The Congregational Handbook

An Guide to Congregational Health and Vitality

Many of The Congregational Handbook's resources focus on using a process—rather than a recipe with a predetermined outcome—to deal with congregational complexities. Congregations can use these processes to make a decision, discern their next steps in development, or embark on a culture transition. The Handbook is intended to be user-friendly and tailored to your congregational size; it offers examples of processes for congregations that are just starting up, for small congregations (with fewer than 150 members), for mid-size congregations (with 151 to 550 members), and for large congregations (with more than 550 members). It also includes options that congregations can adapt to their unique situations. 

Becoming a Congregation or Covenanting Community

An Online Guide to Congregational Health and Vitality

Being a Unitarian Universalist is all about interconnection! 

If you don't have a UU community nearby, you may want to join the Church of the Larger Fellowship, which has a robust online presence.

If you have a local group who are interesting in creating your own UU community, here are some resources:

Holiday concert at First Parish in Bedford, MA.

Options for New UU Communities

The UUA bylaws require a minimum number of 30 adult members to apply to be a member congregation, but there are other ways to connect to the UUA and get advice and support.

  1. Contact your regional staff. They have experience and can be a thought partner with your leaders.
  2. Consider becoming a Covenanting Community, which can be a first step, or be an option for housing co-ops, groups in retirement homes, or other non-congregational ways of being a community.
  3. Review resources for New and Emerging Congregations to help guide you in a path toward becoming a congregation.
  4. Consider applying for 501c3 status.

Intentionality for New Congregations

Decisions made in the early years of a new congregation will influence its future for years to come. An organizing approach should include the following:

  • A long-term vision and understanding of purpose.
  • Inspiring lay and ministerial leaders who are knowledgeable about organizing a new congregation.
  • Knowledge of previous efforts and strategies known to work.
  • An assessment of the geographic area, including needs of the population to be served.
  • A carefully crafted plan.
  • Adequate financing and resources.
  • Support from the larger UU community. 

More on Developing a New Congregation

Book cover

Additional Resources for New UU Communities

 

Congregational Membership in the Unitarian Universalist Association

The banner parade at General Assembly

Unitarian Universalism is faith that welcomes people from all walks of life into community with their local congregation, community, and the wider Association. If you are part of a community that is interested in joining the Unitarian Universalist Association (UUA) we encourage you to contact us.

Procedures for Admission

A new congregation becomes a member of the UUA when the UUA Board of Trustees approves its application. The Board votes on new congregation applications at its meetings that occur in January, April, June, and October of each year. Your application and supporting materials need to be received at least four weeks prior to the next Board meeting. Below is the rough schedule of annual due dates for your completed application.

Application Due Dates​

  • March 15 (for the April board meeting)
  • May 15 (for the June board meeting)
  • September 15 (for the October board meeting)
  • December 15 (for the January board meeting)

If you determine that your group is not quite ready to become a congregational member of the UUA, read more about Emerging Ministries.

Another category of membership is becoming a Covenanting Community. Your Regional Field Staff can help you discern which designation works best for your group.

Application Materials

Submit the items below with the application (Word, 7 pages) (PDF) to the Congregational Life Office at the UUA (please see the address at the foot of this page). You will need:

  1. A complete list of all charter members. The UUA Bylaws require congregations to have 30 adult charter members to be considered for affiliation.
  2. A copy of your congregation's bylaws. A resource for drafting congregational bylaws is Your Congregation's Bylaws: a Guide to Effective Writing and Revising (Word, 89 pages) (PDF).
  3. A copy of your congregation's Articles of Incorporation. The UUA requires that all new congregations be incorporated in their state before affiliating with the Association. Because incorporation laws differ by location, it may be necessary for your group to contact a local attorney familiar with non-profit incorporation procedures. In filing the Articles of Incorporation, it will be necessary to fulfill UUA procedures for Admission-Rule 3.3.5 (f) which states: "congregation shall include in its articles of incorporation or other organizing documents a clause providing that the assets of the congregation will be transferred upon dissolution to the UUA. With the prior written approval of the UUA Board of Trustees, the congregation has the option of naming a UUA affiliate organization (such as district, camp, conference center or other congregation), as the recipient of the congregation's assets."
  4. A check made payable to the Unitarian Universalist Association for its Fair Share contribution to the Annual Program Fund (APF), pro-rated for the month your congregation joins based on the UUA fiscal year (July 1st to June 30th).

    For example: A congregation of 30 members, whose application is dated March 1, would be asked to provide a contribution of $600 along with the application. Full Fair Share would be $1,800 (30 members times $60). The monthly Fair Share for the congregation in this example is $150 ($1,800 divided by 12 months). March—June is four months at $150 per month for a total of $600. Therefore, the Fair Share for a congregation of 30 members that requests membership in March is $600 for the remainder of the UUA's fiscal year that ends June 30. Please visit the APF Office for current rates and information on what your contribution does. If your congregation's fiscal year does not coincide with that of the Association and you would like assistance in budgeting for your APF contribution—or have any other questions—please contact the APF Office (617) 948-6512 or -6513 or email apf@uua.org.

    NOTE: Fair Share is the minimum amount that your congregation is requested to contribute each UUA fiscal year in support of the Association's work. Although a “corporate” contribution, since the congregation is the Association member, it is calculated on the basis of the total membership your congregation reports the preceding February on the “UUA Member Society Annual Certification Report and UUA Directory Update” form. The UUA Board of Trustees determines the method for calculating Fair Share as well as the amount. In coming years, when planning your congregation's budget, please take Full Fair Share for the fiscal year into account.
  5. The UUA requires three recommendations written in support of the congregation. You must include a letter from a nearby Unitarian Univeralism Ministers Association credentialed minister, your Regional Lead, and your District or Regional President. Sample letters are included in the addendum (PDF, 16 pages).
  6. The UUA requires your congregation's covenanting documents and practices. For help writing and living into your covenant, consult with your regional staff team.
  7. The application form included in this congregational membership document is the only application that will be considered for congregational membership with the UUA. For your application to be considered, all materials need to be received by the UUA by the due date. A checklist is included in the application form. Also, please note that this application when submitted will be posted online minus personal addresses and contact information.

Submitting Your Application

You can submit your application electronically or by mailing it to the UUA. Once it is successfully received, you will receive a confirmation email. If you have any questions regarding this process or need further assistance, please contact:

Heather Bond
Congregational Life
Unitarian Universalist Association
24 Farnsworth Street
Boston, MA 02210
hbond@uua.org

As a Member of the Unitarian Universalist Association of Congregations

As a member of The Unitarian Universalist Association of Congregations (UUA), your congregation has certain resources, obligations and privileges, outlined in the UUA Bylaws. The UUA is also guided by the Principles and Sources.

  • For questions concerning the incorporation of your congregation, please contact the Congregational Life office at conglife @ uua.org.  
Close up of a monthly calendar

Re-Certify Your Membership Every January!

Each year, all UUA member congregations are required to submit their annual Certification of Membership report online by the end of the business day on February 1 (or the following Monday).  The report is available each year beginning in mid-November.

You can also use this link to add the names of new members throughout the year to be sure they get their UUWorld subscription.

UUA Data Services

Your Members Will Receive the UUWorld Magazine

When you notify the UUA with the names and addresses of new members, they will be given complimentary subscription to the UUWorld Magazine (also available online). Some congregations include old issues in visitor and new member packets.  

More about UU World Magazine

Attend the Annual UUA General Assembly

General Assembly (GA) is the annual meeting of our Unitarian Universalist Association (UUA). Attendees worship, witness, learn, connect, and make policy for the Association through democratic process. Anyone may attend; congregations must certify annually to send voting delegates.

More about General Assembly

Support the UUA with Your Financial Gifts

Our support for the APF is the fulfillment of a promise already made. It is the living embodiment of the covenant between us, promising to one another our mutual trust and support.

The Annual Program Fund is the primary source of funding for the Unitarian Universalist Association. We give so that our spirits will be enriched by the practice of generosity in community, and so that Unitarian Universalism can flourish.

More on the Annual Program Fund

Connect with Your Local UUA Field Staff

Our Unitarian Universalist congregations are organized into regions. Each region approaches congregational collaboration and identity differently. Each region is served by a Regional Lead and a team of Congregational Life Staff. These staff provide a wide variety of congregational services.

Find Your Regional Field Staff

Browse the UUA Bookstore

The inSpirit: The UU Book and Gift Shop offers books to support people of all faiths and seekers alike to engage with spiritual questions. Unitarian Universalists will find items that will help to nurture their faith, to connect with our history, and to ground and enhance our work for social justice. They also offer a wide range of fair trade gifts, as well as accessories proudly bearing the Unitarian Universalist Association and Standing on the Side of Love logos. 

Visit the UUA Bookstore

Need Something Else? Use the UUA Directory!

Find out more about the UUA staff, member congregations, religious professionals and affiliated organizations.

More Information on the UUA by Department

Conflict is Part of Congregational Life

All congregations experience conflict. While many people’s stomachs knot up at the idea of conflict, conflict itself is not bad. Actually, conflict can present great opportunities for creativity, growth and transformation. How we handle conflict is the key. If conflict is dealt with in covenantal relationships and healthy processes are used, conflict can be a catalyst for exciting change.

Transformation begins with knowing when, and whom to ask for help. It is better to get help sooner rather than later. Unacknowledged or unexamined “differences” often perpetuate conflict. Sometimes an outside facilitator can be a great help in navigating through your congregational culture to better see what issues may not be obvious to you.

As Unitarian Universalists, covenant is our pathway to building/re-building community. All conflict work needs to begin in covenant; we need to understand how we will be together before we can decide what is to be done.

If you feel that your congregation might be headed into conflict it is a good idea to reach out to your Congregational Life regional field staff. Let’s have an initial conversation to see how you might be best supported. 

 

Start with Covenant

Living in a committed, covenantal community is a great way to avoid destructive conflict. Our covenants will reflect our values such as the worth and dignity of all. If living in a covenantal way is part of the congregation’s cultural norms, they are more likely to navigate conflict in a healthy and creative way.

More on Covenant

Watch Out for Triangulation!

One sure way to invite conflict into a congregation is by triangulating. Triangulation is about the transference of anxiety, creating unhealthy relationship triangles. One way that human beings react to anxiety is to try and get rid of it by giving it to someone else.

More on Triangulation

Healthy Congregations Have Creative Conflict

The sixteenth-century Transylvanian Unitarian Francis Dávid is supposed to have said, “We need not think alike to love alike.” But how do we practice that in our congregations? 

More on Creative Conflict

Levels of Conflict

Not all conflict is alike. Different kinds of conflict require different kinds of responses. This is an overview of a model of conflict by Alban Institute consultant Speed Leas.

Levels of Conflict

Dangerous Conflict

Congregational leaders and members have the responsibility to provide a safe and welcoming environment for children and adults—both regular attendees and visitors. Developing a Disruptive Behavior Policy indicates a commitment to creating a safe and welcoming environment by confirming a list of expectations for everyone's behavior. 

More on Disruptive Behavior Policies

Reconciliation as a Spiritual Practice

When we engage in reconciliation--which is different than an apology or forgiveness--we invite change that will transform a relationship. 

More on Reconciliation

Building Security and Safety in Churches

Personal Safety of Congregation Members

Planning for Disasters for the Congregation and Building

Guided by Vision, Mission and Covenant

Who are we, as individual Unitarian Universalist congregations? Who are you, when you gather? Who are you, as a religious community?

Vision, mission, and covenant are resources for congregational development and health. Congregations without a compelling and shared vision may too easily lose track of what they should be doing and, consequently, struggle to determine how to allocate their human and financial resources. Without a centralizing agreed-upon focus, battles can rage over competing interests and equally good projects. However, when vision and mission and covenant are in place, all discussion circles back to these articulated statements for a double-check and grounding.

In congregational decision making, the way forward should reflect the vision and mission of the congregation. If it doesn't, then something needs to change. Sometimes it’s the decision that needs to change, and sometimes it is time to revisit the vision or revise the mission of the congregation. The vision and mission are made alive by the involvement and participation of today’s members.

Congregations that have living vision, mission, and covenant statements are the ones that are growing—not only in numbers but also in the depth of membership commitment and attraction of new members. When vision and mission work isn't followed by planning and execution, resistance and resentment build up; people who helped craft the statements feel as if their time, and life-energy were not well spent.

Good work around vision,mission and covenant may create tension, but that just means you are going deep in your conversations about how to be in community together. By speaking about it forthrightly, and engaging the members and friends of the congregation, this tension can help bring into place creative and deeper relationships among people of the
congregation.

Vision, mission, and covenant work is not easy, and many congregations bring in a consultant such as UUA field staff or a paid church consultant. Developing and following a good process that involves most of the people in the congregation is hard work and takes time. And the outcome can be well worth it.

Definitions

It is always helpful to understand how language is used in a particular context. There are many competing definitions of the words vision, mission, and covenant. In this document, the terms mean the following:

Vision

A carefully defined picture of where the congregation wants to be in five or more years. It is the dream of what the congregation can become in alignment with their "vow with the Universe."

Mission 

A concise statement of the congregation's core purpose. What the congregation wants to be known for, or known as, within the wider world? What the congregation wants to mean to the community.

Covenant 

A statement of how members of the congregation will be with, and will behave toward, one another, as well as what is promised or vowed to one another and to the congregation as a whole.

Why Undertake Vision, Mission, and Covenant Work?

Congregations that have living vision, mission, and covenant statements are the ones that are growing—not only in numbers but also in the depth of membership commitment. This growth shows in the depth of commitment members have to the world around them and to living more fulfilled lives. When a congregation’s leadership uses the mission to create objectives and to make major decisions, the commitment of the members is strengthened. 

Why Undertake this work?

What Are Vision, Mission and Covenant?

The words vision, mission, and covenant have been used but the meanings have varied over time and context. They are interrelated; vision has the broadest focus, which then narrows into mission and covenant, becoming further focused as these statements come alive through shared ministry goals and mission objectives. This diagram offers one mental model of how they might fit together. 

More about Vision, Mission and Covenant

First Steps in Creating Vision, Mission and Covenant Documents

Guiding documents like bylaws, covenants, mission statements, vision statements and strategic plans are developed in consultation with  the congregation as a whole so that there is a general sense of trust and ownership. The documents can then serve as guides for the board, minister, staff and lay leaders in setting goals and making day-to-day decisions.

More on Creating Guiding Documents

The feet of a person going up steps.

Next Steps: Design a Process

There is no one perfect way to develop your vision, mission and covenant. Some congregations do it as part of a congregational retreat, while others do it as part of a single-day program or one that takes place over several weeks. Some congregations create it as part of worship, while others use lifespan faith development religious education as a vehicle for creating these guiding documents.

Whichever method is used, make sure that it is easy for people to take part in by giving plenty of advance notice and providing child care and children’s activities. You may wish to incorporate social time, such as a refreshment break. Beginning with a chalice lighting and reading will impart the feeling that this is an important event.

You may wish to have an outside facilitator assist, but that is not necessary. Make sure that you allow adequate time for the process to unfold; rushing people through these important steps doesn’t contribute to a good process. If exercises take longer than you originally thought they would, stop and talk with the members about that fact. Then work out a way you can continue the process, either through having additional sessions or perhaps agreeing to allow a smaller group to complete the activity and bring the results back for the larger group’s input and feedback.

As with any generative, open process, you need the participants to respect the facilitation and engage with the process. You may wish to start with a covenant at the beginning to be able to address any attempts to derail the process.

Remember, the secret to a good vision, mission, and covenant process is making it easy and fun for people to be involved.

Tip: With any of these processes, save the final wording of the statements for one or two "congregational poets" to create using what came out of the process. Wordsmithing in a large group rarely produces good results.

Here are some general guidelines and sample processes. You can also contact your regional staff for assistance.

Sample Vision Processes:

Sample Mission Processes:

Sample Covenant Processes:

 A blank to do list on the wall next to a large stack of papers

Following Through: Using Vision, Mission and Covenant as Part of Congregational LIfe

When done well, the vision, mission, and covenant process captures the people’s sense of who they are and who they want to be as a religious community. It is the clearest articulation of why the people think the congregation should exist, and the results can help the congregation in all areas of its decision making. Where should we build our new building? The answer can be found in the congregation’s vision. Where should we put our money? And why should we even bother to donate money to the congregation? The answer, you can say, is found in the mission—this is what we have said is most important, so therefore we should focus our money, time, and effort where we said we wanted them to go. How should we treat one another in committee meetings, social gatherings, and the children’s time? Once again, the answer can be found in one of the statements you’ve created—this time the covenant statement. Over and over again, the work and life of the congregation can be tested against the collective will and desire by reference back to the vision, mission, and covenant statements. The reason why most vision, mission, and covenant statements fail is because the congregation fails to plan for their effective implementation.

Strategic Plans

Annual Goals

Annual Assessments

Missional Budgets

Revisiting 

 

Money Matters: Financial Management for Congregations

Introduction

As organizations largely staffed by volunteers who may not have a business or accounting background, congregations will want to establish systems, policies, and procedures to reinforce financial health and vitality. 

It’s also vital to prevent the opportunity for mistakes or malfeasance by any volunteer or leader--no matter how loved and trusted they may be. It is unfair to put people in situations where their reputation is their only protection against accident or allegations of dishonesty. Instituting checks and balances protects both staff and volunteers by preventing the opportunity for misappropriation of funds. 

The UUA's Becoming a Safer Congregation Guide offers a section on Financial Safety for Congregations and a Financial Controls Checklist.

Of course, no system will completely protect a congregation from possible financial loss.

Congregational Financial Health

Human torso with emptied jean's pockets

Money – acquiring it, managing it, protecting it, and using it in service of your mission: all of these are vital to the work of your congregation. 

Having a healthy culture around money – talking about it, understanding its meaning and influence in our lives, seeing it as a tool rather than an end in itself – will help a congregation have less anxiety and more open communication around money. 

If this does not describe your congregation’s relationship with money, you may want to consider offering and participating in the Tapestry of Faith curriculum The Wi$dom Path, Adults: Money, Spirit, and Life. The Wi$dom Path comprises twelve 90-minute workshops, arranged around three themes: Money and Self; Money and Society; and Money, Spirit, and Life. Participants build awareness of their own “money story” and explore their own attitudes and experiences with money. They explore the ways in which money connects us with others, including issues of classism and economic justice as well as money issues in congregational life, then delve into ways to align faith, values, and a sense of a life calling with their financial ways of being.

Talking About Money as People of Faith

PWRUUA Webinar - Talking About Money as Pastoral Care

This was a call-in conversation on May 14, 2018 with Kay Crider, Stewardship Consultant with Stewardship for Us, and Rev. Jan Christian, PWR Congregational Life Staff.

Conversation Overview

Our wounds are often deep when it comes to money and our sense of inherent worth and dignity. The power of money in our own lives often goes unexamined. This plays out in our congregations in all sorts of ways. What would it mean to your congregation to be able to talk about money in ways that are life-giving and healing? 

Pastoral care involves a way of doing all that we do. It recognizes the hurts in our midst, meets people where they are and invites them into new insights and behaviors that are life-giving and affirming.

Pastoral care can happen in one to one conversations, in small groups, in committee check-ins, in adult religious formation classes, and in worship. It can be built into how we conduct our stewardship efforts and in the language we use in various areas of congregational life.

Contract and Consumer Culture takes a serious toll on us.

Some of the possibilities:

  • Scarcity thinking.
  • We are never enough.
  • We can never have enough.
  • We don’t know when enough is enough.

Our net worth = self worth.

We live with guilt and shame. We have more than enough while others do not have enough.

We live with blame and anger. We build walls so that our “too much” is not related to their “not enough.” We may tell ourselves: They need to work harder. I got this all on my own.

We are barely surviving in the midst of abundance. We are one paycheck away from catastrophe. Many people think it is our fault. Sometimes we may wonder if they are right.

We worked all of our lives to own stuff and now it owns us.

In most of our transactions, we come to ask: What is in it for me? We see relationships as 50/50.

Questions for Reflection: Looking at these, do any of these reflect your lived experience? Do you see evidence of these in the lives of others? Is there something that you experience that is not listed?

How does this play out in our congregations?

Talking about money evokes shame and anger, which are often directed at those doing the asking.

Members pledge based on what they are getting and what the services are “worth” to them. And congregations seek to give people what they want, playing to personal preferences rather than our mission and vision.

Members make pledges accompanied by feelings of guilt, resentment and shame.

Congregations hoard money for “a rainy day” while immediate needs go unmet.

We run our congregations as we would “for-profits” talking about bottom lines.

We underestimate the abundance in our midst.

We fail to see our budgets as moral documents, tied to our values.

We avoid talking about money as much as possible.

We forget that we owe our very existence as a religion to those who went before and that usually we owe our existence as a congregation to those who went before.  We forget to “pay our own way” or to “pay it forward.”

Note: An adjunct dynamic in our congregations is that we often underestimate the real scarcity in our midst—assuming that all of our members have a certain level of income.

Questions for Reflection:  Have you noticed any of these dynamics in your congregation? Are there other unhealthy dynamics you have noticed?

Creating a New Path

What can we do to heal the hurts of a consumer/contract culture?

We can:

  • Name and challenge the unhealthy parts of our culture that keep us from wholeness and health.  This is consistent with our work to dismantle the culture of white supremacy. Here, too, we look at how, scarcity, perfectionism, avoidance of open conflict, and a perceived right to comfort stymie our efforts to create a new way.
  • Acknowledge the pain and ambivalence in our lives related to money. Also recognize that acknowledging pain and moving through it is uncomfortable and yet that is what growth requires.
  • Make space for personal struggle and growth.  Recognize that we are all “becoming.”
  • Nurture covenantal culture as a religious response to contract/consumer culture:
    • Our inherent dignity and worth is not tied to our possessions.

    • Our inherent dignity and worth is not even tied to our ability to be generous with what we have.

    • Meaning and joy are tied to our ability to live generously (which means both the capacity for giving and receiving).

    • We all have gifts to share and ways “to bless the world.”

    • Gratitude is a way to move into a richer life.

    • We belong to one another.

    • We have what we have due to the generosity of those who went before.

    • We are called beyond ourselves to something greater.

Questions for Reflection: What are some concrete ways you can think of to integrate these actions and values into congregational life?

Building a New Way

Provide opportunities for deep reflection on the role of money in our lives.

  • Small group ministry

  • “Check-In”

  • 1:1 or small group gatherings sharing “Personal Reflections on Generosity” with one another

  • Faith Formation classes (using The Wi$dom Path, from the UUA) or a common read such as Your Money or Your Life or The Generosity Path

Provide practical workshops on financial planning, budgeting etc. or help link people to these resources.

Create a shared language of covenant in the congregation and be clear about how that differs from contract/consumer culture.  

Personal Reflections on Generosity

Rev. Jan Christian

Note: This resource can be used in many ways.  People might spend some time thinking and writing and then come together one on one or in small groups to discuss with touchstones about listening and sharing.  Individual questions might be used to open committee meetings (with the option always to pass).

Thank you for being willing to think deeply about the concept of generosity and how it applies to your life. It might be helpful to take some time to reflect on these questions and let things bubble up, before trying to jot down some notes. What you write is for your eyes only unless you choose to share.

The Pacific Western Region (PWR) Congregational Life Staff of our Unitarian Universalist Association speak of “Generosity In All Things.” We think of generosity as both an attitude and an action. It may manifest as giving ourselves and others the benefit of the doubt, a willingness to set aside personal preferences for the common good, looking for the best in people and situations, giving freely of the gifts given to us, practicing and seeking forgiveness. Research tells us that generosity in its various forms is tied to a sense of joy and meaning in life.

Questions for Reflection

  • Are there areas in which you find it easier to be more generous than others?
  • Why do you suppose that is?
  • Who has most modeled generosity for you? How did they model generosity?
  • Complete the following statement: Sometimes I think I will never have enough __________.
  • How does that sense of scarcity shape your life?
  • What are some of your first memories of money and its meaning or early messages you received about money?
  • Do earlier experiences still shape your attitude or has your approach to money changed over time? If it has changed, what changed it?
  • What are some of the feelings you currently associate with money?
  • What are the feelings you associate with donating money?
  • Are those feelings different when you donate time?
  • What are some of the talents, resources, and privileges you have been given in life?
  • How do you use or share those in ways that are meaningful to you and perhaps to others?
  • What role does gratitude play in your life?
  • Is there an area in your life in which you would like to be more generous?
  • If so, what would that look like?  (Having more money in order to give more money doesn’t work here, because generosity is about what we do with what we already have)
  • Are there ways the congregation could support that effort?
  • In what ways does this congregation call its members to greater generosity and nurture members’ ability to be generous?
  • What was this process like for you?

Suggested Books on Money and Values

Segregation of Financial Duties

Large bank safe

All financial best practices depend on reducing the risk of embezzlement or theft by increasing transparency and detection by creating systems and roles that segregate key duties. 

Here are some general rules to use in your congregation:

  • People who control budget line items or make purchases should not be allowed to sign checks or maintain the financial records or reports.

  • People who handle collections or deposits should not be allowed to sign checks or maintain the financial records or reports.

  • People who sign checks should not be allowed to handle deposits or maintain the financial records or reports.

  • People who maintain the financial records or reports should not be allowed to sign checks or handle collections or deposits.

Financial Reports

tablet and papers showing reports

Financial reports help the finance committee and the board assess the financial health of the congregation so they can make adjustments or decisions as needed. There are three typical reports that -- together -- give leaders and accurate and helpful picture. Many congregations also have their finance people generate a monthly “dashboard” financial report for board members, which helps to keep the board looking trends rather than details.

Many congregations find themselves with legacy accounting systems developed by volunteers without a financial background. Updating such systems to use standard accounting practices will make it easier for future volunteers and administrative staff.

Income Statements

Income statements show revenues (pledges, plate, fundraising proceeds, rentals, etc.) and expenses (salaries, benefits, utilities, supplies, etc.) for a given period of time (previous month, last quarter, year-to-date, etc.). 

  • This report can be generated by most accounting software.

  • The report is broken out by category (often based on mission), then account or line item

  • It usually has a column showing the current year’s and previous year’s budget on each line item

  • It usually also shows two or three previous year’s numbers for comparison (For example, pledge payments tend to be low in the summer and high in December.)

  • The “bottom line” subtracts the expenses from the revenues, showing either a surplus or deficit for the given time period.

Balance Sheets

Balance sheets show the assets (petty cash, checking/savings account balances, rents due, property value, endowment, reserve funds, etc.) and liabilities (payroll, insurance payments, worker’s comp, mortgages, loans, restricted accounts, etc.) of the congregation at a specific point in time. The total is the congregation’s net worth.

Cash Flow Reports

A cash flow report is similar to a checkbook register. It tracks where money has been spent, and shows how much cash is on hand. These reports are helpful in seeing the ebb and flow of cash balances, and help the board to determine how much cash should be in reserve for the lean times of the year.

For a more detailed explanation of reports and other accounting practices, read The Business of the Church: the Uncomfortable Truth That Faithful Ministry Requires Effective Management by John W. Wimberly, Jr. 

 

Creating a Purpose-Based Budget

We often claim that budgets are moral documents, and that congregational budgets should reflect our values. But line item budgets that include "office supplies, utilities, salary" and other such descriptions don't show how these line items serve the mission of the congregation. How might congregations re-imagine how they categorize our expenditures?

Many UU congregations have moved to "mission-based," "values-based" or other purposed-based ways of understanding congregational budgets in their communications to the membership. This isn't a trick or sleight-of-hand. It's a way of understanding how a congregation uses its assets and resources to serve its mission that makes sense to the members who care about how the congregation is serving its mission. (Note: Traditional financial statements reflect good accounting practices and should continue to be used by the finance committee, treasurer, bookkeeper, etc.)

How does a congregation do this?

Road with two painted arrows pointing toward a mountain

Determine Your Purpose

Determine Your Purpose

Determine the categories of your purpose. Look at your mission and vision statements. Look at your strategic plan. Possible categories might include:

  • Creating the Beloved Community Within
  • Serving Our Mission in the World
  • Developing Liberal Religious Faith
  • Making the World Just For All
  • Healing Disconnection For All
pocket watch on top of american dollars

Pro-Rate Your Resources

Pro-Rate Your Resources

(See this sample budget (pdf) as an example.)

Building

Add up all of the expenses related to the building, e.g. rent, mortgage payments, utilities, custodian/sexton (see staff expenses below), repairs, cleaning supplies, etc. 

Then look at the use of the building during the week, and decide what use aligns with which of your mission/purpose categories.  (Do not include time when the building is empty.) Determine the percentage of use for each category, and divide your building expense total by that percentage to get the numbers for the mission/purpose budget.

Staff

Add up all of the expenses related to each of your paid staff, including salary, housing (for clergy), taxes, insurance, pension, and professional expenses

Have each of your staff members track their time during a typical month to see what part of the mission/purpose categories they are serving. Determine the percentage of use for each category, and for each staff member, divide each by the total by that percentage to get the numbers for the mission/purpose budget. 

Program

Allocate all of your program budget items (e.g. guest speakers, RE curriculum, Share the Plate, etc.) to the proper mission/purpose category.

 

Pie Chart showing mission categories.

Communicate!

Communicate!

Now you are ready to communicate how your budget serves your mission! Create charts, graphics, etc. to use on your website, in your stewardship materials and with your potential and new members.

Help Keep Your Board Out of the Weeds with "Dashboard" Financial Reports

a calculator, pen and spreadsheet

Boards have the fiduciary responsibility to make sure the overall finances of the congregation are in order and the budget is on track. But the line-item spreadsheets given to board often have too much detail and don't give related information that helps the board make sense of the information. Dashboard reports are a tool that enable the board to see -- at a glance -- if the congregation's income and expenditures are on track compared to recent history, and how the overall financial health compares historically based on the ebb and flow of spending and giving patterns over the course of a church year.

Board are more interested in trends, not details, unless things are off track. At that point they might want to dive into the details of a detailed line-item spreadsheet.

Elements of a Monthly Financial Dashboard Report

Trend Analysis

A trend analysis shows the overall year-to-date revenue and expenses compared to the budget and to three or more previous years' year-to-date numbers.

Income Analysis

Since congregations are funded primarily by the financial gifts of members, friends and visitors, tracking these numbers enables the board to notice if there is a drop or increase in giving.

Ratio of Assets to Liabilities

Some debt is healthy in a congregation, but too much debt, or an unexplained increase in debt can be a warning sign.

Notes

There may be other considerations, trends or patterns that don't show up in the numbers that can be explained in the notes.

 Download this sample template (Word).

Gifts and Gratitude: Reporting Contributions and Record Keeping

Hand with pen next to a thank you card

When it comes to tracking financial gifts from members in the form of pledge payments and other donations, it's important to remember that the gifts of money (as well as time and talent) are a form of relationship, not just another financial transaction. As part of the communication and paperwork that is described below, you'll also want to communicate the following in the tone of your communications:

  • The congregation is grateful for all of the gifts from its members and friends
  • Communications about the status of pledges are appreciated by those who have made a financial promise
  • A pledge is a form of consent

Record-Keeping of Financial Contributions

  • The congregation should keep a record of all pledge amounts from members and friends, (and the effectivity dates if the congregation has a rolling or year-round canvass).
  • The congregation should keep a record of contributions from each person or self-identified family unit who makes an identifiable contribution, whether or not they have pledged. The leaders may also find it helpful to track the mode of giving (check, electronic transfer, text-to-give) for future decision-making.
  • If the church financial year is different than the calendar or tax year, records should be clear about what contributions fall within which year. 

Statements

  • Congregations should send out statements, with a tone of gratitude, to everyone who has made a pledge at the end of each quarter. 
  • Sending a helpful year-end reminder 2-3 weeks before the end of the tax year with a self-addresses envelope is a practice that some congregations have found fruitful.
  • Sending a prompt annual statement for tax purposes before the end of January will be appreciated. You could also include naming one or two ways in which the congregation made a difference in people's lives that year. A hand-written note from the minister and/or president (tucked in the envelope with the statement) would be ideal.

Church Financial Management Software Safeguards

Graphic of a computer screen with a spreadsheet and chart

In setting up church financial management software, it’s important to provide safeguards to prevent tampering with the electronic records:

  • Have one person with administrator rights who assigns access levels to the users. The administrator should not be allowed to handle collections or deposits, nor sign checks, nor maintain the financial records or reports.    

  • Another person (usually an officer of the board who is not the treasurer) determines who gets what access levels in the software, depending on their roles and duties. This information should be given to the administrator in writing and records kept of all users with levels of access and effective dates.

  • No user should be given the right to modify or delete a previously posted transaction.

Securing the Sunday Offering

Offering Basket full of bills

The Sunday offering is fairly vulnerable to theft or embezzlement unless good checks and balances are in place.

Your congregation should develop policies and procedures that make sure no one has access to the money without another person present, and that there is a paper trail to provide that money can’t go missing on its way to the bank. For example:

  • After the offering is taken, the offering baskets should be in plain sight on the chancel, or secured in a locked room or safe.

  • Immediately after the service, the offering should be counted by two unrelated persons working together in the same room. 

  • Rotate the counters so that the same two people are not repeatedly working together.

  • The amounts received both in checks and cash should be noted on duplicate forms, both initialed by the two counters. One form stays with the offering and the other is given to the treasurer, bookkeeper or other person who reconciles transactions

  • The funds should be in the custody of two people until they stored in a secure place until deposited.  A safe is best. Deposit bags with key locks are available from many banks, along with a key to the night deposit box used by commercial customers. 

  • The collection must not leave the building until it is taken to the bank to be deposited.

  • Ideally, the person who makes out the bank deposit is a third person, not one of the cash counters. 

  • The deposit slip and counting form (often stapled together) are given to the treasurer, bookkeeper or other person who reconciles transactions, so it can be compared with the duplicate counting form and the deposits noted on the monthly bank statement.

Electronic Giving

Hand holding a smart phone and two dollar bills

Cash is no longer the most convenient form of currency. With the advent of electronic banking and mobile credit card readers like Square, even small businesses can accept plastic, so fewer and fewer folx carry cash. Carrying a checkbook is even more rare.

If dropping a check or cash into the basket is the only way your congregation invites financial gifts, many in your pews can’t participate in the offering even if they feel called to do so.

Luckily, there are many different online giving options, and you can offer all of them!

Types of Electronic Giving

Electronic Payment Service

Members and supporting friends can have their banks set up automatic transfers for their pledge payments. 

You can also enroll in a turnkey electronic payment service such as VANCO or Tithe.ly. Doing your own research will help you find the best option for your budget and context.

Payment Portal on the Church Website

Adding a payment portal such as PayPal on your church website is a straightforward way to set up giving on your site. This option tends to be awkward when accessed via a smart phone.

Giving Kiosk

Offering kiosks use a tablet and a card swiper such as Square to make giving quick and easy.

Text-To-Give

Many of the electronic payment services enable folx to donate via sending a text message with a dollar amount to a number associated with your church account.

Mobile Giving Apps

Many of the electronic payment services offer a smartphone app that you can personalize with your own congregation’s branding and messaging.

Keep Giving Worshipful

The offering has always been a key part of the worship service. To keep electronic giving from becoming transactional, pay attention to wording and take advantage of any ability to personalize the software or app. Many congregations also provide a pew card or an insert for an offering envelope so that electronic givers can add their gift to the offering basket as it is passed.

 

Handling Petty Cash

Lock box with cash (Euros)

Any petty cash kept in the building should be in a locked file cabinet or safe and should be disbursed only upon submission of a written request.

  • The starting balance should be reconciled monthly against withdrawals, and the petty cash amount added to as needed.
  • Any removal of petty cash must be explained in writing or by a receipt.
  • Hiding the petty cash in the back of a desk drawer is never a good idea.

Paying Bills (Disbursements)

Hand with pen writing a check

When making sure that your bills are being paid efficiently, accurately and on time, your congregation also needs safeguards to make sure no one has the opportunity to use your system to embezzle funds.

Here are some typical policies and practices:

  • There must be a bill, invoice, statement, or written request for reimbursement for every check drawn. These should be available for comparison with the canceled checks on an occasional basis. 

  • No checks should be signed without documentation of the expense and its budget category. 

  • Monthly expenses must use the categories established in the church budget.

  • How many people should be authorized to sign checks? Enough that the church business can go on if the treasurer is away at a conference or on vacation. 

  • Other than checks for payroll or other routine monthly payments such as a mortgage, checks larger than an amount set by board policy (e.g., $2,000) should require two signers. 

  • The minister is often the only staff person with signatory authority, but many ministers prefer not to have that responsibility. 

  • Persons should never sign checks made out to themselves without a co-signer.

  • For additional safety in congregations without staff, the monthly bank statement and canceled checks should be opened and reconciled by someone other than the person who signs the checks. This is to protect against someone falsifying the amount on a check after it has been signed.

  • As a substitute for preparing checks for reimbursement or routine expenditures, board policy may authorize electronic bank drafts or electronic payments following other standard procedures for documentation.

Expense Reimbursements

The word "approved" being written on a whiteboard

Employees and volunteers should be reimbursed for approved church related expenses upon submission of receipts and accurate expense reports that conform to the annual budget and IRS requirements. Such expenses may include: 

  • Travel – transportation, lodging, meals, incidentals and other associated expenses

  •  Educational expenses 

  • Computers and related equipment costs 

  • Membership dues 

  • Supplies 

U.S. tax law sets the rate for reimbursement of travel expenses for volunteers serving a charitable organization. Non-employees, while on church business (such as out of town meetings, trips for educational purposes to locations removed from the church, travel with a youth group or a church school class, etc.) will be reimbursed at a lower volunteer rate. 

Tax law provides specific requirements that apply to employees. The church, as a tax-exempt organization, is required by law to document the exempt purpose of every expenditure. Any expenditure which is not appropriately documented is considered to be a nonexempt expenditure. If employees receive reimbursement without providing the required documentation, that reimbursement is considered by the IRS to be the equivalent of a payment made under a non-accountable expense reimbursement plan. 

Payments made under non-accountable expense reimbursement plans are taxable according to IRS Section 62 and are required to be reported to the IRS as such. Expense moneys paid other than through an Accountable Reimbursement Policy will be reported to the IRS as "other income" on Form W2, and then may be claimed by the taxpayer as itemized deductions on Schedule A or Schedule C of the 1040 tax return. Refer to the IRS Tax Guide for Churches and Religious Organizations for more details on this process. 

Read about professional expense allowances.

Expense Vouchers 

  • Use the minimum “Date, Vendor, Item, Purpose,” as a prompt to record the details of the transaction.
  • Appropriate detailed back-up documentation, including itemized invoices and receipts, is required.
  • Appropriate receipts are those provided by the vendor showing an itemized list of the items purchased and their prices. A credit card statement, a canceled check, or a tear tab receipt that shows only the total amount of the transaction is not sufficient documentation.
  • Signatures are required according to the voucher form instructions to ensure that the expense has been properly approved. It is to the benefit of the church to pay expenses in a timely manner.
  • All requests for reimbursement should be submitted within 90 days of the transaction.

Lost Receipts 

When a receipt is lost, the claimant must make a good faith effort to obtain a duplicate, which is typically possible when one pays with a credit card. If a duplicate receipt cannot be obtained, the claimant should provide a written explanation. The Finance Committee or other body should have authority to deny reimbursement if documentation does not meet expectations set forth in the policy. 

Staff Credit Cards

Person holding a debit card

Many congregations supply a credit card to more easily segregate work-related expenses. Staff members would only use the card for professional or church expenses, and the church pays the credit card statement as it would any other monthly expense. 

A second advantage of a church credit card is that staff are not expected to use their own personal funds or credit card and then wait for reimbursement, which can sometimes take weeks.

Policies and Procedures

Church procedures should include a way to note information about the transaction (description, date, account and any required approvals) and turn it into the responsible finance person along with an itemized receipt in a timely manner.

Church procedures should provide monitoring of transactions and reconcile receipts and statements.

Church policy may set a minimum amount (e.g.$25) for transactions needing an itemized receipt, or may require receipts for all transactions. 

Non-Church-Related Expenses 

If a staff member charges non-church-related expenses, board policies should be clear about consequences.  A first offense may result in a warning, a second may result in the withdrawal of the card, and a larger number of offenses would be cause for termination. 

In the event that the card is inadvertently used for personal purchases or unapproved expenses, there should be a procedure where the card user can notify the treasurer(s) within as soon as possible and reimburse the funds to the church within a specific short time frame..

 

Avoiding Scams

Triangle road signs with red border and the word "scam"

Because relationship, compassion, and trust are all qualities that congregations are trying to cultivate, church members and staff can fall prey to bad actors and con artists. Human ingenuity is endless, but there are some general types of scams and red flags you can look for.

Sense of Urgency

If a scam artist is able to raise your level of anxiety with their approach or story, the “flight, fight or flee” part of your brain is engaged and interferes with your ability to think clearly. Your best bet is to take your time, talk to someone else, or do an Internet search to see if the situation might be a scam. These can take a couple of different tacks:

  • Help Me! Many scammers pretend to be someone you know who claims to be in trouble and who needs help immediately.  This kind of requests could be via phone, text, email or any other communication format.

  • The Free Lunch: Another type of scammer has some sort of too-good-to-be-true offer that requires some sort of up-front cash to access

Charm to Disarm

Some people join churches, become involved, then share a sob-story (needing to attend a parent’s funeral, having huge medical expenses, etc.) to elicit money from other members.

False Invoices & Equipment Leases

There are plenty of scams around copiers and other office equipment. The lure of a better price or a special terms lease can steer frugal leaders away from reputable companies. Another favorite scam is shipping toner or other often-ordered supplies without the church ever ordering the supply.

Best Practices

Here are some practices to help you foil scammers:

  1. Whenever money is involved, double-check a person’s story and identity.

  2. If your minister, staff, or anyone else on your church website contacts you for money in and emergency, it’s most likely a scammer.

  3. If it’s too good to be true, walk away.

  4. Check the credentials of any new vendor.

  5. Read the small print, then have two other people read it and take time to discuss it.

  6. Read about scams on the Federal Trade Commission website.

Rental Income

hands holding a key ring

There are nuanced tax rules regarding income derived from renting your building and/or parking lot, depending on its relation to your core purpose.

The following is from the IRS Tax Guide for Churches & Religious Organizations:

Rental Income vs. Other Church Income

Generally, income derived from the rental of real property and incidental personal property is excluded from unrelated business income. However, there are certain situations in which rental income may be unrelated business taxable income:

  •  if a church rents out property on which there is debt outstanding (for example, a mortgage note), the rental income may constitute unrelated debt-financed income subject to UBIT. (However, if a church or convention or association of churches acquires debt-financed land and intends to use it for exempt purposes within 15 years of the time of acquisition, then income from the rental of the land may not constitute unrelated business income.) 

  •  if personal services are rendered in connection with the rental, then the income may be unrelated business taxable income. 

Parking Lots 

If a church owns a parking lot that is used by church members and visitors while attending church services, any parking fee paid to the church would not be subject to UBIT. However, if a church operates a parking lot that is used by members of the general public, parking fees would be taxable, as this activity would not be substantially related to the church’s exempt purpose, and parking fees are not treated as rent from real property. If the church enters into a lease with a third party who operates the church’s parking lot and pays rent to the church, these payments would not be subject to tax, as they would constitute rent from real property. Whether an income-producing activity is an unrelated trade or business activity depends on all the facts and circumstances. 

Restricted Accounts

Row of pink piggy banks

A portion of the money in the church’s checking accounts may represent money that is held for specific restricted purposes, including various religious education accounts, social action accounts, the minister’s discretionary fund, etc. They may also represent “pass through” funds such as those received in “Share the Plate” offerings or fundraisers for an outside organization. These are usually called “restricted accounts.” (Read more about endowments for information about restricted funds from bequests or other gifts). 

  • Money in restricted accounts may be used only for the indicated purpose. 

  • Restricted account balances are reported on the balance sheet. 

  • Restricted accounts are not part of the operating budget. 

  • Income and expenditures from the restricted accounts are best reported separately from the operating budget report. 

Operating Budget

Calipers holding a stack of coins laying on a spreadsheet

Your operating budget helps your congregation live its mission in the world. How you allocate your resources reflects your values and goals.

The budget also provides a document that you can use throughout the church year to track your actual income and expenditures and compare the actual numbers to your expectations.

Balanced Budgets

Budgeting is an art more than a science. It’s the best guess of how much things are going to cost in the upcoming year, based on history and estimates. Budgeting also creates some tension between the visionary and the practical. Congregations sometimes require balanced budgets in hopes that such policies will rein in overspending. But requiring balanced budgets can also increase anxiety during times of transition where a new ministry initiative might be quashed due to lack of sure income.

Mission-Based Budgets

Many UU congregations have moved to "mission-based," "values-based" or other purposed-based ways of understanding congregational budgets in their communications to the membership. It's a way of understanding how a congregation uses its assets and resources to serve its mission that makes sense to the members who care about how the congregation is serving its mission. More on mission-based budgets….

Additional Resources:

Cash Reserves

Pink piggy bank on a stack of $100, with "Keep Calm and Save Money" quote

A congregation’s income ebbs and flows, so it is a good idea to have some cash reserves that can help keep the bills paid in the summer when attendance and pledge payments fall off. 

Also, congregations  often include a line item in their operating budget of 3-5% of the budget for facilities-related reserves (e.g., a Building Reserve Fund), so that when a new boiler or roof is needed, money is available.

 

Payroll

Hands holding and empty wallet

Once the salary and benefits are set by the appropriate church leadership based on recommended practices, it’s important to make sure the payroll is handled accurately and confidentially.  

Because of the complicated nature of payroll, and especially when it comes to ministers’ salary, housing and other benefits, most congregations without a professional bookkeeper hire a payroll service.

  • Make sure you are aware of all of the legal and other obligations as an employer.

  • Double-check the accuracy of payments into pension and for all insurance premiums (health, dental, life and disability) and verify the amounts and percentages with each of the staff. 

  • Make sure that the appropriate payments to the pension and insurance companies are made

  • Require time-sheets for all non-exempt staff.

  • Advances against future salary should be permitted only in extreme emergencies.

  • Offer direct deposit, if possible. 

Completing W-2 Forms

Internal Revenue Service Logo

Can you provide guidance and resources for completing W-2 forms for both ministers and other congregational staff?

Deadline

By January 31, after the tax year, W-2 forms must be given to employees and sent to the Social Security Administration.

Box-by-box Instructions

Instructions for the most recent tax year (PDF).

IRS Resources

Moving Expenses

The Tax Cuts and Jobs Act of 2017 changed the rules for employer payment/reimbursement of Moving Expenses. For moves taking place in 2018 or beyond, direct payments or reimbursements of employee moving expenses are now treated as taxable income. The amount should be included in Box 1.

Professional Expenses

Professional Expenses which are provided according to an accountable reimbursement plan are not reportable income.

Audits

Magnifying glass looking at a hand-written ledger

Rarely can congregations pay for a full-blown audit of the church books by a CPA. Audits are expensive, often ranging from $5,000 to $15,000 depending on the annual budget of the organization. 

An alternative is a management review of the congregation’s cash management procedures, which can be done by any other accountant or experienced church bookkeeper. This should be done at least once every three years, usually before a new treasurer or bookkeeper takes office. Sample Internal Financial Review (PDF)

A cash management review should include:

  • Verifying that the accounts payable policies and procedures are being followed,

  • Reviewing the system for recording and reporting pledges and contributions 

  • Comparing bank statements to income/expense reports to spot check for irregularities

The Becoming a Safer Congregation Guide offers a helpful Financial Controls Checklist.

Embezzlement

Congregations are especially susceptible to theft, embezzlement, and fraud. We foster an environment that encourages trust and vulnerability in other aspects of congregational life. We are often so desperate for volunteers we don’t ask for the kind of skills or accountability that we should to meet our fiduciary responsibilities. And we often inherit systems, habits, and volunteers that would be hard to change without a good reason.

General Financial Fraud Prevention Tactics

Congregations are especially susceptible to theft, embezzlement, and fraud. We foster an environment that encourages trust and vulnerability in other aspects of congregational life. We are often so desperate for volunteers we don’t ask for the kind of skills or accountability that we should to meet our fiduciary responsibilities. And we often inherit systems, habits, and volunteers that would be hard to change without a good reason. Here are some recommended practices and policies that every congregation should have in place:

  • Put the congregation’s financial policy in writing. Keep expectations consistent and clear.

  • Give those responsible for financial matters access to the written policy to prevent any plea of ignorance from a dishonest employee or volunteer.

  • Conduct annual background checks and run annual credit reports on those who have access to church funds.

  • Require annual external audits.

  • Hold people with access to financial documents to a covenant which clearly outlines that they will be removed from the position if the covenant is broken.

More on Financial Safety in The Safer Congregations Handbook

Endowment Funds

Stack of rocks and a candle on a bamboo mat

Bequests and other large gifts from members and friends that are combined into an endowment offer a congregation many advantages:

  • The interest or other proceeds from larger endowments can provide a reliable source of additional income for the congregation’s mission.

  • Well-managed endowments encourage additional gifts.

  • It can be a resource for new ministry initiatives or to jump-start capital improvements, additions or updates.

  • An endowment enables donors to give a legacy gift to the congregation that keeps giving.

Endowments need special handling to ensure transparency, accountability and impact:

  • The management of endowment funds should be undertaken or overseen by a special committee appointed by the board or elected by the congregation. This committee would report quarterly to the board, annually to the congregation, and to individuals upon request about the types of investments being utilized and the success of the investment policy.

  • The endowment committee should meet quarterly to review the performance and allocation of assets. It should act at least semi-annually to re-balance the portfolio if market performance has caused a shift in the previously approved allocation, or if it is prudent to alter the allocation. The committee should not hesitate to seek investment advice from qualified professionals. Many congregations choose to invest in the UUA Common Endowment Fund to ensure that the investments reflect UU values.

  • The board should create written investment and disbursement policies and that all investments and disbursements be in accord with the policy. 

  • The investment policy should cover the nature and amount of risk the committee is authorized to assume, the desired rate of return, how much of the endowment income is to be expended, and the extent to which investment decisions will be guided by considerations of social responsibility. It should also specify whether mutual funds or individual equities and debt instruments will be used.

  • Most charitable organizations immediately sell any individual equities at the time they are donated. This verifies the present market value of the gift for the benefit of the donor, although sharp donors will want to know the value on the date of the donation, not the value when it was sold. Efficient endowment management stimulates additional gifts; even the appearance of inefficient management will stifle them.

  • The Finance Committee should review the monthly statements and reports for the endowment fund at least annually.

Minister’s Discretionary Fund

Family of four in a grocery store

A Minister’s Discretionary Fund  (or Help Fund) is usually a separate checking account that the minister or pastoral care team can use to provide confidential assistance to those facing emergency financial need, for congregational or community programs in need of seed money, or for other tax-exempt purposes stated in board policy.

Suggested Practices and Policies

  • Contributions to the fund may be made by individuals or by allocations by the board or from the operating budget. 

  • To allow contributions to be tax-deductible, no contribution may be designated for the benefit of any particular recipient.

  • No distribution may be made to the minister or to any member of their family at any time. 

  • Any distribution to a church employee must be paid through payroll so that payroll taxes and reporting are correctly calculated and reported.

  • If cash or gift cards are disbursed, there should be a log book including the date and amount of the gift card and it's purpose.

  • The minister should provide an annual report to the board with all amounts paid out by the fund, listing dates and purposes of the payments (but not the names of recipients). 

  • The Treasurer should review the canceled checks and receipts to confirm adherence to the written policy, and will keep confidentiality around any details.

  • Records should be kept in a locked file by the church.

Money Matters Resources

Photo of books on church finance

Consulting

  • Congregational Finance LLC for free and paid subscriptions to access excellent resources, including the webinar she led last winter for the New England Region UUA: Financial Management for Your Congregation led by Rev. Karen McArthur (Slides (PDF))

Publications

Connections

Professional Expense Allowances

Analog speedometer

U.S. tax law provides that congregations and other organizations employing ministers and other religious professionals may consider certain items as usual business expenses. Such expenses are not included in the compensation paid to individuals; they are part of the necessary expenses of the organization and are not reported for income tax purposes.

Important Notes

  1. Items of enduring value purchased with non-taxed professional expense funds are the property of the congregation. Such items may subsequently be purchased at their depreciated value by the employee.
  2. The items below are allowable as professional expenses. However, basics that a staff member needs in order to perform their job should be funded through an appropriate budget line. (For instance, an employee should not need to pay for their office supplies or furniture through their professional expenses.)
  3. Under an Accountable Reimbursement Plan, unused professional expenses may not be converted to salary. According to IRS rules, allowing an employee to take their leftover professional expenses as salary nullifies their Accountable Reimbursement Plan, which then makes the entire amount of their expense line taxable. (See Reimbursement Policies, below, for more on Accountable Reimbursement Plans.)

Allowable Expenses

  1. Automobile expenses while on official business (such as to meetings, hospital or home visits, trips for educational purposes or to purchase supplies, travel with a youth group or a church school class, etc.) are reimbursable at the standard mileage rate in effect at the time. The costs of commuting to and from home to work are not allowable as business automobile expenses. 
  2. Travel expenses while away from home overnight for work or business, including air fare, taxis, rental automobiles, lodging, meals, and incidentals are all professional expenses. This includes costs to attend professional conferences.
  3. Entertainment expenses directly related to the mission or programs of the organization are considered professional expenses. These may include entertainment at home or in restaurants of members or potential members of the congregation.
  4. Books and journals acquired and used for professional purposes may be treated as business expenses.
  5. Computers and related equipment costs may be treated as a business expense through a Section 179 deduction if the items are used 50% or more for professional activities. It is customary today to consider computers and peripherals as essential for the performance of one's duties. 
  6. Educational expenses such as tuition, books, and supplies are professional expenses if related to one's professional status or responsibilities, or to maintain skills needed in one's work. Travel solely for entertainment cannot be treated as a professional expense. Travel in connection with educational activities, conferences, or worship services will usually be legitimate. Please note:
  • Some Jewish and Christian groups have considered travel to the Holy Land as inherently inspirational and valid as serving a religious purpose, but this practice has come under IRS scrutiny.
  • Where the purpose of travel is both personal and business, the expense may be pro-rated as partly a business expense and partly a personal one.
  • Some employer/congregations have included reimbursement for expenses necessary to the overall physical, mental, and spiritual wellbeing of staff in this category of church expenses. We recommend that such items be addressed through a Section 125 flexible benefit plan or a health reimbursement arrangement.
  1. Dues for membership in professional organizations are legitimate expenses.
  2. Telephone expenses, except for the basic charge for a home phone, may be counted as business expense if related to the performance of one's duties.
  3. Religious garments or robes may be purchased and cleaned with funds for professional expenses, but this does not apply to garments worn as ordinary clothing.
  4. Insurance premiums for malpractice insurance or coverage of business equipment may be legitimate expenses.
  5. Office supplies such as stationery, letterhead, etc. are legitimate business expenses.

Reimbursement Policies

By tradition, some religious organizations have made fixed sum monthly payments to their minister or other staff for a "travel allowance" and have not requested an accounting for how the money was spent. U.S. tax law does not permit professional expense funds to be paid to employees as unreported or tax-free income.

Expense moneys paid other than through an Accountable Reimbursement Policy should be reported to the IRS as "other income" on Form W-2, and then may be claimed by the taxpayer as itemized deductions on Schedule A or Schedule C of the 1040 tax return.

It is strongly recommended that the congregation establish an Accountable Reimbursement Policy. Under such a policy, staff is reimbursed within 30 to 60 days for expenses advanced on behalf of the congregation, with reasonable documentation where appropriate. IRS regulations specify that receipts should be provided for expenses over $75. One way of segregating business expenses is for the staff member to charge them to a credit card used solely for this purpose. The church then pays the credit card statement as it would any other monthly expense, although the credit card statement in and of itself may not be sufficient documentation.

Any excess funds that have been advanced to a professional or employee for a trip or special purpose must be reimbursed back to the congregation within 60 days or should be declared as additional income.

It is important to avoid confusion with other checks received by staff, such as for cash salary or a clergy housing allowance. Reimbursement of professional expenses should not be included in checks for those items.

About tax law and advice. While this information is believed to be accurate, the staff of the Office of Church Staff Finances are not qualified tax consultants. We urge congregations and professionals to consult tax specialists or accountants.

We also recommend that churches obtain references such as the Church and Clergy Tax Guide, (800) 222-1840.  This is the most comprehensive guide to the subject for non-experts.  The same author also publishes Church Laws & Tax Report, a bimonthly journal reporting on legal and tax developments affecting ministers and churches.

Canada

As tax laws in Canada may differ from those in the U.S., Unitarian congregations in Canada should contact the Canadian Unitarian Council for information about professional expenses there.

Tax Exempt Status

Internal Revenue Service Logo

Every Unitarian Universalist Association (UUA) congregation is a “church” under U.S. tax law, therefore tax exempt, charitable, and exempt from tax filing. 

There is no “group exemption” from the UUA, but the UUA will provide a letter saying a congregation is in good standing. This addresses most tax exemption issues. For a letter of good standing from the UUA, contact the UUA Office of the President Executive Assistant: administration@uua.org.

 501(c)(3) Status

Many congregations seek their 501(c)(3) status for its benefits:

  • Donors don't need additional proof of their tax-deductible donation to your congregation if they are audited.
  • You can apply for certain grants.
  • You can take advantage of special rates for non-profits.
  • You can sponsor an R-1 visa (Nonimmigrant Religious Worker) that allows you to hire a non-citizen.

How to Apply for 501(c)(3) Status (PDF)

Sales Tax Exemption

More than 30 states offer sales tax exemption. If your church were to gain sales tax-exempt status, the only requirement to receive the benefit is proof of exemption at any retailer at the time of purchase. However, any exempt purchases made by your church must be used exclusively for the purpose of the church. 

In general, when applying for sales tax exemption your state will require the following items: 

Articles of incorporation: This document will help serve as proof that the church has incorporated with the state.

F.E.I.N: The Federal Employment Identification Number is required. Make sure the F.E.I.N of the church matches the name that appears on your articles of incorporation.

IRS determination letter: This is the IRS' “approval letter” for your 501(c)(3) status. Many states require 501(c)(3) status with the IRS before applying for sales tax exemption. 

Political Issues, Elections, and Lobbying

Can congregations lose their tax exempt status when speaking out on political issues, elections, and lobbying?

The UUA, in collaboration with our legal counsel, has prepared a guide laying out the boundaries for political speech and action.

The Real Rules is composed largely of direct quotes from the most recent and relevant IRS publications, organized in a way that is intended to be user-friendly.  All references are clearly documented with footnotes.

Additional Resources

Other information on Congregations’ Tax status can be found in IRS Pub. 1828: Tax Guide for Churches and Religious Organizations (PDF, 32 pages).

The Unique Finances of Your Minister

William Sinkford preaching from a pulpit, arm raised in an expansive gesture.

Understanding Ministerial Compensation

You’ve probably heard that there are special tax rules for ministers. Most church leaders don’t need to be experts on ministerial compensation, but it’s important to understand the basics of how payroll and taxes for the minister differ from other employees.

Your Minister is an Employee, Not an Independent Contractor

A congregational minister may be full-time or part-time. Called or hired. Solo, lead, associate, or assistant. Regardless, they are an employee. While ministers who simply provide occasional pulpit supply can be classified as independent contractors (and issued a 1099), any minister with ongoing responsibilities is an employee and should receive a W-2, just like other staff.

Here's an important difference: 

Ministers are treated as self-employed for the purposes of Social Security and Medicare. This means that you cannot remit FICA for the minister as you do for other employees. Instead, the minister pays self-employment taxes (SECA) when they do their own quarterly tax filings.* Your minister is only "self-employed" in this single regard; otherwise, they are an employee of your congregation.

Other sources of confusion:

As if this dual tax status weren't complicated enough, there are at least two other sources of confusion:

  1. The minister has a "contract" – their ministerial agreement. Some of your other staff may have employment agreements, as well. Please don't let the fact that someone has a "contract" lead you to believe that they are an independent contractor.
  2. Your congregation may have what's known as a "contract ministry." (See the Transitional Ministry Handbook, page 48, for an overview of Contract Ministry.) Once again, the word "contract" notwithstanding, a contract minister is an employee, not an independent contractor.

Whether a worker is an employee or an independent contractor is a critical legal distinction. If you classify any worker as an independent contractor who should be an employee, you are denying them the opportunity to participate in employee benefit plans – and you could be cited for tax evasion, putting your tax-exempt status at risk.

The resources on our Employee or Independent Contractor? page can help you classify your workers correctly.

Salary and Payroll Resources

The UUA Compensation Program is evolving! We launched Phase I of of our program revisions in early 2020 with the introduction of new Compensation Standards. Please sign up for Compensation and Staffing News and stay informed about upcoming changes.

FICA (Social Security)

Because ministers pay the full 15.3% of salary (including housing) for Social Security/Medicare themselves, rather than splitting the amount with their employer, The UUA Benefit Recommendations include a self-employment tax offset, or "in lieu of FICA," as part of the minister's compensation. For questions, contact Jan Gartner, Compensation and Staffing Practices Manager.


Additional Resources

 

Clergy Tax Status, Explained

An overview of the special tax status of ministers, the housing allowance and how Social Security and Medicare payments work.

Learn more about Clergy Taxes

Housing Allowance for Ministers

The Ministerial Housing Allowance (also know as the parsonage allowance) enables ministers to exclude some of their salary from certain taxes. For most active and retired ministers, it is their most important tax benefit.

Learn More About the Clergy Housing Allowance

Negotiating an Agreement: Key Considerations for Ministers

Recommendations and reminders are provided in order to support you in having meaningful, fruitful conversations with any congregation you might consider serving. We want to help you maximize your chances of negotiating an offer that you feel good about, with terms that serve you well throughout your ministry.

Have Meaningful Conversations About Agreements

Ministerial Compensation 101

Need an abbreviated version of the materials in this section? Here is a single webpage for folks who don't need to get into the details.

Read a Broad-Brush Look at Ministerial Compensation

Ministerial Compensation: Unraveling the Complexities for Lay Leaders

Jan Gartner and Rev. Richard Nugent explain ministerial compensation, including tax provisions, paycheck components, and benefits. They also share good practices for contracts.

Watch the Webinar on Ministerial Compensation

Effective Congregational Governance: Organizing for Mission and Ministry

How members of a congregation make decisions together reflects on who they are and what they believe. Whose voices are heard? Who is included in discussions? Is there room for quieter voices? Is time given for reflection and inclusion?

 

Wood gavel

Governance and Ministry In Congregations

Dan Hotchkiss's Governance and Ministry Model

Offers congregational leaders a roadmap and tools for changing the way boards and clergy work together to lead congregations. Demonstrates that the right governance model is the one that best enables a congregation to fulfill its mission-to achieve both the outward results and the inward quality of life to which it is called. (For an overview of how Hotchkiss's model differs from the Carver model [below] see his article How I am Different from John Carver.)


The Unity Consulting Approach to Congregational Governance

Unity offers deep questions and commitments for governance within a progressive religious, covenantal context: Whose Are We? What values, mission, and ends belong in our Nested Bowls? What will we promise to one another about how we’ll use power in the system?


Carver Model of Policy Governance

Policy Governance is a fundamental redesign of the role of a Board, emphasizing values, vision and the empowerment of both Board and staff through policies, limitations and monitoring reports.


Dynamic Governance

Also known as sociocracy, this model offers a flattened, responsive, and more inclusive structure. Congregations that wish to dismantle White Supremacy in their institutions are looking into this model.

Congregational Bylaws

A Comprehensive Guide to Writing Congregational Bylaws

Bylaws exist to support and enhance the functioning of the congregation. Good bylaws provide good process.

Bylaws are important in laying the groundwork for any organization. Although written in language to satisfy legal requirements, bylaws also encapsulate the vision, hopes, and dreams of the congregation. They help guide the congregational board, as well as deal with infrequent situations such as the calling of a minister and the purchasing of real estate. They are also a last resort in cases of disagreement on legal matters. 

For all members, bylaws provide a part of the roadmap for getting involved in key decision making, which is particularly important to groups in historically marginalized communities.

Bylaws Task Forces

Working on Bylaws means learning together, designing a transparent process with input, and building consent before congregational voting.

grouping of six file binderd

Policies: For Nimble and Effective Governance

This section is under construction.

The word committee spelled out in Scrabble tiles

Committees and Task Forces of the Board

This section is under construction.

Photo of the sanctuary at Unitarian Universalist Church of Boulder during worship

Ministry Teams and Task Forces

This section is under construction.

Person making a checklist in a notebook

Procedures

Procedures describe best practices (at least at the time that they were written) or might just serve to help a congregation with it's institutional memory of how something was done in the past. These are easily changed or updated by the affected governance committees or ministry teams.

Thinking about Congregational Procedures

Procedures should have the flexibility to change as the organization changes size, staff, technologies and other situational factors.