Good churches need good manuals – Finance Manual



A finance manual is critical. Church finances require the utmost level of trust from the donors and members toward the pastors and finance staff. A finance manual establishes the policies by which the church’s money will be governed and used. Parts of this document are a legal requirement but most of it is designed to ensure confidence in the handling of funds.


If a church does not have a finance manual, it can create the appearance of lack of integrity and a haphazard attitude towards donated money. That is not the biblical standard. Paul tells the Corinthians to do all things in their church “decently and in order.”


A good finance manual will address accounting, banking, record-keeping, software and hardware, document retention, communication with donors, accounts payable, financial reporting, audits, gift acknowledgement, and too many other things to list here. These policies ensure that even though staff may come and go, the practices within the Finance Office remain constant and completely above-board.


A personnel manual is a living document – it must be reviewed every year and updated at least every other year. Not doing that minimal step is a failure by management. Most policies will remain the same such as contribution processing, payroll, or accounts payable. But as times change, new policies must be written and old policies changed to address changes in the law or accounting standards regarding overtime, designated funds, and PP&E (property, plant, & equipment).


The finance manual template at has

  • A Gift Acceptance Policy to help the church know what gifts can be accepted without question versus those which require research
  • A policy for using church-issued credit cards and reporting the expenses charged on the card
  • Fundraising ethics standards to ensure the church abides by IRS rules


This manual is only $30. It is updated annually to ensure its compliance with the latest legal and tax changes.  This manual is a great starting point for churches needing to develop a manual scratch or to update their current one. It will save hours of research and writing. By using this manual, a church will need only to add sections that are specific to their situation and/or remove non-legal policies which don’t apply to them.

Employees Should Pay for Benefits with Non-Taxable Dollars

2016 06-June 14 (11)

The rule of thumb is that you always want to pay for benefits with non-taxable dollars. If you pay for them with taxable dollars, then when you get the benefit, you have to pay taxes on that benefit. Taxes on premiums are always cheaper than taxes on benefits. The best example is life insurance: the premium on a life insurance policy is a few dollars a year (depending on what the premium is and your tax bracket) but that is certainly cheaper than paying taxes on a life insurance benefit of $50,000 or $250,000! Other examples include disability policies and benefits and long-term care.

Health insurance and its related health savings accounts are not, by law, taxable (as of when this post is written). In fact, employee payments for both health insurance and HSAs are tax-deductible and employees should be encouraged to max out their HSA amounts if financially possible (same goes for retirement).


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Overtime Laws

2016 03-March 29 (8)

On December 1, 2016 new overtime (OT) rules as approved by the US Department of Labor go into effect. Actually, most of the overtime laws are over 30 years old. In May 2016 the DoL altered one major component of the OT laws but almost everything else remained the same.


The major change is that salaried employees must make over $47,476 (just round that to $47,500) to be exempt from OT. Salaried workers who are below this dollar threshold and who do not make executive-level decisions should keep track of their work hours. While tracking hours worked each pay period is a pain, it is necessary in order to know if the employee should receive OT compensation.


Some other information about DoL laws:

  • Hourly workers are never exempt from OT
  • Contractors must truly be from an independent company that has several clients and not just an outsourced former employee or two


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Stock Gifts (part 3 of 3)

2016 05-May (10)

Several times during the year it is a good idea to place in the Sunday bulletin, the quarterly donor gift statement, or other form of communication a reminder that people can give stock to the church. Below is the bulletin “blurb” which I use regularly.


Many members of (insert church name) donate appreciated stock. They give to the ministry budget, to missions’ offerings, the church’s endowment, or the building campaign. You can transfer your stock electronically to (insert church’s name)’s account by contacting (insert church’s broker) at (insert brokerage name and phone number) or (insert church contact) in the church office (insert church phone number). To give electronically, your broker will need a DTC number (insert number) and the church’s account number at (insert account number).


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Stock Gifts (part 1 of 3)

2016 05-May 10 (2)

Virtually all stock in the US is common stock. There are lots of other kinds of stock (preferred, private, etc.) but common stock is typically what is traded on the major stock exchanges. Almost all stock is now held in “street accounts” or an electronic account in a brokerage. Paper stock is available but it is cumbersome to transfer so most people use electronic stocks. For purposes of this post, stock gifts include mutual funds.


Stocks which have increased in value since their purchase are an excellent way for members to make gifts to their church without incurring tax consequences. Churches can accept paper stock gifts without having an account with a stock broker. However, only brokerage firms with selling rights in a stock exchange (think NYSE, New York Stock Exchange on Wall Street) can sell the stock. Churches without an account with a broker cannot accept electronically transferred stock from a member’s street account.


Churches which may get stock gifts should be pro-active and establish a brokerage account. This will require the authorized body of the church to approve a required corporate resolution (the wording is provided by the brokerage firm) which authorizes specific people in the church to sell stock. Typically the people who are named on the resolution are the church’s treasurer, chairperson of the Finance Committee, and the staff person responsible for the church’s finances.


Once the account is established and the resolution is approved, then the church can accept and sell donated stock without much trouble. All stock gifts must be acknowledged by the church and there is a specific way to value stock gifts.


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Finance Office: Computer Filing System (part 2 of 2)


In part 1 I discussed how to set up the hardcopy or paper files of the church’s Finance Office. This post discusses how to organize computer or server-based files. My prediction is that within 5-10 years almost all finance office files will be kept on a computer. I encourage you to begin moving that way as soon as possible.

The first equipment you’ll need (after a computer) is a scanner. Most photocopiers today are also scanners. Or you can get a good quality flatbed scanner for about $200 or top line color “All In One” scanner/copier/printer for about $700. You should also invest in the latest version of Adobe which allows you to work with PDFs. I also encourage you to have an account with Dropbox and to either keep all your files on Dropbox (that’s what I do) or use it as a backup system.

Regarding the file organization itself, have:

  • A folder for every fiscal year and the following subfolders
    • For each month’s financial reports: put all regular financial reports in PDF form in the respective folder to easily access them in the future
    • Budget folder – all docs related to the current year budget
    • Memorial Letters folder – copies of all memorial acknowledgements
    • Stock Gifts and Non-Cash Gifts
    • Finance Committee meeting agendas and minutes
  • Additional folders for other major categories such as
    • Insurance
    • Contracts
    • Tax exemption docs
    • Employee Personnel Forms (tax forms, direct deposit form, etc.)
    • Finance Office Forms (all forms related to the Finance Office)
    • Building Projects & Campaigns (one folder for each one)
    • And as many other folders as necessary to group major activities and events. Caution: do not have an excessive amount of folders or you’ll spend a lot of time hunting for docs.

How you organize the folders is up to you. I organize everything by year – the budget, the monthly financial reports, the audit info, etc. are all in the folder of that fiscal year. I can find things easily if I know what fiscal year or two I’m dealing with. I can’t encourage you enough to be passionately organized about your folders – it will help you later and save loads of time.


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Finance Office: Hardcopy Filing System (part 1 of 2)


I have a simple filing system for my hardcopy (aka, paper) files in the church’s Finance Office. I’ve learned that simple is best: it keeps the staff and the auditors from having to hunt and hunting is just wasted productivity. I have a four drawer filing cabinet (lateral files are best) in which I’ve got the files for the current year (prior year files are boxed up and placed in storage until they are shredded). I’m doing less and less with paper files and moving as much as possible to electronic storage (with backups). We are in an age of transition – within a few years, paper files will be negligible.

  • Accounts Payable (Vendor payments)
    • All accounts payable are in separate manila folders by vendor with the vendor name on the folder tab.
    • All accounts payable invoices have stapled together the check stub followed by the supporting docs for that payment.
    • Credit cards are in separate file folders by employee. I keep them in the A/P drawer
  • Deposits
    • All deposits are in 12 folders with the month on the folder tab.
    • Deposits are placed in each monthly folder based on the date that the deposit hit the bank account.
    • All deposits have the bank deposit slip on top followed by all the docs which support the amount deposited.
  • Payroll
    • All payroll docs are in 12 folders with the month on the folder tab.
    • Payroll docs are placed in each monthly folder based on the date that the payroll hit the bank account.
    • All docs related to that payroll are stapled together to make future research easy.
  • Monthly folders
    • I have 12 folders with the month on the folder tab.
    • Each of these monthly folders has anything that doesn’t fit into one of the previous categories. Typically, this includes: journal entries, bank reconciliations, and investment statements.
  • Annual Files – there are files which are only one folder for the year. These include
    • Voided checks
    • Annual budget
  • Permanent Files – one of my drawers is for files that cross over fiscal years. This includes:
    • Contracts – I have a folder for each vendor. Somewhere on the folder I put when the contract expires. I also keep this info in an Excel spreadsheet to see at a glance when contracts expire.
    • Construction – any building info which will be needed over the course of several years is in a separate folder(s) according to the project.
    • Insurance – contracts and premium payments are kept in separate folders because this is kept forever (see records retention post)
  • Employee Files
    • Current employee files are kept in separate folders with the employee’s name on the folder tab
    • Former employees’ folders are boxed up and kept in a separate and secure location. The Department of Labor says you only need to keep those folders for three years after the employee leaves but I recommend keeping them for 10 years in case there is legal action by the former employee.

Once you are organized and get into a routine, then this system works quite well. I learned this from one of the Final Four accounting firms so it has passed muster.

Prior year files are in boxes on shelves organized by year and by contents: boxes for accounts payable (bills & invoices), a box for the monthly folders, a box for deposits, and a box with any other file (or fit those into one of the previous boxes as possible).


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Monthly Internal Audit Checks


I encourage all my clients to have an annual audit. You can find reasonably priced audit firms who will also provide assistance throughout the year with tricky questions.

In addition, I encourage my clients to have an Internal Auditor, typically the church’s treasurer if they have a financial assistant doing the books (or the Finance Committee chairperson if the treasurer is doing the books).

The procedures the internal auditor does each month are quite simple:

  1. After the month ends, the internal auditor receives the general ledger detail for the checking account. That lists every payment and deposit.
  2. The internal auditor will review the list and select up to 10 deposits and/or withdrawals for which he would like to have more information.
  3. The Finance Assistant finds the source documents for the requested deposits or withdrawals and has them in a folder in the church office for the auditor to review. These documents should never leave the church; the auditor can review them onsite.
  4. The auditor make notes and, if necessary, talk with the staff person or supervisor if there is an expense or receipt for which he needs further clarification.

That’s it. It is very simple and it is done every month. Church staff will be informed that every one of their expenses is subject to a random inspection and that will ensure they attach appropriate documentation and in a timely way. It also provides a sense of lay member oversight so that the church can know that there is someone “guarding the guards.”

The monthly bank reconciliation summary should also be sent to the treasurer. This is done to provide more detail about checks and deposits that cleared or haven’t cleared.


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