Money. One of the major challenges that churches face is setting a sustainable funding strategy.
When it comes to church finances, leaders often take a “seat of the pants” approach each fiscal year with small regard for tomorrow. Too, they may not understand the funding sources available to the church, or how those sources can hurt or hinder faith development through financial stewardship and generosity.
Here is a list of the various ways churches can fund their ministry. And, because our objective is to make disciples, how can we build transformative discipleship giving into them, rather than just hoping for the best?
User fees include facility rental (for example, weddings), program fees, and even setting a basket out for donations during a church dinner. This category may also include the preschool paying “rent” for its daily usage.
These fees typically leave no room for transformative financial stewardship and simply reimburse the church dollar-for-dollar for out-of-pocket costs.
Challenge: What if a facility endowment account were set up by the church, allowing a member or members to create a self-perpetuating fund? This would allow non-profits to use the facility free of charge, to the extent the funds were sufficient. And it could be used to encourage transformative giving among your members!
Note: Whenever fees are involved, consult your accounting professional to protect your non-profit status.
Deferred Maintenance Reserves
Finding a surplus in the annual budget to create sinking funds for long-term maintenance has become a lost cause in many churches. But, for those churches with the ability to do so, this helps even out the financial road bumps that can disrupt ministry.
However, these funds typically come from an operating surplus and are not identifiable to an individual, meaning little transformative ability.
Challenge: Could a separate reserve fund be started and boosted from planned giving or a capital campaign? This self-sufficient fund could assure that no emergency would rob the operating fund when a boiler gives out.
Operating Funds (Annual Pledge Drive)
Many churches develop a budget in the fall and then ask their members to “fund the budget.” It’s a nice little package of annual futility in teaching members how to be transactional givers, always expecting something in return for their dollar.
Challenge: What if you prepared a narrative budget of opportunity? This would highlight current ministries, but also add “what if?” or “could we/would we?” opportunities. Dare to dream big and talk about the power of transformative giving. Teach members to grow into transformational giving. The budget will come, but not at the funding stage. It’s the last stage!
Revitalizing or Adding New Facilities
We all know the architects’ mantra – “form follows function.” When ministries change or new opportunities arise, our facilities need to be adapted. Of course, this is where it’s necessary to develop a capital campaign to meet the need. This is also your most likely opportunity for members to experience transformative giving. We call it, “flexing the generosity muscle.”
Most often the financial need far exceeds one person’s ability, and may even exceed the ability of the community of faith collectively. Perhaps this isn’t a problem, but an opportunity for transformative giving.
Challenge: Articulate a vision of a transformed church and build something special, not only for today’s use, but for generations to come. This is transformative legacy giving at its best.
Covering operating costs through loans is usually poor stewardship. A church without a vision and strategic financial plan is asking for trouble by borrowing money. In special cases, a one or two year deficit can be acceptable – if a plan exists to get back on track in the short term. But these special cases are rare.
However, short-term building loans or even borrowing to fund future capital improvements is more acceptable. There should be a strategy in place to eliminate the debt through a separate funding campaign. This borrowing, as opposed to borrowing for operating expenses, does create transformative giving opportunities.
A Sustainable Financial Strategy
The key to using these funding sources is having a plan before action is taken. Share the vision with members and properly ask for their support. Always seek out transformative giving, not transactional giving.
Does your church have a plan for funding the future? If not, call us today to begin a dialog on how you can create opportunities while making disciples.