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In every parish, the issue is simple:
money comes in
and money is spent.
Control of parish finances
By Jerry J. Pokorsky
n In most dioceses in America, it doesn’t take long for a newly ordained priest to be named pastor. Aside from the pastoral challenges that come with the job, pastors can find themselves overwhelmed with the administrative duties of the parish. Pastors are often unprepared to deal with the often joyless administrative matters because they rightly would like to focus time and energy on the sacraments and pastoral care. Additionally, seminaries usually do not provide training in administrative skills.
The result of this lack of preparation may be, in the extreme, exposure to theft or significant financial loss. More likely, the pastor may be faced with unpaid bills that are “lost in the shuffle,” sloppy and confusing bookkeeping, and unfiled paperwork.
The purpose of this article is to provide pastors of small to medium-sized parishes with a sample of financial procedures that would fulfill the reasonable requirements of basic financial control and streamline the paperwork. Obviously, the article is not intended to manage the peculiarities of every parish, but a thoughtful application of the procedures in the main may prevent a serious breakdown in financial control.
In every parish, the issue is simple: money comes in and money is spent. Most people know how to control a checkbook. But the pastor has the fiduciary responsibility—before God and, well, a government that often plays God—to accurately record and control incoming monies and properly pay all bills. So the categories under consideration include controlling deposits and expenditures, monthly, quarterly and annual procedures.
Controlling deposits:
- Collections are taken every Sunday and holy day of obligation. Collections on Sundays are “operating income.” Holy day collections and special second collections in most dioceses are not considered “operating income.”
- The pastor secures the collection after every Mass and makes sure that the funds are secured in the parish safe. (Only a small number of people who have a need should know the combination.)
- After the last Mass on Sunday, volunteers count the collection under the supervision of the pastor. If the pastor cannot supervise, at least there should be more than one counter. The counters prepare a deposit worksheet indicating the amounts by category of collection and sign it after its completion. For each collection (including special second collections):
- Loose checks are identified, photocopied and kept separate from the rest of the deposit records.
- Parishioner contribution envelopes are emptied of cash and checks; the amount on the envelope is verified.
- Checks from the envelopes are listed or photocopied and kept separate.
- The deposit worksheet is prepared (and signed) indicating, by type of collection (main, second, candles, etc.) the amount of cash and checks.
- A bank deposit slip is prepared for the grand total of the collection (checks and cash) and accompanies the deposit.
- Checks and cash are placed in a zippered bank deposit bag.
- On the same day of the collection (or early in the week), the pastor or a trusted volunteer deposits the collection using the bank’s night deposit facility. After the bank makes the individual deposit, the pastor or volunteer assistant attaches the bank deposit advice to the individual deposit worksheet.
- The deposit worksheet is notated with a sequential number (at least 52 sheets for each week of the year). The worksheet is eventually filed with the monthly bank statement when the statement is received after the end of the month.
- The photocopies of the checks from the envelopes are filed; they are destroyed one year after the close of the preceding calendar year.
- Periodically, the empty contribution envelopes and the copies of the loose checks are recorded on individual parishioner records. A computer data base in the parish can be used for this purpose or—pastors should seriously consider this option because it is fairly inexpensive and convenient—sent to a computer data base management company for processing. At the end of the calendar year, the parish would be well advised to send out a summary of individual contributions to the respective parishioners for their tax-preparation purposes.
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Note: Contributions received in the mail might be deposited separately or combined with the weekly deposit. If a separate deposit is made, a separate deposit worksheet should be prepared and filed in sequence.
- Note: The computer program can be updated when the checks are written or at the end of the month. For small parishes, the computer program may be updated quarterly provided the pastor and bookkeeper have a good idea as to the running bank balance.
- Invoices are usually received in the mail.
- The pastor reviews each invoice for reasonableness, approves the payment by initialing the invoice, and gives the invoice to the bookkeeper for payment. (I recommend using 8 1/2” by 11” checks where the check stub can be removed and filed sequentially with the invoice attached.)
- The check stub indicating the nature and amount of payment is attached to the invoice and filed in reverse order (as a matter of convenience in filing); all voided checks are maintained in the same sequential file. The signed check—with the pastor as the main signatory—is the “approval” document.
- Second collections for national and diocesan purposes (e.g., “Peter’s Pence”) and other “flow through” payments are made based on the information in the deposit worksheet. The deposit sheet should be notated with the check number upon payment.
- A check register (sequential by date and check number) is prepared as the check is written or, for small parishes, at the end of the month. The check register—listing the check number, account, vendor and amount—provides the means to trace expenses back to the invoices because the invoices are filed in check number order.
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Note: Filing invoices by “check number order” saves considerable filing time. Invoices or paperwork having more permanent value can be photocopied and filed separately. But there is no good reason to file electricity bills, for example, by vendor. As the years pass, these files can be easily retired and finally discarded (normally after five years).
- Generally, unless there is only one or two people on the payroll, there should be a separate bank account for the parish payroll. Payroll records should be maintained separately from the other check registers. For purposes of this article, it is sufficient to note that payroll account and bank statement procedures should generally duplicate what has been written above on “Controlling Expenditures.” The bookkeeper should be competent to file the quarterly tax statements (Form 941, etc.) and make the payments to the IRS for income tax withholding and Social Security. Experience (well, bad experience) reveals that it might be helpful to hire a Certified Public Accountant every so often—perhaps every other year—to double-check the bookkeeper’s tax payment and reporting procedures.
- When the bank statement is received, the pastor (or preferably someone other than the bookkeeper) runs a tape on all deposits (from the deposit worksheets) and checks written for the month (from the check register). The ending “book balance” is established. The pastor should inspect every check to make sure that they have been properly signed.
- Bank Reconciliation: The pastor (or preferably someone other than the bookkeeper) reconciles the ending “book balance” to the bank balance by identifying all outstanding checks, deposits in transit and other reconciling items. The pastor (or preferably someone other than the bookkeeper) investigates and resolves all discrepancies.
- Optional for small parishes: Cancelled checks are matched and attached to the individual check stubs. Outstanding checks can hence be easily identified.
- The “monthly financial package” is prepared and filed by month:
- Reconciled bank statement (including book balance as reconciled to the bank) is the cover document.
- Check stubs attached to individual invoices—as well as the matched cancelled checks—and other supporting documentation follow in reverse chronological order.
- The individual deposit worksheets are also attached in reverse order.
- Income and expenses are discussed with the parish Finance Committee. Meetings are regularly scheduled.
- Notice how this saves “filing time”!
On a quarterly (or perhaps monthly) basis, the bookkeeper will update the computer files.
- On a quarterly basis, the bookkeeper uses the “monthly financial package” to enter deposit and expense data into the automated computer financial accounting system and to prepare the computerized year-to-date quarterly financial statements.
- The bookkeeper reconciles the ending book balance on the computer reports to supporting documentation. Discrepancies (if any) are resolved and discussed with the pastor as necessary.
- In collaboration with the pastor, documentation having long-term value is identified and filed separately in permanent files (appropriate photocopies are made for the monthly files). My experience is that very few documents have “permanent value” except for such items as contracts, warranties, initial agreements, etc.
- The bookkeeper prepares the payroll W-2 forms and other payroll forms for the pastor and employees. The bookkeeper also prepares the appropriate income tax reports.
- After the end of the fiscal year (June 30), the bookkeeper prepares the final YTD (year-to-date) quarterly reports (Balance Sheet and Income Statement) as usual.
- The bookkeeper prepares a master check register (a computer printout) for the fiscal year indicating dates, check numbers, vendors and amounts. This register can be used to trace individual expenses to the source invoices filed by check number, by month.
- The bookkeeper prepares a master income register for the fiscal year.
- The bookkeeper reconciles the check register and the income register (“supporting reconciling schedules”) to the income statement and balance sheet.
- Using financial as well as sacramental records, the pastor with the bookkeeper prepares the annual Diocesan financial report.
- The package for the fiscal year is filed including:
- Financial statements:
- Balance Sheet;
- Income Statement;
- Changes in Fund Balance;
- Supporting reconciling schedules.
- The 12 “monthly financial packages” which include deposit worksheets, invoices, check stubs, and bank statements.
- The annual Diocesan financial report.
- In collaboration with the pastor, documentation having long-term value is identified and filed separately (appropriate photocopies are made for the annual files).
- The financial package for the fiscal year is retired from the active files and filed for five years. After five fiscal years, the retired files can be destroyed.
- The pastor presents the financial information to the Finance Committee during a regularly scheduled meeting. The Finance Committee prepares a report for inclusion in the parish bulletin. On one weekend, a month or two after the end of the fiscal year, a member of the Finance Committee may make a presentation to the Mission after each of the Masses.
- The pastor makes periodic deposits to the parish savings accounts. A suitable amount of money for monthly operations is maintained in the checking account. Excess monies are transferred to the savings accounts according to the discretion of the pastor or diocesan requirements.
- The bookkeeper reconciles savings account statements received from the bank to church records on a monthly or (at least) quarterly basis.
- The pastor maintains a listing of all people having key access to the rectory and church facilities. Locks are changed as deemed necessary. Keys are maintained and secured by the pastor in the rectory.
- Blank check stock is maintained in the safe. A record as to the blank check numbers is maintained in the files. Deposits are made immediately as indicated above.
- If a petty cash fund is maintained ($100 to, say, $500), the fund should be appropriately secured and, at any given time, the amount of the fund can be reconstructed by adding up the money and the receipts or appropriate explanations. To replenish the fund, write and cash a check for the amount actually spent (using the receipts as the check’s supporting documentation).
- To the extent practicable, the pastor should consider using a “company” credit card for purchases involving personal reimbursement (e.g., food and gasoline).
- Major purchases are cleared with the Diocese according to diocesan policy. The pastor discusses large purchases that do not rise to the level of diocesan policy with the Finance Committee.
- An annual (informal) budget is prepared by the pastor and discussed with the Finance Committee. Issues such as pastor allowances as well as preventive maintenance plans are discussed in detail.
Reverend Jerry J. Pokorsky is a priest of the Diocese of Arlington, Va. He was ordained in 1990 and currently is the rector of St. Peter’s Church in Washington, Va. This is his first article in HPR.
Back to Homiletic & Pastoral Review Table of Contents August-September 2000