Building transparency into your church budget

November 29, 2022 by Nancy Crowe

Transparency keeps money from controlling the church, said Robert Hay, Senior Ministry Relations Officer with the Presbyterian Foundation.

Hay’s presentation, “Understanding Budgets and Reports,” was part of the Foundation’s Day of Learning Nov. 8. Here are a few highlights to help church leaders make budgeting more workable, reports more understandable and, therefore, church finances more transparent.

What to include

Churches should have separate funds, though not separate bank accounts, for each restricted purpose. This is typically an operating fund for general income and expenses and funds for each restricted purpose, such as reserve, building equity, donor restricted and board designated funds set aside by the session.

Reports should include a statement of financial activity (also known as a profit/loss or P & L) that shows income and expenses for the church’s operating fund. They should also show balances of each designated fund and a statement of financial position (balance sheet). This is a snapshot of a church’s assets (bank accounts) and liabilities (fund balances) at a particular point in time.

Categories of expenses

Hay encourages three categories for giving: pledges, non-pledged and loose offering. Non-pledged giving is when you can track the gift to a person, but that person has not made a pledge. Fewer people are filling out pledge cards, he said. They’re giving, but they’re not pledging. “That trend is going to continue,” he said.

When enumerating expenses, he advises naming a few functional areas related to the three P’s: people, place, and programs. The fictional church listed expenses in seven categories: people, place, worship, Christian education, pastoral care, mission, and miscellaneous.

Clearly accounting for money in and money out is vital. The surplus or deficit you get when you subtract expenses from income isn’t enough to inform members, Hay said. “That number doesn’t tell the whole story.” For example, he pointed out that the church was ahead on expenses but had not yet given any money for mission for the year.

Documenting designated funds

Session designated and donor designated funds should be tracked separately to clearly show which funds the church has control over and which it does not.

Further, each designated fund should have a one-page document with details such as who designated it and when, what the restriction is, initial amount and more. Other documentation such as a copy of the gift letter or payment documents, or session minutes if it’s a session designated fund, should be included. These one-page documents should be reviewed annually by the session to remind the leadership of the fund’s purpose rather than relying on memory.

Good habits

Monthly review of check registers, bank statements and reconciliation reports is really important, Hay said. “We should trust, but we need to verify.” To verify is not punitive, he added.

Investment and endowment statements can be reviewed quarterly; investment and designated funds, annually. A financial review, which is a step below an audit, should also happen annually.

A church needs to also model being a good employer, Hay said. “We don’t need to take advantage of employees who say. ‘No, you don’t have to give me a raise.’”

Help is available

If you’re awash in numbers, or maybe just in questions, help is available from your regional Ministry Relations Officer, Stewardship Navigator and the Church Financial Leadership Academy (access code PCUSA).

Nancy Crowe is a writer, editor, and animal wellness practitioner based in Fort Wayne, Indiana. She is a graduate of Louisville Presbyterian Theological Seminary. Send comments on this article to Robyn Davis Sekula, Vice President of Communications and Marketing at the Presbyterian Foundation, at