Operations 104Finances, Part 2

Recap from Last Week with Mike Boblit on Qualifying for a Bank Loan

• Build liquidity• Read/update bylaws (focusing on leadership)• Monitor variances in budget:

– Push down accountability to ministry leaders• Staff expense control• Open up communication:

– Financial reports (push/pull)– Frequency (how much?)

• Establish ministry measurements (benchmarks/dashboard): – Meaningful – Measurable – Manageable– Mmmmm… actionable

Michael Welles

Michael Welles serves as the Executive Pastor of Administration at Calvary Church of Santa Ana and has been on staff there since 2002. He loves the challenge of figuring out how to support the vision of the church and school and make it all happen. He graduated from Biola University with a degree in accounting and gained experience as a CPA and auditor at Arthur Andersen. Michael received his MBA from California State University of Fullerton and has served as an Adjunct Professor of Accounting at Biola University and currently chairs the Audit Committee at Wycliffe Bible Translators.

Class 4—Finance Committee and CFOs

A Finance Committee and CFO have unique roles in the local church. This class will examine the policies and practices of the Finance Committee and CFO. Your church may or may not have a person with the title of CFO, but will, by necessity, have someone functioning in a similar capacity. Churches need to define the relationship between CFO, Treasurer, and other staff. Churches also must define how their Board and Finance Committee communicate with each other and manage church funds.

Non-denominational mini mega-church founded in 1931 Total weekend attendance of 3,300 with Spanish and

Mandarin services $4.8m General budget; $1.2m Missions; $3.5m Schools 24 Pastor/Directors; 200 total employees Governance: Elder Board

Governance Structure

Elder Board – Hires/Fires Sr. Pastor; Spiritual Oversight; Meet Monthly, Pray weekly; Final Decision Making Authority, Receive staff Strategic updates, provide advice

Trustee Ministry Team- Audit Committee of Board; Led by Treasurer of Elder Board; Approve Budget, make recommendations to Elders on Finance and Facility; Meet monthly

Executive Leadership Team (Sr. Pastor and both Executive Pastors – Ministry & Administration) – responsible to lead staff; provide strategic direction; meet weekly

Org Chart

Responsibilities of CFO

Oversee Administrative Staff Lead from 2nd Chair Vision Implementer Budget Wizard Audit Preparer Finance / Investment / Cash Flow Manager Capital Campaign Director HR Manager – Bus Seat Reassigner Risk Manager / Insurance / General Counsel Chief Negotiator

Responsibilities of CFO

Facility Operations / Campus Upgrades Technology Guru / Database & Website Communications Strategy Bookstore / School Operations Stewardship Ministry Whatever the Senior Pastor cannot figure out Complaint Manager / Chief Listener Architect / Designer / Master Planner Networker in Chief – Liaison to other Churches

CFO Support Staff

Accounting Staff: Controller, A/P, Payroll/HR Facilities IT / Tech General Contractor Communications Director Bookstore Stewardship School / Preschool

Questions to Consider- In House vs. Outsourced

Support- Paid vs. Volunteer

Focus Time / Buffer Time

With all the hats you wear, you could work 80 hours per week forever, how do you balance everything?

Focus Time / Buffer Time study You study spending to create budget; budget your time too. Shut door; be intentional; get off campus Prayer time off campus

Utilizing your assistant and volunteers Balancing “getting things done” with “listening to

people” MBWA

Time Study Chart

Role of Finance Committee (Trustees)

Hire / Communicate with External Auditors Executive Session without you

Perform Internal Risk Reviews Understanding how the church works in detail

Provide guidance and expertise to CFO on Banking, Investments, Legal, HR, Construction, and marketing matters Brainstorming is fun People love using their giftedness

Role of Finance Committee (Trustees)

Provide oversight for budget / review monthly financials Discussing a plan if we fall short of budget or exceed it

Provide update and recommendations to Board of Elders on Finance / Facility / Capital Campaign matters Do we debt finance expansion? Are there deferred maintenance that has to be in budget now

Review major contracts (define “major”) Construction: Owner vs. General Contractor Cell Tower Any Loans / Financing Anything else bylaws stipulate

Reporting Details

Monthly Financials (with YTD Budget Info) Summary of Total Revenue and Expenses and Cash

Balance per entity (Church, Missions, Schools) Capital Projects Report Capital Campaign Income and Expenses Other Reports (usually annually, possibly quarterly):

Giving Trends Budget proposals Bookstore Cost of Sales

Trustee Culture

Have a meal every month at your meetings Annual dinner with spouses Annual hangout with Elder Board and spouses Monthly reports from ministry heads Monthly lunch with Chairman (agenda setting) Minimal monthly reports; have informal conversation

about current issues

Trustee Culture

Engage them to do research and analysis for you No surprises / develop a culture of trust Don’t hesitate to create expert committees for project (i.e.

Building committee) Since they aren’t final decision making authority, you

need to show how their decisions are vital

Policies Trustees Approve

HR – Employment Handbook At-will, sexual harassment, computer use policy

School Policy Manual Auditor Recommended

Conflict of Interest, Whistleblower, etc. Internal Controls

COSO Matrix to Review Ministry Policies

Child protection, permission slips, volunteer application

Internal Control Reviews

AssignedFinancial Transaction Cycle/Component      

to:   High Mod Low Comments

CAROLYNFixed Assets and Capital Expenditures

  X  Purchases exceeding dept. budgetary guidelines need approval Capital Expenditures are pre approved by Trustee Board

CAROLYNPurchases/Accounts Payable/Expenditures

X    Request for payment are submitted for processing after department management approval, and reviewed at signing

CAROLYN Petty Cash     XPetty cash is reconciled monthly and replenished, $700 is the maximum in the fund

CAROLYNLong-Term Debt and Notes Payable

    XOnly one outstanding debt balance - Heritage purchase Loans from Farmers and Merchants and 2 private parties

CAROLYNTravel and Expense Reimbursements Reports

  X  Reimbursement policy is enforced. Reports are reviewed by department managers and accounting staff.

PAULContribution Revenue - (Church & Missions)

X     Layered process involving staff and volunteers for counting and recording

PAULContributed Professional Services

    XNo dollar value is assigned for recording for contributed services No donation is recorded in the donor records

PAUL Auto / Non Cash Donations     X Onerous new tax rules. Highly discouraged

PAULLong-term Pledge Contributions

    X None at the current time

JASONPayroll, Staff Compensation

  X   Payroll is prepared in house for processing thorough an outside vendor

JASON Executive Compensation     XSensitive issue in the public eye, salary surveys are used and Executive Pastor salaries are determined by the Trustee Board

Lessons Learned in Trustee Communication

Asking what they want to know or understand Push back if requests are inefficient and explain Limit re-discussing same topics month to month Differentiate between asking them for brainstorming

input and informing them about a decision that was already made by management

Lessons Learned in Trustee Communication

Have a clear understanding of roles / responsibilities Have a new Trustee Orientation Lunch Vet Trustees in other leadership roles first Have a team of experts that you can call on for advice

and they don’t have to be Trustees

Best Practices

Develop relationships with experts in your church to seek advice in areas you aren’t as strong on.

Delegate projects to Trustees, Elders, Committees, or other staff

Keep communicating the “why” behind audits, budgets, policies and procedures to staff

Set aside time for strategy and prayer personally and with your leadership

Keep learning from the pros: David Fletcher, Richard Hammar, Frank Sommerville, Dan Busby, Vonna Laue, Dave Moja, Michael Batts.

Use your vacation and sabbatical policies!

Q & ASend Questions via Chat to David