Considerations when Investing Church Funds

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As a church grows and acquires financial resources, managing the church’s assets can become a job unto itself. Like any organization that is fortunate enough to have extra resources on hand, a church will want to find ways to make its surplus grow. As managers think about what to do with extra money, they should keep a few things in mind.

  • Give thought to cash requirements. The budgeting process is complicated. It requires careful tracking and analysis of donor behavior so that reliable revenue projections can be made. It also requires a good understanding of the kinds of expenses a church will face, with allowance for surprises. The help of a professional accountant or financial advisor can be invaluable in this process, which should be completed before putting extra cash into investments that might not be easy to liquidate.
  • Understand donor expectations. Gifts that come with restrictions on how they are used naturally create special management challenges for managers who want to invest them in ways that might not be consistent with the donor’s intent. But even if donors place no formal restrictions on how their gifts are used, quite often there are implicit intentions that shouldn’t be ignored. This means that leaders need to understand their constituents.
  • Be consistent with the church’s mission. Investing in a way that is consistent with the church’s broader mission and religious values is a natural extension of donor expectations. It also has an institutional and spiritual dimension. Paying attention to the compatibility of an investment with church values can require an extra layer of study beyond the bare financial questions.
  • Follow a process. Having a clear, written investment policy is vital for ensuring consistent decision making and control over church assets. For many churches, requiring the approval of more than one person for important transactions is a good way to reduce the risk of fraud[AB1]  and self-dealing. A policy can also help outside advisors assist the church with sustaining a consistent approach.

The Church Law Center of California advises churches and other nonprofits on matters of governance and management. We help clients examine and control their legal obligations and risks. To find out how we can be of service to your church, call us today at (949) 892-1221 or reach out to us through our contact page.

 [AB1]Insert link to embezzlement blog.

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