Finances: Understanding Church Financial Documents Without Any Training – Transcript

Jim Latimer
Welcome to Coaching for Interims. We are about empowerment for interim ministers: best practices and quick help from interims for interims – wisdom from the field. My name is Jim Latimer, your host, and today I have with me Reverend Erica Avina, and Erica wanted to speak to us a bit about finances. And as a seasoned interim minister, you probably have some pearls for us here. Erica, what would you like to offer us?

Erica Avena
Thank you, Jim. Yes, nobody is more surprised than me that finances are something that I know about. But what I have done, Jim, is that I have simply asked questions until I understood what was going on. And if there’s nothing else you take from this, ask questions until you understand what’s going on. And to the extent possible, encourage the congregation to ask their own questions. One of the best things we can do in the interim season, is to allow for some transparency around the church finances.

Jim, you and I both know that misconduct is a real problem in the world of churches, and that occasionally things are not on the up and up. So in the interim season, you really have an opportunity to ask some out of the box questions. And because we are interims and we’re coming with a fresh set of eyes, we have permission already, just by virtue of showing up, to begin asking those questions. I have learned by taking a couple of workshops that financial people will say there are two types of financial documents. Just two – nothing too complicated. There is the profit and loss statement, which we may be familiar with as the income and expense statement. And then there is the balance statement. Both of those documents should be someplace visible to the clergy. And they should be also visible to the membership, not necessarily the public. Churches are not accountable to the great wide public. But we are accountable to our membership. And in some denominations, you are also accountable, of course, to your bishop, or your authorities as well. So those are the two kinds of documents to look at until we understand.

What I have done is first of all, looked at the documents that I’m given before I arrive at a congregation, and usually they’ll give you the annual report. And I’ll just kind of stare at it for a while. And then once I get there, I can compare that document to the next document that I’m handed at the business team or the stewardship or the trustees or whatever name they are given. Then I begin to compare one document to the next. And if it’s convenient, you might sit down with the treasurer and just ask a couple of questions about what’s going on. And then, as you become familiar with the way this congregation is tracking their finances, asking questions in the larger committee, which actually, I’ve learned really helps everybody in the room. This has been very counterintuitive for me, Jim, because I don’t think of myself as being a financial wizard at all. But I have been looking at church finance documents for a while. And if anybody listening has been in church work for any length of time, you’ve probably been looking, if not at one church’s budget you’ve been looking at another church’s budget, and you’re familiar with how things are laid out. So asking the question about how things are characterized, and how we’re thinking about certain line items, especially over time, and just allowing people to have some conversation about that. And if you’re not understanding how people are talking about that, highlight that, and come back to it. I have found that the confusing things to me in church budgets are usually confusing to a lot of the people in the congregation as well. And so the question there, the opportunity, is to help the congregation either change how they talk about it, or change how they’re representing it in their budget documents, or, something else, you know, that there’s opportunity there.

I’ll also say, one of the churches that I served, and this might be unusual for people, but one of the churches that I served had an awful lot of money circulating off the books. It was not represented either on the income expense statement, or in the balance statement. That particular church did not like doing balance statements, and didn’t tend to include certain kinds of things. There were a couple of sinking funds for missions that people felt, “Well, if we show that we had this money, then they’re gonna take it for another purpose,” which is really dangerous. That’s not a good environment for our church. We need to be honest about what our resources are. And if we’re not in a position to do missions, well, let’s have that conversation. Let’s not hide that conversation. What we ended up doing, Jim, to get some of that money revealed was we took our church’s, employer ID number to three different banks in our community. And we were able to find the money that way. It was otherwise completely invisible. That was a church that had had some conflict. People were not talking about where the money was. So as churches, we are 501 C3 organizations through our denominations. That is what we are. We need to be very transparent about the money we are collecting, and then how it is used. And courts of law, give us tremendous leeway, in that churches themselves, in my experience, tend to be much stricter with themselves than a court of law would be.

The great example of this, and I believe this is an actual example, is that there was a church that had all but completely gone out of business, except they had this massive endowment fund for flowers. And the congregation insisted that the money be spent on flowers. And they needed to close the doors because they couldn’t afford a pastor anymore, they couldn’t pay the janitor, nothing else. And it actually went to court. And the judge was like, “It’s your money, spend it on ministry.” The judge is not holding us to a flower fund. It’s a church. We get to be the whole church with our money. I absolutely want to advocate that we spend money as people intended to, but not to the extent that we’re going to – what is the expression – cut off our nose to spite our face? You need to keep things in balance. So, just fundamentally, asking questions about the finances can really help the whole congregation, especially in that interim season, understand how their church’s finances are going. And so bring people on board, help them to have confidence in this institution that they have been supporting for so many years.

Jim Latimer
Wow, that was a very coherent and beautiful final sentence. I love the natural curiosity that you bring to this. And that you model being curious, not accusing. But just curious: help me understand. And recognizing that people are listening to you and benefiting too. And then keep at it, as more and more the circles of clarity and transparency get bigger and bigger. That’s the image that appeared in my mind.

Erica Avena
Yes, just asking those questions. And this doesn’t need to be a big interim focus. But it can really be a major side benefit and major value that you bring to the congregation, just by virtue of being an interim minister in that system. It’s questions, questions about finances.

Jim Latimer
Thank you so much, Erica.

Erica Avena
Thank you. Great to be here.

More Bits Of Wisdom from Rev. Erica Avena
< < < Back to Rev. Erica Avena’s Biography