3 Pitfalls with Designated Giving (and what to do instead)

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Here at Bellwether we have seen churches with designated giving accounts that go on for pages and pages at a time. While having some designated accounts can assure the congregation that their donations are being used toward a special project and therefore encourage giving toward that goal, too many designated accounts can cause problems.

 

  1. Your church becomes “designated broke”

Your bank account may look large but if too many funds are assigned to obscure or outdated designations then you may not be able to utilize the money you have. This can become a huge problem if the original purpose of the designation is unknown. Perhaps years have gone by, the person(s) who gave to the fund no longer attend the church or have passed away, and the church has a new pastor. These funds are locked up and there is no way of knowing what they were even meant for in the first place. There may be money in the bank but only a fraction of it is part of the operating budget. We don’t want this to happen to your church!

 

Congregation

2. Disruption of church unity & vision

Too many designated accounts means that members of the congregation can dictate their ideas through giving therefore usurping the church leadership’s prayerful decision regarding the church budget. Too many smaller projects with a designated line item for giving can distract from the main mission and goal of the church as well. While smaller projects can be fun and seem harmless at the time, too many too often will result in major distractions and possible issues with keeping the church focused on the main vision of spreading the Good News.

 

  1. It complicates the bookkeeping

When setting up a designated fund some churches add the funds to their main checking account and simply note the designation on their software while others create a completely new bank account for those funds. The first option can create the façade that the church has a healthy bank account balance when simply looking at the account when really many of the monies are tied up. The other option means extra bank transfers back and forth which can get complicated depending on method of retrieval. In either case it adds extra layers of documentation when inputting deposits into your accounting software.

Some ways to avoid these designated account pitfalls:

  • Have a giving policy on your website. Include in the policy that the church does not accept designated gifts but that they can give to the general offering which will be budgeted out by the church leadership.
  • If a designated fund is set up then clearly outline the parameters. For example, the fund will run from X date to Y date for Z project. Any funds that were not needed for Z project once the project is over will be returned to the general operating budget so that the funds are not tied up indefinitely. Make this clear to your congregation before collections for that fund begin.
  • Have an annual congregation meeting to discuss the church leadership’s goals for the coming year. Gain buy-in from the congregation about these goals so that they do not feel the need to give to designated funds. They understand what the church leadership is doing, how they are handling the finances, etc. and can rest easy that their tithes are being used to further the Kingdom of God.

 

If your congregation is used to having designated funds but you want to move away from this practice know that it is possible, but it will take some time. Start with creating and approving a giving policy and discontinuing the practice of designation. Then work as a church to use/dissolve the funds you have.