Investigating your Balance Sheet

I’ve been on various finance committees for churches and non-profits for nearly 20 years now. That’s almost half my life! During those meetings, we always review the various financial statements…usually Balance Sheet (aka Statement of Financial Position) and Income Statement (aka Statement of Activities or Profit and Loss). If the budget isn’t on the Income Statement, we also review a separate Budget to Actuals report. Guess how much time we spend on the Balance Sheet. Usually just long enough to make sure there is cash in the bank.

I don’t think this is necessarily a bad thing, but I want to encourage you to take a closer look at your Balance Sheet at least once a year. A great time for a Finance Committee to do so would be during or in preparation for the annual audit. (Note: Many denominations require an annual internal audit because it’s a really good idea.)

Below is the recording of our the First Quarter 2022 Webinar where Sheri Meister and I looked into the Balance Sheet. One of the things we stressed was taking a “fresh look” at your Balance Sheet. Here’s the type of questions you should be asking:

  • What’s missing? Many churches have hidden pockets of money that people may have heard about but have no idea the amount. Usually it’s a bequest that the finance committee or treasurer decided a long time ago not to include on the Balance Sheet so that it doesn’t get spent. That doesn’t sound healthy.
  • What needs to go? There are also funds from old projects or unused memorials or retired programs that are taking up space and just clutter up the Balance Sheet. They can also add up to a significant amount of money. The Finance Committee can help clean this up by finding a new home for these funds.
  • What assets are restricted, AND what are those restrictions? Specifically it’s good to identify those funds given by a donor with strings attached. These may be a trust, a bequest, or an endowment. It is critical that the donor’s written instructions at the time of the gift are preserved to protect us from the danger of not using the gift or misusing the gift.

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