ethics seminar

ETHICS SEMINAR

Rev. Dr. Todd Adams, Associate General Minister and Vice President

TIME TOGETHER • Ministerial Code of Ethics• Pastors, compensation and

retirement• Financial Ethics for Congregations

– Internal Controls and Auditing– Budgeting and Accounting 101 – Giving and Pastoral Care– Should the pastors know what people give? – Fundraising and stewardship

TIME TOGETHER • Financial Ethics for Congregations

– Internal Controls and Auditing– Budgeting and Accounting 101 – Giving and Pastoral Care– Should the pastors know what people give? – Fundraising and stewardship

INTRODUCTION• Who is the room?

–Who are you?–Where are you from? –Name a challenge you face as a local

church pastor related to finance? –What kind of financial training did you

receive in undergrad or seminary?

INTERNAL CONTROLS FOR HANDLING OFFERING / MONEY• Trust and Accountability

–Trust: assured reliance on the character, ability, strength, or truth of someone or something b : one in which confidence is placed

–Accountability: an obligation or willingness to accept responsibility

TRUST…• Trust in people and the systems that

protect people –Transactions–Decision making–Paperwork processes–Human contact with the system–Opportunity to catch and correct

errors• Trust is not an internal control

BASIC PRINCIPLES OF GIVING• People give to people, not to

organizations. • They give to support a mission. • They give to organizations where

there are high levels of trust and accountability.

WORD PROBLEM #1• Take about 10-15 minutes and

discuss the issue(s) you see in the word problem. –How typical is this of your

congregation? –What are the internal control

issues that need to be addressed?

ROLE OF THE FINANCE COMMITTEE• Monitors receipts, commitments and

expenses. • Budget development and

implementation• Reviews monthly financial reports

and statements.

FINANCE COMMITTEE• Interprets spending in missional

language• Manages banking relations and

recommends policies–Check signers –Spending limits

FINANCE COMMITTEE• Facilitates the transition of

Treasurers and financial officers • Ensures consistency in practices,

policies and procedures (internal controls)

• Advises the pastor, Board, planning/visioning teams

BASIC INTERNAL CONTROLS• Gifts are always in dual control

–Counters collect, escort and process contributions

• Standardized form and process –Photocopy checks–Clear separation of duties

BASIC RULES OF HANDLING MONEY

–No husband / wife teams –Money is counted at the church–Deposit is made immediately after

church–Treasurer and employees don’t

count the offering–Forms are filled out

COUNTING DUTIES Counter #1 Counter #2Counts cash Opens and verifies information

on envelopes (if used)Photocopies checks Designations are noted

Runs tape from copies Runs tape of checksDesignations are noted Counts cash

Compare Tapes Compare TapesDeposit slip is prepared Counter Form is prepared

Form signed Form signedDeposit is made in locked bag Receipt is given to Treasurer

FINANCIAL SECRETARY• Records the gifts

–Uses the photocopies of checks and envelopes with cash indicating donor

–Generates a report for the treasurer–Treasurer uses the report to match to

bank deposit slip and tapes.

GIFT ACKNOWLEDGMENT • Send quarterly statements of giving• Add personal note from pastor • Add a letter updating on mission

– What has happened– What is coming up

• Tax statement – No goods or services were received in

exchange for the contributions

AUDITING AND REVIEWS

–Ensures that established policies and procedures are being followed

–Reviews expenses and reimbursements–Recommends additional policies and

procedures –Provides donors with confidence in the

policies and procedures–Audit includes an opinion; review does

not

RECOMMENDED LEVELS• $1 million plus = audit• $250/500k – $1 million = review• $1-250/500K = internal review

INTERNAL REVIEW• 2 months of deposits• 2 months of checks• 2 months of bank statements • A group of 3-5

BASIC QUESTIONS TO ASK• Do the deposit slips, bank statements

and receipts match? • Did the counters sign the deposit

information?• Are the checks signed within appropriate

limits?

BASIC QUESTIONS TO ASK• Is there documentation and

authorization for payment? • Are receipts properly noted? • Have the bank accounts been reconciled

by someone other than the treasurer?

SUMMARY REPORT TO THE CONGREGATION–Process

• What was checked and who did it?–Findings

• Errors and corrections• Accuracy regarding policy

implementation–Recommendations

BUDGETS• Standard numerical budget

–Income categories–Expenses by department

• Narrative budget–Explains the missional components

of the budget–Connects the why to the what

CATEGORIZING EXPENSES• Mission beyond the Congregation• Administration

–Personnel –Building Expenses

• Program by Department• New Mission Initiatives

EXPENSE AND REIMBURSEMENT OF EXPENSES FOR EMPLOYEES• Word Problem #2• Accountable Expense and

reimbursement policy• Review of Expenses

WHAT ARE APPROPRIATE EXPENSES? • Travel:

–IRS guidelines –Employee rate .565–Charitable / volunteer rate .14–General Assembly expenses

WHAT ARE APPROPRIATE EXPENSES? • Meals

–IRS per diem for travel–Staff? Members?–Alcohol? –Budget for staff lunches / celebrations?

EXPENSES• Cell phones

–Shared expense or new IRS guidelines –Paid by the church or reimbursed to

the employee?–Shared family plans?

• Cash–Receipt requirements–Lost receipt documentation?

ACCOUNTING• Basic means by which we track and

report income and expenses • Complexity depends on the amount of

money• Quicken for simple• Quick Books well suited • Good membership program, do not

include accounting software

UBIT• Unrelated Business Income Tax

–Non-profits that have income from non-charitable sources.• Amway or Pre-Paid Legal• Rental of your parking lot • Advertising in church bulletin • Rental of facility @ fair market value

501C3 STATUS • Blanket 501c3

– Held by the denomination– YearBook– Determination letter– Exempts you from IRS– Creates eligibility for state tax exemption

Unique Situations for Pastors

GIFTS AND HONORARIUMS• IRS guidelines

–Taxable income when received in exchange for services (wedding, funeral etc.)

–Not a charitable deduction

GUIDELINES• Have the board set the parameters

for honorariums –Wedding policy–Funerals – consult with the local

funeral home for recommended amounts

SITUATIONAL ETHICS• Use of a vacation home • Employing my spouse• Personal loan

–Member –Congregation

• Paying for additional education • Serving as an executor

GUIDELINES• Transparency and accountability • Written plan • Sunshine Test • Every situation must have an exit

strategy identified up front• Amount of time consumed by one

family or individual

DISCUSSION• What are the challenges you have

faced that you would like to discuss?

• It is a spiritual discipline –How can you help people grow in

the discipline?–How can you effectively guide their

spiritual practices? • Opposition

–Lowest proportionate givers

SHOULD THE PASTOR KNOW??

• Giving stops with or without explanation

• Giving pattern shifts - monthly, annually, etc.

• The giving patterns become completely erratic.

PASTORAL CARE

• Regular weekly giver suddenly stops giving

• Regular offering decreases and special giving increases

• If envelopes are used and are consistently confused in order

PASTORAL CARE

• Who attends worship• Who attends Sunday school• Who is involved in a prayer ministry• Who comes to bible study

WHAT THE PASTOR KNOWS

• Pastoral care issues:–Surgery–Divorce–Problems in the bedroom–Mental health issues–Difficult children

WHAT THE PASTOR KNOWS

• Leads the congregation –Sets a Stewardship vision for the

church–Tells the stewardship story–Encourages others in their giving

WHAT WE DO WITH WHAT WE KNOW…

• Leads the congregation –Models the way–Celebrates the victories–Effectively leads the congregation

WHAT WE DO WITH WHAT WE KNOW…

• Play favorites• Pick people for important positions for

their giving• Kyle’s story• Blackmail folks• Think poorly of folks

WHAT WE AVOID DOING…

• Change in presentation of instrument–Consistent errors in numerical and

written amount–Portion of the check left blank–Handwriting changes significant or

appears to be written by someone else e.g. adult child

CHECKLIST FOR THE FINANCIAL SECRETARY

• Gifts versus estimate of giving–Gift is significantly less or suddenly

decrease versus indicated gift–Gift is significantly more than indicated

gift

CONTINUED…

• Estimate versus estimate year to year –Dramatic change in estimate of giving (increase or decrease)–Forward any comments included with instrument of giving–Estimate of giving is revoked

CONTINUED…

Financial Evangelism

FINANCIAL EVANGELISM• Define evangelism • Define finances / financial • Power of story

• Personal story• Gospel story• Donor’s story • Connection

THE AVERAGE AMERICAN CONGREGATION• Middle Class church• 1 in 6 lives on less than $20,000 per year• The median is $45,000 per year • Less than 4% make over $100,000 / yr• 75% are white collar or self-employed• 61% have an education beyond high

school • Most strained for time and money

HOW DOES THE MONEY COME?• Out of every $1,000

– 68% from people with post-high school education

– 90% from those employed in the middle class– 92% from those who earn more than $20,000– 76% from those who attend every week – 77% from those who consider their religious

commitment to be very important

• Eg: monthly, automatic deposit, annually, etc• Cash flow practices of giving • You have to understand the culture of handling money for all the generations in the church

UNDERSTANDING GIVING PATTERNS

• What is the unique culture of money in your community?• VANCO Services

– Electronic Funds Transfer– Online giving– Credit cards

UNDERSTANDING GIVING PATTERNS

• Money One–Cash (IRS issues)–Check–This is money available for daily

operating e.g. medicine, food, utility bills etc….

UNDERSTANDING THE CULTURE OF MONEY

• Money Two–Legacies/Endowments–Capital project giving

• Money Three–Bequests / Wills – Christian Church

Foundation

UNDERSTANDING THE CULTURE OF MONEY

• When you think of the word budget, what comes to mind?

• How involved are you in the budgeting process?

PROVIDING FINANCIAL LEADERSHIP

• How knowledgeable are you about where your church stands today financially?

• We learn to read a balance sheet or a financial statement

PROVIDING FINANCIAL LEADERSHIP

• Do people feel that their records are secure from public viewing?• Is there an accountable system expenses?• Do you have an audit, a review by a CPA or volunteers in the church?

COMMUNICATING INTEGRITY

Average Per Unit

$5,146.07

$6,954.21

$4,661.56$5,709.23$6,044.00

$5,132.04

$6,347.78

$8,164.55

$-$1,000.00$2,000.00$3,000.00$4,000.00$5,000.00$6,000.00$7,000.00$8,000.00$9,000.00

1 2 3 4 5 6 7 8

Group

Amou

nt

1 – Choir; 2 – Board; 3 – Deacons; 4 – Youth/Children’s Workers

5 – Financial Officers 6 – Adult Sunday Participant

7- Adult Bible Study Participant 8 – Elder

Strategies for Financial Evangelism

“The Annual Campaign”

• Pastor and lay leader must have a working knowledge of the finances of the church.

• Know the needs of the church• Don’t ask people to fund a budget; pay a

bill; fix the roof or increase the Pastor’s salary

ANNUAL CAMPAIGN

• Planning should start four to six months prior• Four weeks with a common theme, tied to the

mission

LettersPreachingPrayersMusic

Lay speakersCelebration timeE-mail & website

THEME

Breaking the Cycle:It is not a Big T-Shirt

$10 PER WEEK OR LESS• Under $5 and under $10 challenge

them to increase their pledge by 10%–Increase of .10 to $1 – different

approach to different folks –Change the pattern

$11-50–Use the Everyday Life example

• Cost of a manicure• Cost of a carwash• Dinner for four

–Specific information related to their demographic• Tell this group what your want• Tell them why (mission) you want it • Tell them how they can do it.

$51-$200 –Break into relational groups, don’t

send a specific pledge card–These members will increase their

giving as a spiritual discipline –Thank these members for being

leaders in the church–Encourage them in their giving

$200 PER WEEK AND UP• Personal Visit from the Pastor• Key leadership in the campaign• Consult with them on specifics in

their giving• Expand their interests within the

church and beyond the local church

PRACTICAL FUND RAISING STRATEGIES

• Make a 12-month plan• Choose leadership that has a proven

giving record• Eliminate the negative

PRACTICAL FUND RAISING STRATEGIES

• Remind folks of all the positive things that are happening

• Set visitation teams up to visit folks along relational not geographic lines

FOUR LETTER STRATEGY

• Week one –Introduce the theme–Connect to your congregation / mission

FOUR LETTER STRATEGY

• Week two – tell me what we are doing that “feels good”–How many kids did we send to camp?–How many new members? Baptisms?

FOUR LETTER STRATEGY

• Week three – tell me what we are doing for others–Feeding at the shelter?–Denominational giving?

• Week four – the ask letter

CONTENTS OF AN ASK LETTER

• 1st Paragraph – What do you want me to do?

• 2nd Paragraph – When do you want me to do it?

• Closing Paragraph – How much?

BASICS CONTINUED • Use the same criteria for letter

writing - - no more than three paragraphs, one side, one page

• Do it well• Do it in a timely manner• Include a self-addressed envelope

WHEN IT IS OVER• Thank people immediately• If you use pledge envelopes, consider

a monthly mailing service• If you use box envelopes, never leave

them in the narthex beyond the last week of the prior year

DURING THE YEAR• Include a letter telling them about

the mission and ministry they have accomplished and what is coming up

• Do you use blue ink?

DURING THE YEAR• Send a quarterly statement and

thank people

• Do you have pens in the pews?

TODD’S TOP 10• Pastors must tithe• Pastors and lay leadership must be

comfortable talking about money• Do not make assumptions about what

people give• Giving is a spiritual matter – your Pastor

should know what people give• Leadership should be faithful givers

TOP 10• Your most faithful givers should chair your

annual campaign• Annual campaigns are not big T-Shirts – one

size doesn’t fit all • Preach it…year-round• Thank people at least 7 times for their gift• Pastor and Financial Secretary / Treasurer

must have a good working relationship

ACKNOWLEDGEMENTS • This presentation is an ever evolving source of information influenced by

many people, authors and congregational experiences. Among those who deserve acknowledgement are:

• Sandy Lacore, former General Secretary on Finance and Administration for the United Methodist Church who introduced the term Financial Evangelism, the giving evaluation charts and required the development of a stewardship strategy for a D.Min. course.

• Lovett Weems, Director of the Lewis Center for Church Leadership at Wesley Theological Seminary.

• The D.Min faculty at Wesley Theological seminary and the required courses and reading that influenced and shaped the presentation.

• Memorial Drive Christian Church in Houston, Texas who allowed me to implement most of this presentation.

• Rev. Ed Taylor, who was an early influence in my theology of stewardship.• John Goebel, Assistant Vice President for Finance, Office of the General

Minister and President and James Oberle, Partner, Capin Crouse.