Ensuring Your Ministry’s Financial Integrity
(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)
Last month, Ministry Banking Today highlighted four priorities for ministries looking to more effectively manage their finances (Now Is the Time to Review Your Ministry’s Financial Management). This month, we take a closer look at priority number one — ensuring financial integrity.
Integrity is foundational to sound financial management. It will protect the reputation of your ministry and those on staff. And it is another way for your ministry to glorify God. If integrity is called in to question, donors may stop supporting the ministry.
The first step toward ensuring your financial integrity is establishing and maintaining accountability. Here are a few key activities to create this accountability in your ministry:
Receipts. Ensure all funds intended for the organization are received, promptly recorded and deposited, and kept under adequate security throughout this process. Maintain a system where two unrelated individuals are always present when processing and preparing the deposit. No one person should ever have access to funds by themselves.
Disbursements. All funds should be disbursed only after proper authorization by management and for valid ministry purposes. Ensure these disbursements are properly recorded and reconciled.
Petty Cash. Petty cash should be safeguarded and assigned to an individual, and then periodically reconciled with receipts along with a reason for the disbursement.
Payroll. Ensure payroll records are maintained and authorized, payroll is properly recorded, and related legal requirements (such as tax payments) are also compiled and filed.
Managing Restricted Funds. Money restricted by a donor for a specific use should only be used for the purpose it was given. Avoid the temptation of borrowing against restricted funds when you are faced with a cash shortage. When calculating your cash reserves, make sure you don’t include restricted funds.
Financial Reporting. Prepare timely financial reports and provide both ministry leaders and board members with actual, budget, and annual comparisons. Consider having your financial records reviewed (or audited) by an accounting firm who understands your type of ministry. Remember that financial reports are another way to communicate your story of ministry effectiveness to your donors and ministry leaders.
To learn more about strengthening your ministry’s financial integrity, check out sample policies and guidelines from Evangelical Council for Financial Accountability at www.ecfa.org.