WHAT’S THE DIFFERENCE BETWEEN PASTOR DISCRETIONARY FUND                                 EXPENSES AND REIMBURSABLE EXPENSES?

 

            I wanted to write this blog after reading an article titled “A Matter of Good Stewardship: Tips for Responsible Handling of a Pastor’s Discretionary Fund.” My review of the General Council on Finance & Administration’s website (gcfa.org) has an updated article titled “Clergy Discretionary Funds.” Too often, I have encountered pastors or financial people who don’t understand the difference between pastor’s discretionary funds and accountable reimbursement plans.

Accountable Reimbursement Plans (ARP)

            Accountable reimbursement plans are defined as a fund or account set up for his/her ordinary, necessary, and reasonable business expenses incurred in the conduct of the ministry for, and on behalf of, the Church. Various costs that would be included here would be automobile (standard federal mileage rate), parking and tolls; office supplies and postage; office equipment, computer and software; books, subscriptions and periodicals such as professional journals; professional dues; religious materials, vestments and business gifts; continuing education and seminars; entertainment required for Church business; and travel fares, lodging and meals while on business for the church.

            The Internal Revenue Service defines a business expense is one that is directly related to the purposes and goals of the organization and is reasonably necessary to fulfill those goals. It is necessary that expenses relate to the church’s unique mission

and that they not be personal expenses of the pastor.

 

a.    For example, it would not be proper for a minister to claim a travel reimbursement for the expense of visiting a sick relative who is not a member of the church and who lives 100 miles away, even if part of the purpose of the trip was to give spiritual comfort. The primary reason for the trip is to visit a relative.

b.    If a pastor went on a two-week vacation with his/her family and also preached at two churches during the trip, reimbursement for the travel vacation expenses would not be proper. Some of the expenses related to the preaching would be appropriate if the pastor’s church encouraged such preaching arrangements during vacations, the pastor obtained approval for this, and the pastor incurred additional expenses on the trip for going to those church locations. If the personal nature of the expense is the primary consideration, it is not a business expense.

Pastor’s Discretionary Fund

            Clergy discretionary funds at a local church are for helping the poor and needy. The clergyperson administering the clergy discretionary fund is essentially acting as a trustee of the funds held in it, which are owned by the local church or annual conference and often funded by the contributions of numerous donors. As such, the clergyperson is obligated to use the clergy discretionary fund only for its stated purposes, and not for personal gain or benefit. The funds can’t be used to benefit the clergyperson or the family. It should not be used on projects which might present an actual or potential conflict of interest or an appearance of impropriety. Examples of this would include: cash payments to the clergyperson or a family member; paying the tuition/medical/etc. bill of the clergyperson’s child; reimbursing non-business related travel expenses of the clergyperson’s spouse; paying one month’s rent for a cousin of a clergyperson, even if the cousin is poor or needy; and providing funds to support the activity of another nonprofit entity lead by a family member of the clergyperson.

            This link will take you to the GCFA article which takes time to give many examples of appropriate disbursements, inappropriate disbursements, and other issues that should be cared for. For example, using the pastor’s discretionary fund to buy groceries for a family in need (with proper documentation and receipts) is appropriate, but buying a bag of groceries for all families in the church (even if some are in need) is probably not appropriate.

            https://www.gcfa.org/media/1280/clergy_discretionary_funds_rev112816.pdf

            No matter what, good written procedures should be in place at our church, and these policies and procedures should be communicated to your pastor and council and SPPRC, and continually communicated to new pastors as they come on board and to new members of the council and SPPRC.

            Policies are important, but must be communicated AND followed. Proper documentation for both types of “payments” are vital and being careful to separate the two types is also vital.