Church Integrity and Handling Restricted Gifts
- Tuesday, April 23, 2013
We live in a day and age when it is more important than ever for churches and their leaders to demonstrate integrity.
In today’s culture, people are inclined to challenge long-held assumptions and even question some of our nation’s most respected institutions—the church included.
Demonstrating integrity is important for churches because, over time, doing so establishes and reinforces necessary trust with church members as well as those outside the church who we are called to reach with the Gospel. Enhanced trust ultimately translates to a greater witness and Kingdom impact.
1 Samuel 16:7 illustrates this principle well. While God is able to look past appearances into what is in our hearts, people naturally form their impressions of both individuals and organizations by seeing what is displayed outwardly.
As president of ECFA (Evangelical Council for Financial Accountability), I have the great privilege of serving an organization that is committed to raising the level of demonstrated integrity in churches and other Christ-centered ministries. The founders of ECFA realized in 1979 that the time had come for Christ-centered organizations to make outward demonstrations of their commitment to excellence and integrity, thereby enhancing trust with their supporters and those they serve.
One of the foundational Scriptures of ECFA is 2 Corinthians 8:20 (NASB): “taking precaution that no one should discredit us in our administration of this generous gift, for we have regard for what is honorable, not only in the sight of the Lord, but also in the sight of men.”
These verses inspire ECFA’s standards relating to the proper handling of gifts made to churches and other Christ-centered organizations. The process of handling gifts that have been entrusted to us must be honorable—not just in the sight of God, but also men.
Even greater opportunities to demonstrate integrity occur when a church accepts a contribution that is restricted for a specific purpose or time. We call these “giver-restricted” or “donor-restricted” gifts.
Nearly every church receives restricted gifts. For example, if you ask your congregation to support missionaries, a church building fund or specific programs like a food pantry, your church is already in the process of soliciting and accepting restricted gifts and must be careful to honor the giver’s restriction(s). This is because there are important accounting, legal, tax and integrity issues related to giver-restricted gifts. (The accounting, legal and tax aspects are beyond the scope of this article, but you can learn more by visiting ECFA.org).
Improperly handling restricted gifts is one of the fastest ways that your church could lose trust with its constituents. When a donor makes a gift to your church for a certain purpose or for a certain time, the donor expects that the gift will be used accordingly.
Let’s say a giver finds out that funds she contributed to support a mission trip by the youth group were placed in the general fund and used to pay operating expenses. Your church has immediately lost any level of established trust with this giver, and the church’s witness is tarnished.
Admittedly, most churches would never deliberately misuse a donor’s gift. But when proper procedures for handling restricted gifts are not established or followed, this opens the door for the improper use of funds and invites a breach of trust.
What steps can your church take to demonstrate integrity in handling restricted gifts? ECFA’s time-tested standards are replete with guidance. Here are some of the important considerations to keep in mind:
- Resources must be used and accounted for in accordance with the giver’s intended purposes;
- Giver expectations that are created by fundraising appeals must be realistic and fulfilled through the use of the funds;
- Givers, including those providing restricted gifts, must receive appropriate and timely gift acknowledgements;
- Giver-restricted gifts may not be used to pass money or benefits through to any named individual for personal use;
- All gifts must be under the church’s control;
- Reports must be provided, including financial information, on the specific project for which a church is soliciting gifts;
- A church must make every effort to avoid accepting a gift from, or entering into a contract with, a prospective donor which would knowingly place a hardship on the donor, or place the donor’s future well-being in jeopardy;
- Outside stewardship resource consultants or a church’s employees may not be compensated directly or indirectly on a percentage of charitable contributions raised, whether or not the gifts are restricted by givers.
These steps go beyond what the law requires in handling restricted gifts, but for churches that commit to these higher standards, the end results are well worth it.
The more your church demonstrates integrity in this area, the greater potential you have to build trust and increase Kingdom impact.
Listen to this in podcast format here.
Stay tuned for future articles in this special Crosswalk series on how churches can demonstrate integrity in key areas of governance, finances and fundraising/stewardship.
Dan Busby is president of president of ECFA (Evangelical Council for Financial Accountability), an accreditation organization that sets standards for governance, financial management and fundraising/stewardship for churches and other nonprofits across the country.
Publication date: April 23, 2013
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