Who Can Spend Church Monies?
Who can spend church monies?
A question I am frequently asked, or I make it a point to bring up is, “Who has authority to spend church funds?”
Unless, and until, authority has been granted an individual by action of the Board, no person [the pastor; the pastors wife; NO one] has authority to spend church monies. The only exception to this is where a Budget has been set, [established] and monies have been approved for specific projects/programs. Allocated monies can then be spent by authorized persons to fulfill the intent. But again, a budget would have been established, by prior action of the Board of Directors.
We always recommend the Board develop a Policy, authorizing the Pastor to spend up to $xxx.xx amount of monies, [whatever is appropriate], requiring him to provide an accounting to the Treasurer for any funds spent. Any expenditures over the pre-approved amount must be approved and allowed by action of the Board of Directors in advance.
In the Articles of Incorporation of every non-profit, there is, or should be, the following language - -
"The property of this corporation is irrevocably dedicated to religious and
charitable purposes and no part of the net income or assets of this
corporation shall ever inure to the benefit of any director, officer or
member thereof or to the benefit of any private person."
What is meant by "Personal Inurnment?" This means that no person can spend church monies that would be deemed to have been for his/her personal benefit. To simplify this, recognize that no person can spend church monies except as authorized by those defined in the church By-Laws - usually the Board of Directors, and other specific persons authorized by a written church policy. In the event of an IRS inquiry, any and all other expenditures would be suspect.
Does the treasurer bear responsibility? YES, and anyone else whose name is on the church checkbook would be held accountable in the event of wrongdoing found by an audit conducted by the IRS. Severe fines, penalties and interest could be levied against anyone involved.
In other words, only the Board of Directors [unless the By-Laws say it's the congregation] have authority to spend church monies. Authority can certainly be delegated to a person or committee, but then that person, or committee, is required to give an account of their expenditures to the governing authority.
Could the church suffer loss if found in the wrong over this issue? YES – the church face severe fines, and even loss of it’s tax exempt status. Always remember – the IRS cares not a wit about your theology – but they sure can follow the smell of money.
It is imperative to understand that, if there are no By-Laws, no functioning Board, and no minutes the IRS would likely ascribe ALL income to the pastor, and he would be treated as a "Sole proprietor." In other words, all income would be deemed his - and he will have a huge tax problem.
Another Article you might read is - Church Fund Accounts and Accountability
http://www.admin-assist.com//blog_detail/11_Church_Fund_Accounts_and_Accountability
If this discourse is of interest to you, please see "The Church Administration 'How To' Manual" for more specific information. There are Worksheets and Forms at the end of the chapter to enable you to maximize Housing Allowance, and minimize personal income taxes. A CD is included with the purchase of this manual, with the Worksheets and Forms. This Manual, endorsed by three CPA's, an EA and two attorneys, was updated again in January, 2010, for the 11th time, since its original publication in 1991.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE – Rev. Don L. Buckel - Director. 8419 Vista del Cajon Pl. Lakeside, CA. 92040 don@admin-assist.com. Please feel free to call us at 619/443-5221.
Please allow for West coast time zones, and call after 8:00AM PST
