Financial Transparency

Transparency is a “buzzword” in many situations. It means many things to many people, but generally elicits a positive response in most minds – transparency is a good thing.

When applied to the church as a whole and to a local parish, school or other church organization in particular, it begs the question, “transparency of what?” There are basically two sides to that equation – pastoral and temporal. Pastoral transparency may or may not be a good thing depending upon the situation. Making known the rector’s openness and accessibility for pastoral concerns at any time is inviting and a good thing. Making the confession of a parishioner available is not. For the purposes of this article, we will leave pastoral transparency to the discretion of the priest and vestry. Temporal transparency, on the other hand, is generally misunderstood, ill-defined and poorly implemented throughout the church; probably not by design, but because of a lack of focus and the failure to understand its importance.

What is Transparency?

It is important that we first start with a clear definition when speaking of transparency. Merriam-Webster’s Dictionary defines transparent:

2a: free from pretense or deceit: frank
b: easily detected or seen through: obvious
c: readily understood
d: characterized by visibility or accessibility of information especially concerning business practices

When thinking of your parish and its dealings with money, is it secretive? Do you regard the clergy discretionary account as a secret, not to be seen by anyone other than the clergy? Do parishioners have an easy way to learn how the vestry spends and allocates money? Are the current income and financial stability of the parish clearly communicated in multiple media outlets? Is there a plan to be financially transparent? Why is it that greater transparency often leads to greater giving, greater trust and greater investment in the church’s mission? Let us examine some of the inhibitors of transparency in churches, and conversely, the enablers.

Inhibitors: What hinders transparency?

It all starts with the leadership of the parish – clergy and vestry. The rector, priest-in-charge, interim or vicar is the top clerical leader. If the tone at the top reflects indifference, unwillingness to get involved in the church’s temporal affairs, disbelief in transparency or the like, the congregation will view transparency as unimportant.

If there is a lack of internal control with regard to money – separation of duties, checks and balances – parishioners and other donors will feel less comfortable contributing. In more severe cases, mistrust regarding donations is detrimental to the financial vitality of an organization.

Often, lack of communication or the wrong communication inhibits transparency. Maybe there is no monthly financial reporting to the congregation. Perhaps the vestry minutes are not published and there is discomfort when speaking of money in the church. Sometimes money accumulates outside the oversight of the vestry, as in a thrift store or men’s club, and there are side checking accounts. These things foment rumors and distrust. “Each of you must give as you have made up your mind, not reluctantly or under compulsion, for God loves a cheerful giver.” (NRSV, 2 Corinthians 9:7).

Enablers: What creates transparency?

It is important to examine all parts of the organization and ensure they are working in concert to enable transparency – its people, processes, technology, and the organizational structure itself.

We turn back to leadership for the people part. Attitudes that foster transparency in financial matters – and other daily activities of the church, for that matter – begin with the attitudes and opinions of the bishop and diocesan officers and the parish clergy, staff and vestry. These must be stated and shared openly.

Processes for handling money must be sound and free from the opportunity for fraud. If just one or two people count the offering, post the books, and reconcile accounts, there is a serious lack of separation of duties. The congregation knows that, whether one realizes it or not. If a parishioner sees only one person taking the collection plate to an out-of-sight place, it is natural to question the safety of the donation just made.

Title I, Canon 7 of the Episcopal Church Constitution and Canons requires that every organization in the Episcopal Church is required to keep adequate records and have them audited each year. The technology used should be appropriate for church accounting and appropriately implemented. Fund accounting packages designed for churches include products from ACS Technologies and Blackbaud. The use of accounting software that cannot accommodate fund accounting (e.g., QuickBooks) can be problematic in achieving efficient and effective accounting.

Organizational structure is an enabler when roles are clearly defined. For example, the vestry is fiduciarily liable for the money of the church. It is in the vestry’s best interest – and its role – to deliberately design and approve the internal control processes that are implemented by the church. It is also their role to inspect and provide oversight for those processes. It is the lead clergy’s responsibility to implement those controls on a daily basis with staff and volunteers. When there are procedures in place for handling and processing financial transactions, a part of the congregation will also be involved in carrying out those procedures. The transparency of the internal control will become apparent and actionable by the parishioner.

Transparency leads to growth and healthy stewardship

While I know of no academic study of the effects of transparency, in my work with hundreds of churches, I have seen that churches that are transparent in their operations and financial matters are in better shape than those that are not. People join and contribute to organizations they consider to be successful. Healthy stewardship thrives where transparency instills the desire to join, contribute and participate in the organization’s success. And, if the church is in need of revitalization, being transparent about the need and keeping the parishioners informed and engaged in the journey, demonstrates an organization that is working towards its goals and its future mission.