May 2012

Knowledge is Power

For 25 years, I taught courses in congregational leadership and in canon law at Episcopal seminaries. An essential learning goal for my students was developing a familiarity with Canon 7: Of Business Methods in Church Affairs in the Constitution and Canons of the Episcopal Church (pp.39-41 in the 2009 Edition). (Contrary to some rumors, the Episcopal Church and its congregations are not “Mom and Pop stores” authorized to operate on an informal basis.)

I am pleased to share a summary of key provisions in Canon 7, which apply to parishes with readers of ECF Vital Practices. (See the Constitution and Canons for precise language):

Sec. 1c. Records shall be made and kept of all trusts and permanent showing at least the following: 1) Source and date; 2) Terms governing the use of principal and income; 3) To whom and how often reports of condition are to be made; 4) How the funds are invested.

Commentary: It is illegal to spend endowments that are designated for one purpose for another. The fund to maintain the organ must not be spent to pay the Clergy Pension Fund Assessment. It is irresponsible to spend more than 5% of the value of the average value of the endowment over thirteen quarters – when we do so, the endowment rapidly begins to disappear. I once led a vestry retreat for a parish that thought of itself as historically resourced and endowed. That myth was soon history when we determined that they had been drawing over 19% over several years. 

Sec. 1d. Treasurers of funds that exceed $500 annually should be bonded.

Commentary: I have encountered too many parishes where at least some funds are not properly recorded and accounted for. Some may well be in boxes under someone’s bed. The existence of bonded treasurers is practically a myth. I once preached in a New York City parish where three collections were taken during the service. I was told only one was accounted for to the diocese. I was stunned when I was handed my honorarium – one hundred $1 dollar bills in an elastic band. Some dioceses provide support services for parish accounting. I knew of one diocese where the bishop, who had an MBA from Harvard, carefully reviewed financial spreadsheets from all the parishes in the diocese. In reviewing one parish’s annual summary, the Bishop discovered the parish only reported open plate offering in July when the rector was on vacation and then found out that this pattern of malfeasance had been going on for years.

Sec. 1e. Books of accounts shall be kept so as to provide the basis for satisfactory accounting.

Commentary: Quick Books has made accounting for small organizations much easier. Nonetheless, some small congregations may not have the human resources to make bookkeeping happen in appropriate ways. I recently learned of a congregation where, for nearly 20 years the rector did ALL the budget preparation, bookkeeping, and bill paying for the congregation with a nominal parish treasurer signing off on reports to the vestry. The ordinal does not put such work in the job description of a priest and this approach has insufficient safeguards for the priest, the parish, and the concept of fiduciary responsibility.
Too many parish treasurers serve almost in perpetuity or until they have been exhausted by the position. Rotation in lay leadership roles serves many positive functions and offers significant safeguards against error or fraud.

Sec. 1f. All accounts of parishes, missions, or other institutions shall be audited annually by an independent certified public accountant, an independent licensed accountant, or such audit committee as may be authorized by appropriate diocesan authority.

Commentary: Audits by informal audit committees are all too common. They rarely rise to the level of significant oversight of fiduciary responsibility. 

Sec. 1g. All reports of such audits shall be filed with the bishop not later than 30 days following the date of the audit and no later than September 30 of each year.

Commentary: Diocesan oversight of those audits is too often perfunctory. Audits are meant to be timely and regular, not late and occasional.

Sec. 1h. All buildings and their contents shall be kept adequately insured.

Commentary: It is unfortunate that the canon does not also say: a) policies need to be reviewed regularly; b) every parish needs current inventories and photographs of anything of significant value; c) negligence of facilities and unattended safety concerns may make insurance mute; d) leaving church buildings unlocked may seem like pastoral outreach, but it undermines safety and invites thievery, mischief, and vandalism; e) no insurance policy will pay the whole bill of replacing a burned down church, though church fires have been known to spark a parish revival in a new and improved building. 

Sec. 2. The several dioceses shall pass diocesan canons to provide for standard business practices.

Commentary: Every diocese expands on these Episcopal Church canons in its own way. One needs also to study and honor the diocesan canons.

Sec. 3. No vestry, trustee, or other body authorized by civil or canon law to hold, manage, or administer real property for any parish, mission, congregation, or institution, shall encumber or alienate the same or any part thereof without the written consent of the bishop and standing committee of the diocese, except when the canons of the diocese prescribe other regulations.

Commentary: The sale, mortgage, or long-term lease of parish buildings always requires the consent of the bishop and standing committee, unless diocesan canons provide otherwise. Many observers today believe the wholesale disposition of rectories and the popularity of clergy housing allowances has actually presented ongoing financial challenges for both clergy and congregations, including falling home values, decreased clergy mobility, and expectations that parishes will buy out or buy up clergy homes when they leave a community.

Sec. 4. All real and personal property held by or for the benefit of any parish, mission, or congregation is held in trust for this Church and the diocese thereof in which parish, mission, or congregation is located. This trust shall in no way limit the power of the parish, mission, or congregation as long as it remains a part of this Church and subject to its constitution and canons. 

Commentary: This well known part of the canon stipulates that if a parish leaves the Episcopal Church, it cannot take its real and personal property with it. The property will continue to be held by the diocese.

Congregational governance, by design, is structured to allow for new leaders, bringing new perspectives to the vestry. There is also a responsibility to provide appropriate training for our leaders to equip them to effectively carry out their responsibilities. The availability of resources such as manuals for the business operations of the church, diocesan training programs for parish treasurers, diocesan based financial support services, policies and procedures for audit committees, and similar initiatives have already made a positive difference. But the continuing appropriate oversight of the church’s financial affairs is crucial to setting all of us free to live out our Baptismal Covenant and to carry on with the mission and ministry of the Episcopal Church in the 21st century.

The Rev. William A. Doubleday spent 25 years as a professor of Pastoral Theology at The General Theological Seminary (1986-2005) and at Bexley Hall (2005-2011) where he taught courses in congregational leadership and in Canon. He stays very busy with supply work, guest preaching, adult education, and diocesan training programs.

This article is part of the May 2012 Vestry Papers issue on Governance