How to Establish a Funding Strategy for Your Church

As a follow-up to the 5 Objectives of the Church Finance Team, I want to kick off a series on Establishing a Funding Strategy for your Church.

As I mentioned in this post, in absence of a person devoted to the funding strategy of the church, the Finance Team is the perfect fit. Someone at the church should be regularly thinking about how to fund the mission of the church. A lot of time goes into managing the finances of the church right? (Like managing its needs within the parameters of what is given). I’m just saying an equal amount of time needs to be invested into the “funding-side” of the ministry.

A two-part strategy needs to be in place in regards to:
1. The Nature and Number of Funds the Church Utilizes.
2. The Giving Tools or Initiatives that Help People Discover the Joy of Giving

A natural result of this two-fold strategy will be more people in your church giving of their financial resources. After all, what Pastor, Finance Team or Staff doesn’t want to see their budgets increased in order to reach more with the Gospel?

In other words, it’s a Win-Win.

Let’s look at first part of the strategy.


The Nature and Number of Funds the Church Utilizes

This is pretty much a one-time thing here, but it’s very important. Get this done first.


In short, it Facilitates Trust. Everyone knows the vehicles in which to fund the ministries of the church. Everyone knows how the church ministries are funded. Just be sure to communicate the why behind your funding strategy.

Conversely, churches without a well thought-out Fund Policy, open the church up to people designating to things that are not necessarily connected to the Mission and Vision of the church, or designating to areas that are already adequately funded. And thus risk those excess funds going unused. Designated Giving gone bad, reduces offerings needed to fund the budgeted ministries and missions of the church. Therefore, the church should consider what it wants to accomplish – so with budget and designated giving history in hand, determine the nature of and the number of funds needed.

Two Choices:

1. A One Fund System. Outside of simplistic, the biggest advantage of a One-Fund System is everyone’s offering directly supports the ministries and missions of the church. Everyone has a direct impact. There’s no pressure or need to ask for additional funding. And, people can still designate to any budgeted item. I mean everything in the budget doesn’t have equal priority right?

2. A General/Budget Fund with a few Designated Funds to support ministry efforts that may not be in the budget or to support special projects.

A Few Thoughts To Consider:

First, I encourage you to only establish funds and purposes on the basis of those that further the Mission and Vision of the churchAnd, this is important – allow the creation of no others without the approval of the Board and Finance Team.

In the long run, the more things the church can put in its budget, the better. The fewer places to designate to, the betterThese really do go hand in hand. If the budget is indeed tied to the Mission of the church and its Vision of fulfilling the Mission, ideally, everything the church is doing should be funded through one offering and one fund. If you’re not able to put everything in the budget, consider planning to get there – or at least everything that makes sense to in your church culture and context. For example, our church had a Men’s Ministry that had a budget for its weekly ministry needs. But, this ministry also put on an annual event that was funded through ticket sales. This event cost around $50,000 excluding the value of items donated. We did not put the cost of the event in the budget.

If you can’t budget your base or core ongoing ministries, you’re going to have to fund some items thru designated giving and/or fund-raising. A word of advice – if you have any ministries currently not in the budget, don’t start new ones until the existing self-funded (or under-funded ones) can be adequately funded in the budget.

A Word on Designated Giving:

I’m not trying to demonize all designated giving. Part of the grace of giving as described in 2 Corinthians 8 and 9, is that people should want to give to meet needs. So allow them to. There’s nothing inherently wrong with this. If you have ministries that are vital to your ministry and congregation, but no budget funding, you have to start somewhere right? Or, if you see a need, there’s great joy in the church coming together in meeting that need. I’m just saying if they are to be ongoing core ministries of the church then transition them to the budget.

Without transitioning core ministries to the budget, a potential pitfall to keep in mind here is that, over time, as more ministries are added that are not part of the budget (or underfunded in the budget) the more areas people can give to are added also. If you’re not careful, before you know it, you have so many funds, offerings and fund-raisers, etc. – they can end up distracting or taking from the budgeted mission and vision of the church. See this post to see how my church transitioned items into its budget.

The Tension:

There’s definitely a tension to manage here, or at least to be aware of. The more ministries that need funding outside of the budget, the more there is a tendency to ask for special offerings and to have ministries engaging in fundraising activities. These distract from the main offering and add to the noise.

And, the law of unintended consequences can raise its ugly head:

Donor Fatigue sets in. People tire of constant requests for money. (Particularly the ones doing most of the giving).

Perception Problems. The church appears needy – it can’t manage its finances. Then, a belief creeps in that all the church wants is more money. Perception is Reality.

If the church is generating a margin, it should be funding what its doing. See this post on margin planning.

Now that we’ve laid the ground work, in my next post, we’ll look at the need to understand Designated vs Restricted Giving BEFORE starting to work on funding policy.

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