Financial Reporting for Churches

By Darrell W. Mims

There are many stakeholders who rely on the relevant financial information produced by churches. This information is needed for church leadership to make critical decisions in the future operation of their ministry. The stakeholders who rely on the financial information include the senior church leadership, church members/attendees, contributors, elders, staff, creditors and government entities. The information that they receive must be timely, accurate and easily understood by the audience that is relying on them.

The information that most stakeholders want to know is the following:

1) How much is received in donations?
2) How much is being spent?
3) Are the expenses greater or less than the operating budget?
4) How much money is in the bank?
5) What are the future vision of the church and the financial impact of attaining the vision?

Financial information that is communicated to the stakeholders will be different depending on who the stakeholders are. The more sophisticated stakeholders will require much more detail and explanation of the financial results. They also may have some specific requirements based on loan or credit agreement requirements. The general congregation and contributors may only require a verbal explanation and vision casting. It is the responsibility of senior leadership to determine the correct level of communication to the selected audience. Meaningful financial reporting should contain the following components:

1) Information that is easily comprehensible so that anyone who reads them can understand.

2) The information needs to be concise so that the reader does not get lost in the details.

3) The information should include all accounts, departments and financial activities of the church. Nothing should be omitted.

4) The actual information should be available to compare to current month budget, year-to-date budget and to the previous year.

5) The reports must be completed on a timely basis.

6) All financial information must be presented in accordance with Generally Accepted Accounting Principles.