Disbursements & Expenses

Expenses for Charitable Purpose

A church must use all of its resources (financial, human resources etc.) for only charitable activities and carry out these activities itself.  What makes an activity charitable is whether or not it is carried out to achieve or work towards the organization’s charitable purpose.  In Canada the relief of poverty, the advancement of education, the advancement of religion and certain other activities recognized by the courts are legitimate charitable purposes, provided they also benefit a large enough segment of the public.

The essential elements for handling disbursements (expenses) are proper authorization and control to ensure payments are made only for authorized purposes.  Council approval of a budget for the year allows for disbursements to be made which the budget authorizes.

In some cases where an expenditure is for capital items and/or exceeds an acceptable limit, estimates/quotes should be obtained and approved by council before proceeding.  This will ensure that the pricing was appropriate and can be later substantiated against the budget and cash flow needs of the church.

​Importance of Internal Controls

Appropriate system of internal control protects the staff from wrongful accusations and provides a tangible deterrent from fraud. This system should include:The person authorizing the invoice should not be the same person who signs the cheque.
  • Setting dollar limits for staff making large expenditures.
  • An approval system for expenses should be implemented that requires a reimbursement or cheque request form be submitted for purchases.
  • Financial reports should be prepared every month showing budget to actual comparisons of revenues and expenses.  Significant variances should be investigated.
  • Pastors and/or members of the church should not take personal responsibility for paying church invoices when funds are limited.  This creates an unhealthy balance and puts the financial burden on a few members while other members are not aware of the need.  Shortfalls should be communicated and members be encouraged to increase giving.
  • The church will not take responsibility for the payment obligations and/or overdue interest charges of a personal credit card.