Finances at the local faith organisation level
We often talk pensions, endowments, foundations, and other larger, liquid and longer-term assets of faiths. But some of you also work with local houses of worship, and many of us are involved with finances at our local houses of worship, and therefore see first hand the effects of long-term faith-consistent investing. How do these local faith organisations view their own financial situation?
A recent study “Pastors’ Views on Church Finances“ by US-based Lifeway Research asks local faith leaders their views and experience with 'finances'. The study was narrow by faith – just US Protestant pastors – but broad in participation, with over 1,000 participants, and helpfully 'longitudinal' (occurred over time) for trends.
Respondents have very limited cash reserves to cover their costs – just 24% have more than 1 year of reserves.
Though church finances are starting to stabilize, 20% have just 7 weeks of cash reserves, (versus 26% from the 2016 survey).
Interestingly, they saw a correlation between the pastor’s age and cash reserves, with older pastors (55+) 'more likely' to have 7 weeks or less of reserves, than younger pastors, as well as a positive correlation between pastor education level and reserves, and an understandable positive correlation between church attendance and reserves.
To my personal surprise, pastors must deal with embezzlement – 8% reported they had experienced embezzlement, no change from the prior 2016 survey, potentially correlated with the roughly 22% who reported never or not sure if they’ve had a financial audit. This touches on the importance of governance, a topic we talk about a lot in FCI.
Other interesting data points and correlations within, and overall gives a view into the practical challenges at the local level: is there enough cash to cover costs, and is it being managed appropriately and safely.