USA Church Accounting Practices


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Like most religious organizations, our church is a 501 (c)(3) charitable organization. The board of directors for the organization consists of the senior pastor, chairman, and his family members serving as secretary and treasurer.
The pastor owns four very lucrative businesses.

My concern is the way church projects and financial obligations are funded. For example, if a major remodel is necessary and the church doesn’t have the finances, several of the pastor’s business accounts fund the project by purchasing the materials through local vendor charge accounts and then those receipts are ‘billed’ to the church within Quickbooks by the treasurer (who also maintains the personal business accounts). When there is enough money within the church account, the treasurer pays the bill within Quickbooks and reimburses the pastor's business accounts.

Everything about this doesn’t seem right. Can someone please offer some advice?
 
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kirby

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One question back to you is whether those church books are audited by an independent CPA. If so that would give you some assurance that things are OK. If there is not, then because the pastor has control of the board there is really no independent oversight. Church could be paying for bills for the pastor's own businesses, for example.
 

smallbushelp

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You are correct; it isn't right. It sounds like the Pastor is using his other businesses to "help the church out" but such dealings between these related parties could jeopardize the churches 501(c)(3) status. If the church can't afford something, then it should either seek additional contributions from its membership, seek donations from the vendors or community members, get a loan, or have the Pastor's other businesses donate the money to the church. Again, the activities you describe are jeopardizing the church's tax exempt status. They should stop.
 
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The church bylaws state, "The Church shall have each annual financial statement of the Church audited by a certified public accounting firm selected by the Board of Directors." If an audit is being performed annually, wouldn't the CPA notice such transactions? I totally agree with smallbushelp. The pastor is trying to help the church but without a budget. He'd rather just get it done now and not wait. I will probably leave rather than try and talk to the pastor about the situation that would most likely cause hard feelings for him.
 

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