When it comes to operating a church, a foundational document is the Finance Policy. If a poorly written Finance Policy is executed well, then the Policy can strike fear into any staff person. If a well-written Finance Policy is executed poorly, disharmony in the staff will erupt. The best Financial Policy is written well and executed well.
There are at least eight significant aspects to writing a good Finance Policy. At our church, we just adopted a new policy. Here are eight of the lessons learned in that process.
1. Keep it short.
Our Finance Policy came to thirteen pages and that was short! We started with twenty or thirty pages. Every item was trimmed as much as we could. A policy should have just enough words to be effective and legal, not verbose and inflated.
2. Cut procedures.
It seems redundant to say, “Only include policy in a policy document.” You are writing a governing document, not a task list. A procedure is: “Checks are processed by Remote Deposit Capture on Monday morning by 11:00 am.” A policy is: “All checks shall be processed by two or more people as soon after the worship services as is practical.” Let your finance staff determine procedures.
3. Keep it legal.
Send the proposed document to your CPA and attorney while still in the draft phase. Don’t hype up your policy with lots of legalese. Use plain English and a straightforward tone, so that all on the staff can understand it.
4. Teeth and grace.
Give your Finance Department enough teeth to enforce the rules. Yet, also allow enough grace in your policy to deal with offenders. Example: “Receipts for reimbursement shall be turned in within 45 days of expenditure, but rare exceptions can be approved of by the Director of Finance and the Executive Pastor. Failure to follow this will result in either taxable income to you or denial of the reimbursement, and a explanatory letter may be placed in your personnel file.”
5. Define roles.
Many finance policies feel like a set of rules foisted on the staff. Begin with your Constitution, if applicable, and explain who is responsible for your finances. Note the role of your Board, Finance Committee, Director of Finance (or CFO) and all staff. Define the role of the Executive Pastor if you have one. Demonstrate that it takes the entire team working together to have healthy finances.
6. Have independence.
Define how independent views on the church finances can be presented to the Finance Committee or Board. An independent person is “one not having an employment or contractual tie to the church.” Independence could be in the form of church members on the Finance Committee, your CPA or auditor. Independence helps ensure against fraud, self-aggrandizing decisions, and brings in honest input.
7. Get buy-in.
Seek the comments from senior staff. They will have to live with the policy, so get their input. This doesn’t mean that you will accept every suggestion but you will know their views on controversial subjects.
8. Draft and re-draft.
It may take you three or four drafts until your document is ready for approval. Check the Financial Policies of four to eight other churches to see if you are missing significant areas. Accept that it will take a few months to write and rewrite the document. Finally, get approval of the finished document from your Finance Committee and Governing Board.
By making this a team effort, all the players will realize that they have an important part in your church’s healthy finances. People will understand the rules and generally follow them. The gospel is the foundation for a solid spiritual organization. A well-written Finance Policy will help give your church a solid operational foundation.