The Charities Handbook of the Canadian Council of Christian Charities makes the following statement in reference to financial records. “The purpose of financial reporting in the charitable sector is not to determine profit, but rather to determine the contributions required to meet the objectives of the various projects undertaken by the charity in the year. Donors are asked to make contributions to the charity based on its goals and objectives.”
The Treasurer reports on the financial transactions to the board. This report is made monthly but if church meets every two months, it may be enough to report at each meeting. The purpose of financial reporting is to make sure that the board understands the financial position of the organization. With that understanding, the board can make important decisions based upon good financial information. No matter how often the board meetings are held, it is still useful to give board members the Treasurer’s Report monthly in writing and a week before the meeting.
Typical monthly financial statements/reports prepared for the church board include (see CCCC Article on Understanding and Reading Financial Statements in Resource Section):
- Statement of Financial Position (Balance Sheet) – this is a ‘snapshot’ of what the church owns and owes at a fixed point in time. It lists:
- the church assets (eg. cash, investments, furniture, equipment, land, buildings and any intangible property)
- the church liabilities (the amounts the church owes – loans, money owed for rent, supplies, equipment, payroll, taxes, etc.)
- the church Net Equity or Fund Balance (the Total Assets less Total Liabilities)
- Statement of Operations and Changes in Fund Balances (Income Statement) – shows the different sources of income/revenue (eg. donations, sales, fees, interest income), any restricted/designated funds (eg. building fund, missions, etc.) , and where funds have been used (expenses). The difference shows if the church is in excess or deficit for the period/year.
- Statement of Cash Flows – (recommended for larger churches) is used to to monitor if the church has enough cash on had to be able to pay current expenses. It provides a summary of cash receipts and cash payments for a specific period of time (such as a month or year).
- Notes to Financial Statements – help the reader understand the financial statements and may include notes on designated funds, property and equipment, investments, lease commitments, liabilities etc.
- Auditor’s Report/Financial Review (Annual) – The Auditor’s Report or Financial Review provides an opinion on whether the statements fairly represent the financial position of the church according to Canadian accounting standards.
These reports help the board assess the finances of the church in order to make wise decisions. They also allow members the ability to hold the board/leadership accountable.