Congregational Giving Best Practices
Oct 09, 2019
It’s here! And maybe only ‘church nerds’ like me will care! But if your congregation’s future matters to you, keep reading…
The Lake Institute on Faith and Giving has just released its National Study of Congregations’ Economic Practices (NSCEP). If you want to learn how America’s churches are receiving, managing, and spending their money, this summary report covers the waterfront. I was SO hoping that this report would uncover more BEST practices on money and ministry. Unfortunately, we know too many churches with BAD practices on money. Assuming that those habits have also been accounted for in this study, it’s wise to look at this initial report as a survey and NOT a play book for getting your church money house in order. The Lake Institute has promised to report on the factors that lead to growth or decline in future publications.
But in my impatience to equip ministry leaders with philanthropy’s best practices, I’ve teased out any of the illuminating data I could find related to fundraising and charitable giving, and offer:
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3 revelations about church practices that are obviously NOT working
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3 celebrations about church practices that ARE working
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3 recommendations about best practices that barely got a mention but need your attention
REVELATION #1: The Annual Stewardship Campaign DOESN’T Work
According to the report “Congregations that have annual stewardship campaigns reported similar increases in revenue when compared with those without them.”
45 percent of the Lake Institute’s study participants conducted an annual stewardship campaign in 2017. Most reported that it is “an ingrained part of their giving culture.” Among congregations that ask participants to make a pledge, on average 53% of regularly participating adults made a pledge, and 87% of regular participants made at least one gift during the year. Those are excellent response rates in the fundraising world!
But in terms of real revenue, stewardship campaigns have less bearing than you would hope or expect. Churches that go through all the effort of a focused, annual stewardship drive aren’t seeing any better results than those churches that don’t. At this point, you should be asking “What do those that don’t DO?!
I’m in the middle of leading two congregational stewardship drives right now. I’m hoping my approach will defy the odds. Wish me luck!
REVELATION #2: Your Gift Acknowledgement Practices DON’T Work
Congregational leaders rarely acknowledge or thank their donors. The Lake Institute study reports that 91% of congregations only acknowledge individuals’ contributions quarterly or annually. And it usually comes in the form of something that looks like an invoice, with any pledge balances prominently featured as the bottom line. Tell me, does this document that usually arrives in a window envelope feel like a heartfelt ‘thank you’ or more like a bill?
Yes, congregational donors tend to give routinely and we want to encourage that habit! I’m not suggesting that we need to be thanked for each and every gift each and every week. But the rest of the nonprofit sector espouses a best practice of acknowledging and thanking their donors within 48-72 hours of receiving a gift. Your local church is competing for a philanthropic dollar with the hundreds of other charities that your members care about. Pay attention to what these organizations are doing:
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Send a special thank you letter to the first time giver.
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Send an occasional hand-written note from someone whose life is impacted by their generosity.
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Pick up the phone to thank the person who makes a larger gift for a special purpose.
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Honor the bequest donor by telling their story in your newsletter.
And by all means, when you bring their gifts to your altar to give thanks for God’s generosity, it’s more than okay to give thanks for your donors too!
REVELATION #3: Your Church’s Endowment Fund DOESN’T Work
According to the Lake Institute, the average congregation receives just 4% of their revenues from their endowments. Worse, only 25% of congregations reported receiving money from an endowment or similar investments. If a church’s endowment is the equivalent of a members’ savings, then the average congregation is as vulnerable as the 69% of the US population that has saved less than $1000.
It’s no surprise that congregations with a longer history are more likely than newer congregations to have these endowment funds. But even younger congregations need to get more serious about the diversification of their revenue streams if they are going to be sustainable into the future. More about this in my recommendations to come.
The biggest reason why your endowment fund doesn’t work? You’re not actively inviting new gifts. I’m always astonished at the majority of these funds that never grow, except for a small slice of investment income that might not get distributed. Have you heard about the great American wealth transfer?! NOW is the time to get serious about growing your endowment with new gifts.
CELEBRATION #1: Talking About Giving Every Week DOES Work
The NSCEP report discovered that only 9% of congregations “discuss or teach about giving weekly”. But out of that modest segement, 90% experienced revenue growth over the past 3 years. Overall, only 48% of congregations experienced revenues growth in the year of the study, and 35% experienced revenue decreases.
If the passing of the offering plate constitutes a gift invitation, then almost 100% of congregations are asking for money every single week. But the vast majority of churches reported that they rarely teach or preach on giving.
In the world of philanthropy, the absolute inverse is true. We train our fundraising professionals to inform and involve our donors before inviting their next gift. We expect to find multiple ways to express our thanks for the first gift before asking for the second.
The congregations that experienced the 90% revenue growth report:
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a high engagement of members in the sharing of individual giving stories and testimonials,
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frequent teaching and discussion on what the Bible has to say about money and giving.
The Lake Institute concludes “With rising religious illiteracy even among those participating in faith communities, and congregations’ own lack of explicit religious teaching on giving, congregations should not assume that most religious participants will naturally know their faith tradition’s teachings on giving or feel compelled to support the congregation without an explicit articulation of the mission.” Amen!
CELEBRATION #2: Knowing What Your Members Give DOES Work
The Lake Institute found that 55% of head clergy have access to giving data, and of those with access, only 50% view giving records. But among those that have access AND look, 58% reported increased revenue - 42% with increases of 10% or more.
Churches have long suffered some less than helpful taboos around money, and excluding the clergy from access to giving data is one of the least helpful. Even clergy will commonly say “I don’t want to treat people differently based on their level of giving”.
Please… you are more professional than this.
Clergy and other congregational leaders who observe giving information report that they use it to:
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be aware of significant changes in giving patterns. The death, move, or disgruntlement of a single major donor has sent some congregations into an economic tail spin. On the other hand, a significant increase from another could signal a new readiness for engagement or support. You need to appreciate every donor in your pipeline and the impact their increases or decreases may have on your ministry.
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identify major givers. The Pareto Principle is alive and well in congregational life too. Across the charitable sector – churches included – there are typically 20% of the people providing 80% of the support. In larger organizations, it’s likely that 10% of the donors provide 90% of the revenue. Whether you’re moving into a capital campaign or want to take some leaps forward in your budget, it’s your work with your major donors that will move the needle on your ministry.
CELEBRATION #3: Offering Multiple Digital Giving Options DOES Work
The Lake Institute’s evidence is clear. “We find a positive relationship between congregations that embrace innovative donation technologies and reported growth in both revenue and size.” 60% of congregations with digital options experienced growth in revenue.
The key here is to make it as easy as possible for church participants and other givers to support the work of the church both in and outside of the worship experience. The study reports that in congregations with more than 1000 participating adults, 95% offer online giving options, 48% utilize smartphone apps, and 28% offer ‘text to give’.
In the broader nonprofit sector, we know that:
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more digital options for giving helps you grow your total number of donors. The jury is still out as to whether or not those same options will help you retain those donors
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the lifetime value of a donor DOUBLES when they become automated donors. So best case scenario, you’re using digital platforms to enroll people in recurring giving programs.
If you don’t know where to start with digital giving, your youth group could have you set up by Sunday!
RECOMMENDATION #1: Your Church Needs to Diversify Its Sources of Gift Income
The Lake Institute discovered that 40% of congregations receive essentially their entire annual revenue from individual donations. The vast majority of those funds are given during a worship service (78%).
Those that did have other sources of income were likely to cite rental income and fundraising events like bake sales, bingo, and spaghetti dinners…not exactly the kind of charitable giving that promotes the Biblical view of Christian stewardship and certainly not the kind of revenue that moves the needle on ministry.
Only the congregations with schools or auxiliary social service ministries are likely benefiting from the support of foundations and corporations. But every church could benefit more from:
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donor advised funds. Only 14% of congregations in study reported receiving gifts through donor advised funds, yet donor advised funds at fiduciaries like Vanguard and Fidelity are seeing 50% year over year growth in new accounts and additions. Your congregants have started and will start these funds. You need to be ready to help them make their distributions in your direction.
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qualified charitable distributions. Many parishioners 70 ½ and older will have to take required minimum distributions from their IRAs. But there are multiple tax benefits to your donors if they make qualified charitable distributions (QCDs) from these funds instead. In my work with congregations, I see donors more than doubling their current support with QCDs.
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charitable trusts and gift annuities. These life-income gifts for your donors can provide a remainder benefit for your church that you might use to grow your endowment, develop a new program, and share with a partner ministry. Often these gifts create additional income for your donors, who might use that income to increase their current support for your ministry as well.
RECOMMENDATION #2: Your Church Needs to Invite Gifts From Assets
One of THE most important realities that should be driving your church’s approach to giving is understanding that your donors’ wealth basically exists in 2 buckets – the cash/income bucket and the asset bucket. Do you realize that only 10% of the average American’s wealth is held in cash? Think small bucket. 90% of the average American’s wealth is held in accumulated assets. Think big bucket.
Let’s just admit that the church has been mostly stuck in our small bucket approach to giving. Sure we might promote the biblical principals of tithing or a proportion giving, but a tithe or a proportion of what? Income! The small bucket. We’ve been training the typical person in the pew to think only about the small bucket, and we remind them to think that way every time the plate comes around and they reach in their wallets for some cash or maybe an envelope with a check in it.
We haven’t been asking from the big bucket. We haven’t helped donors know that the big bucket is even an option. In fact, let’s be honest - most ministry leaders don’t
understand the big bucket. We’re not receiving gifts from the big bucket because we don’t even know what we don’t know.
If churches are going to really move the needle on mission, you need the knowledge, the strategy and the courage to invite gifts from the big bucket.
RECOMMENDATION #3: Your Church Needs to Get Serious about Bequests
Have you heard? The United States is at the cusp of a great generational wealth transfer. There are various calculations floating around out there, but one fairly consistent estimate says that $60 trillion will transfer from one generation to the next between now and 2050. An estimated $6 trillion will benefit nonprofits – approximately 1/3 rd of that for religious organizations.
The average nonprofit organization receives 9% of its annual charitable revenues from bequests. Higher education and other organizations that have been doing planned giving work for a long time report averages of 20% of total gift revenues. If 9% is the average, then ministry organizations and other small nonprofits are receiving something far less.
The number one indicator of a persons willingness to leave a legacy gift is loyalty….no, not wealth, but loyalty. Generally speaking, the pews of our churches have an abundance of loyal members who would be ready to leave a legacy if only you would help them. The average bequest these days is $35,000, and many are much larger and can literally transform the life of your church. If that doesn’t inspire you, I give up!
It can take several years before you start receiving bequests, so establishing a Legacy Giving program now, before your ministry finds itself facing new financial challenges, is the wise approach. I’ve developed an online course to get you started. You can learn more HERE!
Here are two things you can do NOW to move the needle forward!
1. Download this pdf to share with your congregational leaders. This document summarizes the findings in this article and can help you start conversations about next steps!
2. Set up a FREE Consultation with Brenda Moore to discuss your challenges and explore whether or not you need outside counsel and support.