Church financial statements
Church financial statements are a few short reports that show where a church's money came from, how it was spent, and what it holds and what it owes. Most churches put together 4 core statements, and they become much more helpful when a budget is set beside the actual income and spending.
The 4 core statements
A church normally prepares 4 core statements. Each one covers a different side of the church's finances.
| Report | What it tells you |
|---|---|
| Statement of activities | Money coming in, money going out, and how net assets changed over the year. Think of it as the church equivalent of a business income statement. |
| Statement of financial position | Everything the church holds, everything it owes and the net assets left over. Many people know it as the balance sheet. |
| Statement of cash flows | How cash came in and went out, split into everyday operations, investing and financing. |
| Statement of functional expenses | Costs grouped by program, administration and fundraising. |
Net assets are what remains once you subtract everything the church owes from everything it owns. In the business world this would be called equity; churches simply track net assets instead.
To see one of these filled out, the Accounting Committee for Churches and Ministries shares sample church statements in its accounting guide. In that sample, costs are divided into two groups: the church's actual work, like worship, its school and outreach, and the behind-the-scenes costs of running the office and raising money.
Keeping gifts with and without donor restrictions separate
Churches following generally accepted accounting principles must report net assets in two groups: with donor restrictions and without donor restrictions. A restriction simply means the person who gave the money said it had to go toward a set purpose, like a building fund.
General offerings and tithes, event income and most program fees fall into the category without donor restrictions. A reserve set aside by the board still counts as money without donor restrictions.
Keeping the 2 groups separate matters. If restricted gifts get spent on something different, the donor or an heir may have a legal right to ask for the gift back, even long afterward. In the sample statement of activities, the line "net assets released from restrictions" shows amounts moving from the with-restrictions column to the without-restrictions column.
Church budget template lines
One church accounting guide describes the budget as probably the most important tool for clear reporting, compared with actual income and spending during the year.
Download the free church budget template as a CSV file for Excel or Google Sheets. Its income lines cover general offerings and tithes, gifts with donor restrictions, and other income. The expense lines are based on Vanco's rundown of typical church costs:
- Pay for staff, including wages and housing allowances
- Employment taxes and benefits
- Office and administrative costs
- Facilities and building costs
- Equipment
- Mission work and outreach
- Communications and marketing
- Travel
- Training
- Paying down debt
- Building fund and expansion
- Money set aside in reserves
The columns give you the yearly and monthly budget figures, what actually came in or went out this month and so far this year, and the difference from budget.
For the monthly figures, dividing the yearly budget into equal monthly slices can mislead when giving and bills shift across the year. Basing each month on last year's pattern works better.
How is a church budget usually split?
The Unstuck Group surveyed churches and found that 52 percent of church budgets are spent on staff costs, while buildings and facilities take 17 percent. Another guide offers these suggested ranges as a starting point:
| Budget area | Portion of spending |
|---|---|
| Staffing | 45 to 55% |
| Operations and facilities | 20 to 30% |
| Ministry work | 10 to 15% |
| Mission giving | 10 to 15% |
| Debt and savings | 5 to 10% |
Reporting to your board and members
A good church financial report pulls together the income statement and balance sheet, plus a cash flow statement and a comparison of budgeted and actual income and spending.
The best reports are easy to understand. They set the numbers beside the budget or beside last year, and they're prepared on time. Monthly reports are likely better than quarterly ones, and they're close to essential in a cash crunch.
Questions people often ask
How do I put together a simple treasurer's report?
Keep it short. A monthly report to members can simply show how much was given in tithes last month and what went out in spending.
Do small churches need an audit?
Most small churches don't need audited statements. A lighter option is compiled statements, which for a small to medium church could cost around $350 to $500 a quarter.
Can a church keep its books on a cash basis?
The cash basis is what most churches use, which means recording money when it actually arrives or leaves. That's usually appropriate. Even so, include any unpaid bills so the statements have real meaning.