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Lecture 21: Pastoral Leadership and Finances (Part 2)
IV. Develop a Sound Structure for Giving (cont)
C. Designated Giving
I want to talk a little bit more about finances as part of our leadership in the church. One of the issues that comes up
is what is sometimes referred to as “designated giving.” It sounds great, it sounds nice, often problematic. It is well that one thinks through their position ahead of time. Because the question here is, can one designate what they want to give
to the church? Really, that is the question. Someone really is into gardening and would love to designate that their money
goes towards a new lawnmower for the church; or someone who dies and always wanted to have a particular window that would
be stain glass. It can be a lot of different things. But certainly where it particularly comes up is, “I would prefer that
my money goes to missions.” That is probably the more common; and people who in fact want their money to go, not just to missions, but “I would like it to go toward this particular family”, oftentimes a family they have known and they want to support their cause.
Certainly it is great that people are generous in that way. But the question I raise here is, how healthy can that really
be? It sometimes can circumvent the budgeting process. People might say, “Well, if we agree as a community that this is what we’re going to do with our money, but I don’t think we are doing enough over here. I will then designate that my money
goes to it or maybe supplement it.” Sometimes it does stimulate giving. People sometimes use language like, “over and
above.” I don’t know if that makes a lot of sense to me. Giving is giving.
It would seem that if we are thinking of, and we should be thinking about, operating as a community, and we have the
leaders to whom we entrust leadership, it seems like we should take our resources and say that I am entrusting them to you, to make really wise decisions on what we should do as a body; and if we believe that the money should not be going for the lawnmower over here because the present one is okay; but it needs to go to this need over here, we should do that and if we have more to give, then it is an extra gift. There is some wisdom on one side to say, Then just give it to the general
budget and let the leadership decide what is in the best interests and where that should go. If there is a memorial fund,
I think the best designation is just to go towards the ministry of the church and then the church collectively together decides.
When we start designating money, what I discover is that sometimes we are dealing with deficit issues over here, but we
are doing fine over here. I have never had anyone say, “I would like my money designated for the electricity” or “for the
water”. People don’t do that, but those are real costs.
Where we in our particular church had to navigate through this, because it is a form of designation, is what is commonly
referred to as “faith-promise.” We had in our church two, the general budget and the faith-promise budget. The faith-promise was an event that happened every year. People would be challenged to step out in faith and do something that would take great faith, believe God for it and make a promise. Then there would be these wonderful stories. The faith-promise money
went to missions. It sounds good and there are different churches that promote this. I’m not here to say that is wrong,
but I don’t mind saying, I think it can again at times create certain havoc with the budget. One of the things it tends to do is, it tends to categorize giving in ways that we tend to create hierarchies. I’m writing a check to “general” and I’m
writing a check to “faith-promise.” One is certainly going to sound more spiritual than the other. Like this over here is
not faith; or this over here isn’t promise.
One day I spoke to the church about this and I said, Shouldn’t all of our giving be an issue of faith? And shouldn’t it
all be an issue of promise? We have promised, this is what we will do. Then again, let the church as a whole collectively
decide what they are going to do with that money. You can listen to this and you will come down in different ways. But if
we get into some of the very practical issues in pastoral ministry and leading the church in how it manages its money, this is going to be a real issue that you may face, that I had to face.
After about three years, I came to a place where I thought, this does not seem right. It seems like it’s not my place to
tell the church what it should do with its money. I do have that role and that place in budget meetings, to say that I think we should be giving more. We are giving 11% to missions, I think we should be giving a greater percentage to missions.
It could be things like that. I have had my say and then others have their say and then I instruct the leadership to make
the best decision. If I don’t like the decision of the leadership, then I vote for different leadership. Once we have
a leadership that has been called, then summoned to come together with a financial plan that if the church then embraces and goes together, I should step in and do that. Those are some thoughts.
D. Capital campaigns
I will just say a couple of things. I had the great privilege to be part of I think four capital campaigns. I’m probably
being a little bit sarcastic here because who wants to be part of a capital campaign. But we needed to do it. We built a
new sanctuary. What have I learned from capital campaigns? I think capital campaigns are necessary for one thing. The
second thing I learned is that you are really smart if you get someone who knows how to conduct a capital campaign. My experience has been that churches that try to do it on their own don’t typically do a very good job.
You are going to have to think about your issue on borrowing, going into debt. You have to work through those issues. I do
not think it is necessarily wrong to go into debt as a church, as long as it is manageable and there is a commitment to pay it off at a certain time. I will give an illustration. If we had built a sanctuary with pay-as-you-go, I don’t think it would have ever gotten built. It certainly would not have gotten built the way it should be built. It necessitated money up
front. I think if we had waited until we had that money, I don’t think it would have ever gotten built. There are some
benefits; but you have to have the discipline to go after paying off that debt as soon as possible, recognizing what it is you believe the church can manage.
Unfortunately, we were planning to build our new sanctuary in 2006 and 2007 when the economy was white hot, when costs of
building the church were going up in the tens of thousands almost every week. We felt the pressure that we needed to get on with this. The cost to the church mushroomed to 24 million dollars. I remember at that point as a pastor going, I can’t
lead the church into that kind of debt. We pulled back and thankfully we did, because the next year was 2008 and the
economy collapsed. However, we had settled on a different design at about half the cost and we were already full of motion with that when 2008 happened. That was a scary time.
Looking back now years later, it was a great decision I think, for the church. A new sanctuary allowed us to do a lot of
things that otherwise we could not do. But we could have never done it without a great capital campaign that helped us pay off a significant amount of the debt.
V. Manage the Budget Carefully
You might be thinking that no, you probably don’t, because you are not aware, though I have mentioned it, that I oversaw
a church that I just discovered, after having now been gone for two years, that a half million dollars was embezzled out of the church, some of it under my watch. I felt really bad about that. So speaking about managing the budget carefully, it
is not that we didn’t have policies and procedures in place. Unfortunately, and I was not aware of it, they were not
followed. They are good policies and I am going to mention a few.
A. Create a budget that is driven by the mission and vision
I have already said this, but I’ll say it again. Create a budget that is driven by the mission and the vision and a
B. Establish priorities of what gets paid first
Establish priorities of who gets paid, what gets paid first. If you come up short, it is important to know, okay, what is
it we can pay, we must pay first and what is paid second.
C. Have a solid structure with clear lines of accountability
Have a solid structure with clear lines of accountability when it comes to the budget. Identify those who are responsible
for administrating resources, preferably not the pastor. Find those who have some training, who have impeccable character. Have a keen sense of detail. Ultimately a church is going to have people like a business administrator, a church
treasurer, a financial secretary, a bookkeeper. They all have their roles. And a financial committee, and it has its role.
It is important to have the best procedures you can have in place and be aware then of trends and patterns. Know your
people. Treat the budget as a guideline, not a straight jacket. These are some things I have written down here. Create a system that guards against embezzlement. What does that look like? We somehow had the right procedures and we did have backup
and we did have a team. But we were not paying as careful attention as we should have. It is important to have immediate
deposits to the bank and two signatures on every check and treasurer term limitations and authorized signatures. It is
really important not to just take people at their word, but to check off systems. It is imperative to have periodic
audits. Somewhere, auditors missed something here.
What can I say in learning? The learning is, don’t assume anything. You might trust someone completely. I did, this
particular person. When I found out, I thought, him? Are you kidding? I trusted him; but all of this time he was stealing, using church credit cards, doing things. This is what I discovered about embezzlement - it is just small enough,
little things that no-one really notices; but over time it adds up, in this case to nearly a half million dollars. It is
an amazing thing. It is really important to have structures and accountability.
D. Maintain Confidentiality
The question which we touched on is confidentiality. What should pastors know when it comes to people and their giving?
There are two ways you could argue this that I have mentioned. Some would say it protects the pastor from a certain prejudice, a preferential treatment, something James warns against in the Book of James. It protects from certain
judgmentalism. It respects the fact that giving is between the giver and God. I think I have moderated on that. I think
giving is part of a community, too, because it is not ours.
On the other side, some would argue that yes, the pastor should know if a person is giving, is investing in the community,
in the ministry, especially if they are going to serve in leadership. It can also serve to flag a pastor if something is wrong. If I know there is a family that is not giving anything, something is not right. It could be they are giving a lot away to the Lord, it is just not to the church. That is problematic, too. They either do not believe in our ministry, or they do not value the church. If they are giving to no-one, then that says something about greed or possible debt. We are to be shepherds of souls; and if money is a huge temperature gauge, then we should know what the temperature is. I’m not saying I
live by that; but I think if I had to do it over, I may not want to know what everyone gives. But I think what I would do
is, I would sit down with my business manager, maybe periodically, and say, Are there any families – because somebody has to know, there are red flags here – that I should be aware of that I need to talk to. I wish I had done that now.
E. Report income and expenses periodically
Again, it is really good to establish great communication with the body. People want to know how the church is doing
financially. They don’t want to feel like it is some secret. The question is, how much information do you give on a regular basis? One of the things we tried to do is to say, nothing is hidden. You can have as much information as you want. But when it comes to what we will report on a regular basis, which often was in our worship folder, was to say, here are some
basic things you need to know. If you want to know more, you can ask. People seem to be generally satisfied with that.
This is finishing up our discussion on finances and leadership. I am happy to talk about any questions you have.
A. What are the IRS guidelines regarding tax deductions for designated gifts?
Question: What was your designated giving? I was under the impression that it was illegal to designate giving unless
it is to capital improvements. Is that not the law anymore?
Dr. Johnson: In other words, if you’re going to take a tax deduction, you just have to give it to the nonprofit institute
and it is their decision.
I don’t know if that is necessarily so because I’ve seen a number of people do that, unless the laws have recently
changed. But people have sometimes said, “I would like to give this gift to this ministry, this person over here, but I need to do it through the church as a 501-3C organization. I think some churches say that it kind of fits within our overall what we are doing here, that’s fine. Let’s say that your church missionally pours a lot of its investment into Africa; and in a more strategic way , this is kind of the heartbeat of our church. Someone says, “I know someone that is serving in South Africa. It is not one of our missionaries, but we know they are a great family doing great work, they are with a legitimate organization. Can I give through the church to them?” I think some churches might be fine with this. I think we more and more moved away from that, to say that any giving needs to go towards the priorities we have established here. So we stopped being
a funnel, if you will, for people to give to other causes. So I do not know if it is illegal, maybe it would help to be
illegal, but I do not know if it is illegal.
B. Do you think the church should know the pastor’s salary?
Question: Do you think that the church should know the pastor’s salary?
Dr. Johnson: That is a really good question. When I was in my first church, I was horrified at something that happened to
me. I was a bit naïve. I had been there a year and it was the first budget meeting that I attended. The budget was put on the overhead back then, put up there line-by-line and there was my salary. Then people debated. Some people said, “I don’t think we are paying the pastor enough, I think we can do better than $17,000.” There were other people who said, “No, I think we’re paying too much.” All I can tell you is this: My wife and I were sitting there, we did not have kids yet. I went to the elders within a week and I said, “Don’t you ever do that to me again.” I said, “How many of you have something like that happen in your business, where the shareholders or constituents sit around debating in a very public way with everybody, your
salary? I do not think you would appreciate it.”
So then the question is, it is a significant part of the budget. Should it just not be up there? What helped a little bit
is that we started doing this: We would just put all of the costs of our staff as one number, to say, in terms of the cost of doing ministry, this is what we have budgeted for our staff. If someone said, “Well, could you break that down into
individual units?” No, we are not going to do that. We may have said that we don’t have anything to hide and if you want
to call or ask someone in more specific ways, we can give you that information. I’m not even sure we went that far
because that could be problematic, too. I think no-one else, to my knowledge, knew my salary from that point on in any of
my church experiences.
Question: I remember talking to an executive pastor about this once and I said, “The problem is, people are saying, ‘We
are paying his salary, we should know what it is.’” His response was, “No, you are not paying his salary. You are giving the money to the work of the Lord and entrusting the elders to spend it appropriately. You don’t have a right to know what
Bill or Steve or anyone makes.” Is that legitimate?
Dr. Johnson: I think it is legitimate, especially if the church is being a good steward and they are entrusting the
leadership to be wise. I think it is a fair question for a church to say, - I’m not fishing or asking for numbers here - but when you determine the salaries of our pastors, what guidelines do you use? If they come back and say, We’ve looked at what average people in the community with this amount of education and this amount of experience, what they earn in general
because every community is going to have different numbers. It is more expensive to live obviously in some communities
In the early 1990s I was pastoring in the Netherlands, I was earning $99,000.. But I was living in Lake Oswego, the most
expensive part of the Netherlands, in an expat community where corporations sent their people. My rent was like $6,000. a month. In other words, I made a salary that on the surface looked really great; but my wife and I at the end of the month
would go, How are we going to make it? because the costs were astronomical.
So asking church leadership, how do you determine that number? We looked again, as I said, at costs here; then we looked
at a national survey of what people with an M. Div?_____22:14.5 degree with 10 years experience in a broad range of different denominations, what the average salary is. We looked at all of this and then we looked at our own pastor’s needs.
He has eight children, so has a little bit higher costs and his wife is not free to work right now. Or we believe that we
want to give the pastor the freedom for his wife to not have to work if she doesn’t want to.
In our case, my wife, a public school teacher, loved what she was doing; and if people said, I don’t think the pastor’s
wife should work, we would go, Well, sorry, my wife loves teaching. On the other hand, if we had let’s say a number of children and my wife didn’t have a profession and wanted to stay home, I want her to be able to do that.
My general response when a church said, Pastor, give us a little bit of a guideline on your salary, I would say something
like this:” I’m not looking to be rich, I did not get into ministry to get rich, so I’m not aiming to get rich here. But I want you to pay me such that I don’t have to look for outside income to survive. I don’t want to do weddings and funerals and outside speaking just to pay my bills.” In fact, what I worked out, which was really a great thing, is I worked it out so that the salary I got - which was not great, but it was adequate - was enough so that I could say to anyone when I did
memorial services or funerals, “I am not doing this for money, it doesn’t feel right to me.” I’m not saying it is not
right. I could not do a memorial service and take a check. I also have a little bit of a problem with weddings in that way. I like to say to a couple, ”I’m doing this as a gift to you.”
The point is, people nonetheless at times will still insist to say, “I would like to give to you.” I say this: “ Here is
what I’m going to do. Any money you give will go into a fund that pays for my missionary travels.” Each year I would go overseas. I began to develop a passion to see missionaries and it was funded by those funds. So, it was kind of a win/win. It went sort of to me, but it went for the ministry. It was able to happen because I told the church, “This is what we need so that I don’t have to depend upon those other things; and also so that I don’t have to be cheap.” I really detest stories
where pastors are with business people or out in the community, going, “Do you have a pastor’s price?” In my more cynical
moments, sometimes I think churches want to make the pastor’s salary equal to the lowest family’s income in the church.
The Jewish tradition is, you need 10 people to form a synagogue; and since they all tithe, the rabbi was guaranteed the
average salary of the community. Have you ever heard of a church saying, “Everyone here, tell us what you make, we are going to find the middle and that is what the pastor’s salary is.?” In one sense, I remember an academic situation, we objected to the administration looking at what professors were paid at other schools; so just because everyone else was being
underpaid, that means we can be underpaid? That is kind of the issue.
I often wondered if a church ever had the nerve to say, We need to find out what the average income is in this church, and
that is what the pastor is going get. Have you ever heard of anything like that?
Question: I have not. But I am not sure I would really be favorable to that because I think there are other factors that
come into play. Let’s say your pastor has a doctorate and he has invested a significant part of his life being as
prepared as possible. Let’s say he comes in with years of significant experience. Let’s say the average person in the
church has a bachelor’s degree and let’s say the average has fewer years of experience.
Dr. Johnson: You are comparing two different things. I don’t know if that works for me. I think you just have to take each
person and say, What kind of education does he have? What kind of education are we going to invest in? What is his
experience? What does our community in terms of its incomes tell us? Let’s look at, what do pastors make anyway? That is
difficult because some pastors have extraordinarily huge incomes and some are pathetic.
Other questions before we move from finances.
C. How do you respond when people want to designate their gifts?
Question: Designated giving in our church was always one of the hardest things. If somebody really had a heart for
missions and Uganda, we wanted to respect that and we wanted to encourage that. On the other hand, it often is just a way to bypass the elders’ decisions and the church’s agreement on the budget. It is really hard to get anyone to give to the
general fund. In fact, nobody intentionally gives to the general fund, right? They always go to special gifts. I think it
is really difficult; but the more you let it happen, I think it is somewhat dangerous for the church.
Dr. Johnson: I heard on many occasions of people in the church that someone would say they only give to missions. So
actually, we’re doing all this ministry for them for free. There is something that strikes me as wrong in that. I rather like to say that if someone says, “I’d like to use the church so I could support this person in Uganda” we should say, “Don’t
use the church, just give to the person in Uganda.” If it is about tax write-offs, then maybe you need to check that, too.
Maybe you need to say, “I don’t need a write-off to do this, I just to want to help this person.”
I think it shows respect to the church to honor the church by saying that if they are not supporting the person in Uganda
and I have placed myself under the direction of this church, I have to go with the direction of the church; and say to the person in Uganda, “I hope you can persuade them that you have a ministry they should consider.” But if they say, “We
would like to, but we are doing our kingdom work primarily in Lebanon” then we have to honor that. The person says, “Well,
I think it should be Uganda” then go to a church that is supporting work in Uganda. Simple as that.