 or older?
6. Is any expense category threatening sustainability?
7. Are you deferring maintenance?
8. Is your endowment or permanent fund invested to maintain its value?
9. Do you have a reserve fund, and how is it used?

I see these as all good questions. I would just add, what is your congregation’s impression of your church’s financial health? While the Bible instructs us to give cheerfully and not to worry about our gifts once they are made, as humans, we inherently want to know that our hard-earned money is being put to good use. 

Stay tuned for future UMF CFO blogs on what we all can do to ensure our churches and other organizations we serve are as financially fit as they can be.

This article was written by Ivanna Cole, CFO of the United Methodist Foundation, Inc. Details behind the policies listed above can be found here. Details regarding the questions to assess your church’s health can be found here. For more information on what to include in a Reserve Spending Policy, contact UMF’s CFO, Ivanna L. Cole at [email protected].