Featured Columns

Written by Dan Busby
From his column God, Government and Me—Money in the Church

god-government-me-07-17_article.jpgAlmost every church receives some designated gifts each year. The gifts are “restricted” for accounting purposes, but churches often refer to them as “designated.” Designated gifts may be received for the World Evangelism Fund, the building fund, the benevolence fund, and more.

While this may seem simple, it’s not unusual for questions to arise about how to handle designated gifts. Beyond this, honoring giver expectation and intent is critical to building and maintaining trust with church members, givers, and the broader community. Let’s look at four keys to handling designated gifts well.

1. Decide the purposes for which designated gifts will be accepted.

This may come as a surprise, but a church can decide whether or not to accept designated gifts. There may be very good reasons not to accept gifts for certain designated purposes.

It all starts with sound policies on designated giving options. Without a policy on this topic, givers may make contributions for projects that could be difficult to accomplish. Here are two examples of what can occur without a designated giving policy.

Example 1: A giver wants to see a playground for kids built on the church campus. However, because of liability and supervisory concerns, the church has no plan to build a playground. The church should probably decline the gift or ask whether the giver might be open to the church using it for another purpose the church has approved.

Example 2: A long-time church member passes away, and the family wants to provide a memorial gift to the church. They pool their gifts with a designation that the funds will be used to pay the initial salary of a care pastor. The church has no plans to create such a position, so the church should probably decline the gift or ask whether the givers might be open to using them for another purpose that the church has approved.

Honoring giver expectation and intent is critical to building and maintaining trust with church members, givers, and the broader community.

2. Identify which gifts are designated.

If a church requests funds for a certain need that is more specific than the general purposes of the church, and gifts are given in response to the request, the church has received designated gifts. Many situations, however, are not so clear.

How about the youth fundraiser lunch with a suggested “donation” of $10 for the meal? Some meal participants pay a little more, some pay a little less. The amounts contributed for the meal are not charitable gifts since the cost of the meal approximates the amount paid by the participant. The net proceeds from this event do not meet the definition of a designated gift. However, the church board may approve a fundraiser like this with the funds placed in a ministry account to be used for youth activities.

Gifts for Nazarene Work & Witness trips require clarity. General gifts to fund a Work & Witness trip are an example of designated gifts that qualify for a charitable gift acknowledgment. It is when we get into raising gifts for individual members of the Work & Witness team that issues can get sticky.

3. Honor giver designations.

When a giver imposes a designation, he or she expects the gift to be used as intended. It’s that simple. When a church uses the gift within the giver’s designation, the giver is pleased and all is well.

Churches must faithfully respect and adhere to restrictions imposed on a gift. Doing so will help the church to operate above reproach, and avoid concerns about the use of gifts. This is important to maintain a giver’s trust with the church.

One other good reason to honor giver designations is that such designations may be legally enforceable under state law.

4. Maintain clear records of designated gifts.

Church accounting records must clearly reflect designated gift income and the related expenses. Otherwise, the church will be unable to document the designated funds received and expended.

The church board should receive a monthly report of unexpended designated gifts, distinguished from ministry accounts that are funded from sales, fees, or other non-charitable gifts. It is the church board’s responsibility to regularly monitor whether designated gifts are being expended in a timely manner and for the intended purposes.

5. Maintaining Integrity

Integrity has many faces for churches. And abiding by giver intent is one of the most important aspects of manifesting integrity as a church faithfully administers its resources.

Contributors are watching and making giving decisions based on whether trust is being modeled. More importantly, God is watching. We are accountable for how we steward the resources He entrusts to the churches we serve (2 Cor. 8:14-25).

Trusted churches honor giver intent—period!

In a few instances, churches pile reserves upon reserves, building balances that, at least in part, may have been provided by God to expand His work.


Let me share five essentials of church cash reserves:

1. Make a plan to generate cash reserves.

Staying within the cash budget is certainly preferable to operating outside of it; but if cash inflows consistently equal cash outflows, cash reserves are not being depleted, nor are they being built. Here are a few concepts churches use to build cash reserves:

  • Project next year’s revenue to be lower than current year expenses.
  • Include a cash reserve line in the budget.
  • Add legacy gifts to cash reserves.

The bottom line: The only way to create cash reserves is when cash inflows exceed cash outflows. This is the “law of cash reserves.”

2. Measure Cash Reserves.

Cash reserves are often measured in terms of months of operating cash. In other words, if the operating budget (exclusive of cash related to unexpended designated or restricted gift balances) of a church is $1.2 million, one month’s operating budget is $100,000.

When using the number of months of operating cash to determine the adequacy of cash reserves, the most appropriate time to measure them is at the end of the month when cash is generally at its lowest point for the year, perhaps August 31.

3. Account for Designated Gifts.

The first priority for the use of cash reserves is to be sure they are at least equal to unspent designated or restricted gifts. A designated or restricted gift is one that is given for a purpose more specific than the broad limits imposed by the church’s purpose and nature. These could include a building project or mission trip.

4. Adopt a Cash Reserves Policy.

A church should consider developing a cash reserves policy to ensure appropriate reserves are available for:

  1. Unexpended balances of designated or restricted gifts
  2. Debt service
  3. Capital replacements
  4. Church planting and other ministries
  5. Operating reserves

5. Communicate the Importance of Cash Reserves to the Congregation.

Building cash reserves in a communication vacuum can create questions, or worse—prompt misunderstandings about why the church is maintaining funds instead of spending them. Sharing information about cash reserves is often done periodically, such as at an annual meeting.

When a church clearly communicates the reasons for why cash balances are needed, most givers understand. They recognize that having adequate cash reserves does not exhibit a lack of faith, but rather reflects attentiveness to good stewardship. As it says in Proverbs 21:5, “The plans of the diligent lead to profit as surely as haste leads to poverty.”

Various biblical texts illustrate that while God’s provision can at times be bountiful, it can also fluctuate greatly during any given year. Diligent administrators will exercise care to create adequate reserves to make it through seasons of famine as well as plenty.


by Dan Busby

Our church wants to raise $25,000 to replace some old air conditioning units. How do we avoid an issue with givers if we receive more than the amount needed?

When the project is announced, clearly communicate that any gifts received in excess of the $25,000 needed for air conditioning units will be used for (fill in the description). It might be wise to use any excess funds for facility expenses, keeping the purpose of the gifts in the same general framework.

Same question as above, except how do we avoid an issue with givers in the event we receive less than $25,000?

When the project is announced, clearly communicate that if the $25,000 goal is not reached, the funds will be used for (fill in the description). Perhaps whatever funds that are raised could replace some of the air conditioning units, if not all of them.

What if there are changes in plans after money is raised for a designated purpose?

Upon board approval, a church raised $10,000 to send the pastor to the Holy Land to study the Bible under a recognized biblical scholar. When the pastor decided that he could not find time to make the trip, the church board chose to spend the $10,000 on pre-payment of the mortgage instead of using it for the pastor’s trip to Israel. Is this a problem?

Yes. The church is duty bound (perhaps legally bound), to spend the gifts for the purpose intended.

Dan Busby is a certified public accountant and president of the Evangelical Council for Financial Accountability (ECFA).

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