Tips in Creating Your Fund Policy

As I mentioned here, someone at the church should be regularly thinking about how to fund the mission of the church. A lot of time goes into creating a spending plan and then to managing the finances within the parameters of what is received. An equal amount of time needs to be invested into creating a funding plan and actively managing it as well.

Before creating a Funding Plan, you have to think thru the nature and number of funds your church has vs. desires. I spoke to this in the two posts below:

How to Establish a Funding Strategy for Your Church
Designated and Restricted Giving are the Same, but Different

In today’s post, I wanted to offer some helpful tips as you start to put pen to paper in regards to your Fund Policy.



9 TIPS in Creating Your Fund Policy


#1. Establish funds that are directly related to your Mission/Vision. No others. If it doesn’t advance the Gospel, why do it?

#2. A One-Fund System is ideal, but alas, we don’t live in an ideal world. Establish no more than 3 to 5 funds that people can give to.

#3. In regards to Designated Offerings, emphasize the priority of the tithe (or step giving) over Designated Offerings. This should be in writing and mentioned periodically.

#4. The Policy should Communicate How Designated Gift’s will be Handled:

a). Gifts to budgeted items. These should increase the appropriate existing operating budget line item. Decide if they will go in the General Fund or their own fund. Regardless, you need to be able to track the balance of them. Unspent funds will need to carry forward into the next budget year.

b). Gifts to non-budgeted Items. I’m speaking to self-funded ministries. These gifts should become the budget for these areas and will go into their own designated fund.

c). Gifts to new areas. Decide if the gift will be accepted or if you will ask the donor for permission to redirect to another area of need. See #5.

d). When there are remaining funds after a major, extended campaign. I’m referring to funds related to a construction or debt reduction capital campaign. Your fund policy should give the church the discretion to redirect these funds. See note below.

e). When a project is over-funded. Similar to (d) above, this could be a renovation project or the purchase of vehicle or new audio system, etc. More was received than needed. For example, the church solicited funds to renovate the Sanctuary and estimated the cost to be $20,000. The actual cost was $19,000, but the church received $21,000. Your fund policy should give the church the discretion to redirect the remaining funds. See note below.

NOTE: In each of case mentioned in (d) and (e) above, your fund policy should give the church the discretion to redirect these funds unless there are significant amounts left. In the event of significant funds being left over, out of courtesy and respect for the donors, and depending on the nature of the project, your policy should state the original donors will be consulted before redirecting these funds. See my post on Designated and Restricted Funds.

f). When a project is woefully under-funded. For example, the church solicited funds to purchase a bus at a cost of $50,000. After a year or so, the church determined there wasn’t enough interest as only $5,000 had been received. Again, give consideration to how this situation will be handled. Even if your church has a policy that gives it the right to redirect funds, I would not do so without consulting the donors to see if they want to redirect or want a refund. The policy could simply read “Donors will be consulted.”

#5. Develop a written process on how members can request a new designation or fund. For example, require a written request to the Finance Committee. Related to 4 (c) above, just don’t automatically accept any and all designated gifts.

#6. Develop a written process on how and under what circumstances the church will close a designated fund. These have to do with funds/purposes in which the church leadership has deemed no longer fits in the church’s mission or direction.

#7. Develop a Benevolence Process for Members and Non-Members. This is an important area to get your arms around ASAP. Document how you want this to work in your church. You may want to include a statement that reads “Designated gifts directed towards individuals are accepted, but not deductible.”

As mentioned here, in order to be deductible, they must relinquish control of the gift to the church – meaning, they can designate to benevolence, but give the church the control of who receives assistance in accordance with its benevolence policy. Sure, they can make the benevolence committee aware of a person’s need, but the decision has to be made by the committee to be deductible.

#8. Address Non-Cash Gifts. Establish ways and communicate to the church it accepts non-cash gifts. For example, gifts of stock, bonds, real and personal property. Don’t miss out on this.

#9. Establish Legacy Giving. Consider encouraging people to give to the church thru their Last Will and Testament. Establish a program that helps people prepare their Wills. Research tells us that 60% of people don’t have a will. Some will put a gift to the church in their will. Don’t miss out on this potential blessing.

In Closing:

WRITE a short, concise Fund Policy that communicates what the church will do. The “how” or details can be in your desktop procedures.

Publish and communicate the Fund Policy to the church. To make this policy official, it has to be distributed and adopted in a business meeting or by card ballot.

Cover the Fund Policy in the New Members Class to make new-comers aware.

Be sure to report on the results of designated giving. Report cash in, cash out and ending fund balances. Report on what was accomplished thru these gifts. This is a part of being transparent and helps to facilitate trust.

At end of the day, much judgment and discretion is required. Do all you can to maintain the trust of your givers. That’s good stewardship.

In my next post, we’ll dive into part two of the funding strategy – Creating a Giving Plan.

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