Letter to My Future Pastor, Part 3

In the first two segments of this three-part series I discussed three of the most important qualities I would look for in a senior pastor if I were in the market, which I’m not. Today I’ll add one final thought. If you haven’t read them yet, you can access parts one and two here.

A Pastor Who Embraces Ethical Church Governance

This might seem like a no-brainer, but in my experience it’s harder than you would think for a church to put in place a system that ensures ethical practices, particularly when it comes to finances. In this post I’m not going to try to convince you that one form of church governance is better than another, whether congregational, Presbyterian, episcopal, or the more recent development of senior pastor as CEO, although I have my opinion on that.

I’m sure you do as well.

Experience has shown that no matter the system, fallen human beings find ways to work around principles put in place to protect us from ourselves. So today I want to highlight three ideas that would help a senior pastor working in any of these systems to embrace ethical governance.

Full Disclosure of Expenditures to the Board

I was at a board meeting once where, while reviewing the month’s expenses, we learned that a sizable sum had been spent on staff meals with congregants. Though as a team we valued the relational strength that comes from sitting down with a church member over a sandwich or a cup of coffee, the issue was whether the amount was excessive.

One of the board members asked the obvious: Isn’t that a bit much? The pastor acknowledged that yes, it probably was, and assured us that the staff would rein it in.

At our next meeting, however, the line item for meals had disappeared. Staff meals were now included under miscellaneous ministry expenses. So things like the new copier, supplies for our Easter baptism service, parking fees, another rolling cart for our mobile church, staff lunches, and coffee dates were all lumped into the same category.

There was no way for the board to know how much had been spent on meals. It was the beginning of a shift from financial transparency to hiding expenditures, from openness to darkness.

Things went downhill from there.

Every church is required to have a governing board responsible for ensuring that the organization complies with all state and federal regulations for nonprofits. This board is legally accountable not only to the governing authorities, but also to the congregation. In a worst-case scenario, a negligent board can be sued by members of the congregation.[1]

Good-hearted people donate hard-earned cash to a church they assume is using it to further the kingdom. When they learn funds have been used in questionable ways, they are rightly outraged.

The Evangelical Council for Financial Accountability, the Rolls Royce of ethical financial practices for churches and other Christian nonprofits, explains the importance of financial transparency like this:

Transparency serves to deter improper diversion of funds and other misdeeds. It also provides a defense to critics and a witness to both believers and nonbelievers.[2]

When a pastor obscures expenditures it means he has something to hide. An inappropriate expense here, an unqualified outlay there. She knows that her use of funds is questionable, so she keeps it to herself.

This results in an ethical quicksand that can consume our ministry. Our reputation and all the good we have accomplished may be permanently tarnished due to our inability to be forthright about expenditures.

If we believe our governing team does not understand the monetary demands of a modern ministry context, it would be better to make the case for how much is needed, encourage open discussion, and rely upon the collective wisdom for the final decision.

I realize that the relationship between many senior pastors and their boards is strained, and that in some cases a pastor has to fight for every penny he needs if he has any hope of doing his job well. That is an unfortunate situation that needs to change, but it is a separate issue from the necessary and appropriate disclosure of expenditures. Hiding expenses is never the solution.

Ethical Financial Decision Making

Underlying the issue of transparency is the bigger question of how financial decisions are made in the first place. Who decides what benefits the senior pastor and other staff receive? Who signs off on the senior pastor’s expenditures? Or his wife’s?

One time our church board received a financial review from an independent accounting firm that highlighted several weaknesses in our systems, one of which was the lack of oversight to the senior pastor’s expense reports. We were new to this church governance business and, apparently, hadn’t thought things through carefully enough. Inexperience may not be an issue in denominational settings where procedures are set at a regional or national level. But in the independent church plant world where systems are built from the ground up, this type of mistake is not uncommon.

Numerous related issues fall in the same general category. Who decides when the church should pay for childcare for the senior pastor or other staff members? When is it reasonable, when does it cross the line, and who decides? What if the senior pastor needs counseling as a result of job-induced stress – does the church cover the expense? More importantly, who makes that decision? What about personal development, moving costs, and travel expenses? What policies are put in place to ensure that funds are allocated appropriately, and who makes those policies?

I have known pastors who understood their authority to run the staff to include establishing policies that benefited themselves. The reasoning goes something like this: I set policies for the staff; I am part of the staff; therefore it is not inappropriate for me to set policies that also benefit me. The result is that funds are allocated to the pastor’s needs without board knowledge or approval.

Even if the benefits can be justified and the board would have approved them, a pastor who accrues benefits to herself without going through proper channels has crossed a line that should not be crossed.

Once again ECFA sets the standard.

Every organization shall exercise the appropriate management and controls necessary to provide reasonable assurance that all of the organization’s operations are carried out and resources are used in a responsible manner and in conformity with applicable laws and regulations, such conformity taking into account biblical mandates.[3]

In the final analysis, it is the board that holds legal responsibility to make sure this happens.[4] For this reason, the board must oversee the church’s systems and set in place practices that ensure ethical financial decision making.

It’s not about whether the pastor and staff deserve benefits. The question is who decides and how. The church is not the senior pastor’s personal business where he can determine how much to pay himself or how much to use for various personal expenses. A church is a nonprofit governed by state and federal law. The financial guidelines set in place by the board are intended to protect not only the church, but also the pastor.

What’s Said is What Happens

A church also needs to consider how it communicates its financial practices to the congregation. Are things explained to the people in the way that reflects what actually happens? Or are they spun in a manner that misrepresents reality?

One church I was part of presented some of its financial practices in a misleading way for years. I wasn’t aware of what was going on at first. As things began to rise to the surface, I realized I had some decisions to make about my future involvement in the church.

One of the discrepancies had to do with how much money the church donated to other charitable entities. It has become popular for churches to give a percentage of their income to other worthy causes, often designated at ten percent to reflect the personal tithe. This particular church tried to do that and more.

The problem is that it wasn’t always sustainable.

Which wouldn’t have been a problem if the church had simply acknowledged that fact.

But there seemed to be a certain amount of embarrassment at being unable to meet their goal, so the church’s “giving” was redefined to include any sort of local mission work. As a result, the church began to use these funds to pay its outreach pastor and pursue its own community outreach initiatives.

There’s nothing wrong with a church deciding how it will spend the dollars that come in. That’s its job. If the church decides to donate some amount to other worthy causes, that’s wonderful. If it wants to use those resources for its own programs, it has that prerogative. The main thing is that what is communicated is what actually happens. The problem here was the discrepancy between the two.

Other inconsistencies I’ve observed relate to the issues discussed above. Is the way financial decisions are described, particularly with respect to staff benefits, the way they are actually made? Is the congregation given the impression that there is complete financial transparency with the board when in reality there is not? Is the senior pastor’s salary set in the way it is described to the people? In the way the bylaws prescribe? Or, in practice, is a different process in place?

The simple solution to all of this is simply to abide by the principle that what’s said is what happens. Misleading the congregation by presenting itself in a better light than reality would allow is never right. The ECFA puts it like this:

In securing charitable gifts, all representations of fact, descriptions of the financial condition of the organization, or narratives about events must be current, complete, and accurate. References to past activities or events must be appropriately dated. There must be no material omissions or exaggerations of fact, use of misleading photographs, or any other communication which would tend to create a false impression or misunderstanding.[5]

Looking back, I wish the board I served on had taken the time to study the ECFA’s Seven Standards of Responsible Stewardship as we launched into our church governance experiment. If the board, in conjunction with the senior pastoral leadership, had set the groundwork by having real discussions about how we were going to apply these principles to our governing systems, a lot of problems might have been avoided.

It’s water under the bridge by now. But perhaps our mistakes will help you.

[1] Lawsuits against church boards are becoming more frequent. One of the most common allegations is that the board did not provide adequate financial oversight to the church. Financial oversight falls under the board’s “fiduciary duty of care,” which is a legal responsibility of all nonprofit boards.

[2] ECFA Standard 3: Financial Oversight. The ECFA’s Seven Standards of Responsible Stewardship are available at www.ecfa.org/Content/Standards.

[3] ECFA Standard 4: Use of Resources and Compliance with Laws.

[4] Once again, this goes back to the fiduciary duty of due care to which board members are legally bound.

[5] ECFA Standard 7.1: Truthfulness in Communications.