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Transparency in Church Finances

Reconsider your church’s approach toward transparency in finances
by Faith+Lead | August 23, 2021

By Jim Elrod

The Giving USA Foundation recently released its annual report on charitable giving in the United States. Many were worried that the challenges brought on by the COVID-19 pandemic and social unrest in 2020 would compromise charitable fundraising. How would nonprofit organizations—particularly churches—fare? Here we explore the topic of transparency in church finances and gifts.

When Giving USA published its report you could almost hear the nonprofit world breathe a collective sigh of relief. Nonprofits raised a record $ 471 billion in 2020. Not only did donations to charity rise 3.8% from 2019 to 2020, but the rate of growth in charitable giving also increased year over year. Total giving in 2019—a year of economic expansion that also witnessed a rising stock market—only grew 2.8% from 2018. 

Yet, not all nonprofits participated equally in this rising tide. There were clear winners and losers by category. The public benefit subsector, for example, enjoyed a 14.3% increase in giving from 2019 to 2020. Donations to the environmental sector rose 10.3% over the same period. Yet giving to religion declined 0.2 % between 2019 and 2020. The undeniable truth is that churches lost the battle for wallet share among American donors in 2020. What can church leaders do to make sure this trend doesn’t continue?

Create Transparency in Finances

They can start by reconsidering their church’s approach towards financial and operating transparency. Survey after survey indicates that donors in every demographic category want to know that their gift will make a difference. Whether the gift is going to their alma mater, the United Way, or their church, donors want to know their financial support is having a positive impact. As John D. Rockefeller, a devout Northern Baptist and storied American philanthropist, asserted, “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.”

Compliance vs. Missional Impact

Regrettably, many churches view the topic of transparency through the lens of compliance rather than impact. This approach asks, “What must we do to meet the minimum disclosure requirements that will satisfy interested parties such as local government, regulators, and denominational authorities?” From a fundraising perspective, a more effective approach towards transparency asks, “What kind of financial and operating information would illustrate that our church is achieving its mission and making a difference in the lives of our members and neighbors? Do we make it easy for members and prospective members to see that their financial support is having a positive impact?”

Steps Toward Transparency

Here are three questions worth considering by churches interested in cultivating greater generosity by becoming more transparent.

Are your mission and your reporting on your mission balanced? Not every activity a church undertakes directly supports its unique mission. Contributions to a local food pantry, for example, are never a bad thing. But if food security is not a pillar of your outreach program and the contributions are modest, should this effort be highlighted? Sometimes churches feel compelled to report on all their activities and compound the problem by giving each equal attention. The result is the information overload that confuses donors. Whatever you decide to report, keep it simple and connected to your missional story.

Are your results easily accessible by members and prospective members? A 2018 study of churches by the Lake Institute on Faith and Giving revealed that while 92% of congregations produce an annual report, only 81% share it with their members! Compiling financial and operating information is being compliant, not transparent. Sharing an annual report in paper format with only those members present at your annual meeting is being compliant, not transparent. Reports on your financial and operating results should be made available on your church website.

Do you present your results in a consistent format and does it reach across time periods? Not many churches achieve their financial and operating goals every year. When they fall short, there’s a temptation to highlight what has worked and downplay what hasn’t. Committed members and donors are more interested in knowing their church is making progress towards achieving its mission over time. They will not abandon ship over temporary missteps. Providing summary information that covers three or five-year periods, and candidly reviewing disappointments as well as successes annually, will bolster donor confidence.

Church members—like all donors—want evidence that their donations matter. And most congregations have an admirable record of stewarding member contributions effectively.  Unfortunately, not as many churches do a good job of reporting on their good works in a clear and transparent manner. Make it easy for members and potential members to see that they are, collectively, making a difference. You may be pleasantly surprised at the response.

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About the Author

Jim Elrod teaches courses on church and nonprofit financial sustainability and crisis management at Yale Divinity School. His book Creating Financially Sustainable Congregations was published earlier this year. Jim holds an AB degree from Colgate University, an MBA from Harvard Business School, and a MAR from Yale University.

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