The Church has been a cornerstone of community support for generations, providing spiritual guidance, social services, humanitarian aid, and other essential components of society. However, as the significant changes in the world accelerate, so does the landscape of church funding and donations to all nonprofit organizations. With ever-changing societal pressures, it’s increasingly important to delve deeper into the emerging trends in funding for churches and faith based nonprofit organizations, examine the challenges they face, explore the innovative solutions they are adopting to sustain their missions, and discuss the prospects of these essential institutions. In doing this, the critical mission of the Church can not only be sustained but strengthened in the days ahead.
The Traditional Funding Model
Throughout history, churches have relied almost exclusively on the faithful support of their congregants through tithes and offerings. While tithing was once widely practiced, even among the marginally faithful, the average donation to one’s local congregation has been strained as competition for donor dollars continues to rise. The loyalty and generosity of members has played a crucial role in sustaining the church’s operations, including funding missional activities, maintaining facilities, and supporting community outreach programs. Today, many of the ancillary services once performed by the church have spawned entire sub-industries of humanitarian organizations, now competing for funding with the church. This shift, along with the lower adherence to faith of younger generations, have combined to strain the traditional funding model.
Over the past few decades, the steady decline in overall religious practice has caused many churches to experience a decline in weekend attendance. This trend accelerated during the COVID-19 pandemic and the rise of the “nones” has become increasingly noticeable. Societal shifts and changing values have contributed to the trend, resulting in fewer people actively participating in organized religion; this has begun to show up in the financial results of many churches. As church attendance decreases, so does the traditional funding model’s effectiveness. This leads to financial challenges for many religious institutions, causing them to explore more creative and unique funding for ongoing mission fulfillment.
The Rise of Online and Mobile Donations
In response to the changing demographics and advancements in technology, churches and nonprofits have embraced online donation platforms. Online giving, once seemingly experimental, has become a vital component of most ministry funding strategies, enabling more consistent revenue and broader reach to audiences well beyond the local community. These platforms offer a convenient and secure way for people to donate, increasing the likelihood of receiving contributions from individuals who may never attend physical gatherings but still support the cause. Ten years ago, it wasn’t uncommon for a church to still receive most of their support from in-person offerings on the weekend. Those churches are the exception today, as most healthy churches receive over half of their support through online or other recurring methods.
As smartphones have become ubiquitous, churches and nonprofits have embraced the power of mobile apps for not just giving, but also engagement and connection. The best of these apps allows easy contributions, during events or on the go, while also providing information and resources for connection to services and programming. Mobile giving is especially popular among younger donors who prefer seamless digital transactions and are less likely to carry cash or write checks. I’m on the oldest edge of this group and it’s rare that you’ll catch me with cash in my pocket or a checkbook within reach, but my phone…that’s always nearby!
Diversifying Revenue Streams
As the reliability of Sunday giving to fund all ministries has declined, the need to adapt to changing funding dynamics has caused many churches to explore additional sources of revenue. Besides the traditional tithes and offerings, I’ve met churches exploring many other means of generating income, such as hosting events, selling merchandise, facility rentals, or launching fee-based programs and services.
These ventures not only have the potential to bring in additional funds but can also strengthen ties with the community by offering ancillary value-added services. While this all sounds good and easy, in practice it often comes with as much risk as potential. Unrelated business income has potential tax implications, so before you open that restaurant or daycare onsite, check with your accountants and/or attorney. Hosting events and renting out spaces can also open the church to higher potential for discrimination lawsuits and liability for onsite injuries.
The risks and opportunities that income diversification present aren’t absolute and should be weighed against revenue and impact potential of any venture under consideration. The biggest risk I typically see in ministries that explore other revenue streams is the risk of mission drift, or simply getting distracted from the main mission of the organization.
Building Transparent Financial Management
With ever-increasing scrutiny on how nonprofit organizations manage their finances, transparency and accountability have become essential factors in establishing and maintaining donor trust. Churches and nonprofits are adopting transparent financial practices in making their financial records readily available to donors and the public, often including actual CPA prepared financial statements. Clear and transparent communication about how donations are utilized builds confidence among supporters and encourages trust and engagement. There are several organizations that certify and rate nonprofits, like Charity Navigator.
The Evangelical Council for Financial Accountability, ECFA, has done a good job of helping standardize a set of best practices for faith-based nonprofit organizations, and membership is definitely worth exploring. Even if your church isn’t ready for certification and adding a link to the audited financials on your website, moving to more transparency in financial communication with donors and prospective donors is a good idea. If you’re afraid of how donors will respond when they see how you’re spending their money, that’s a good test that maybe something should change.
Engaging the Next Generation of Donors
Millennials now make up over 35% of the workforce, which represents the single largest share of any generation. As younger workers become financially capable, churches and nonprofits must adapt their fundraising strategies to engage them effectively to earn their donations. Millennials and Gen Z donors are often motivated by causes and want to see the tangible impact of their contributions. It’s not enough to simply tell them to tithe or put the scale model of the new baptistery in the church foyer. Organizations that leverage technology to showcase their achievement, share real-time progress, and tell compelling stories are more likely to resonate with these younger donors. The more you can tie back a donor’s giving to tangible impact, the more likely they will continue to give and scale up that giving, while also telling others of the amazing outcomes you’re achieving.
Ensuring a Strong Finish for an Aging Base
While we must engage the next generation of donors, we cannot forget to help our core givers finish well. I’m seeing an increasing number of ministries develop intentional approaches to legacy giving and endowment funds. Working with an organization like National Christian Foundation can unlock the potential for your existing base of donors to leave a legacy of impact that will last well beyond their in-person involvement in your ministry. This is an area where the church has lagged behind its other nonprofit peers, especially higher education which has long established its ability to get funding from the end-of-life plans of donors with an affinity for their organization.
Navigating Economic Uncertainty
With the wild season of pandemic we have just endured, and the ongoing unrest and uncertainty of rising interest rates and inflation pressures, it’s also a prudent time to ensure you’re budgeting effectively and conservatively. Economic fluctuations can significantly impact donations, as individuals often tighten their spending during challenging and uncertain times; if your church has budgeted for a 10% growth in expenses, a dip in giving can have traumatic repercussions. Establishing an emergency fund, and eventually an endowment, can help ensure the organization’s stability during financial downturns. We recommend that every nonprofit maintain adequate reserves. The amount of those reserves can flex dramatically based on fixed expenses of facility and personnel. Just like in your personal finances, three months of savings/reserves is a good starting point.
Strategic Partnerships
I’ve always been a proponent of finding specialty expertise to help your organization go further and faster than you could go on your own. The need for these experts continues to increase in the face of all the challenges and opportunities I’ve touched on here. Fundraising, banking, accounting, technology, donor development, and facilities are just a few of the areas where deep complexity can be made simpler with the addition of the right expertise. While I’m not one to quote a proverb out of context, I will say that there is indeed wisdom in a multitude of counselors.
Along with specialty counselors, it’s also worth investing in understanding data. With the ongoing advancement in data analytics, churches and nonprofits can gain deeper insights into donor behavior, preferences, and giving patterns. Analyzing donor data can help your organization tailor fundraising efforts, personalize donor communications, identify potential changes early, and optimize campaigns for better results. Data driven decision making can lead to more efficient and effective campaigns and strategies. As your organization grows in size and complexity, the importance of data driven decision making should grow as well.
Conclusion
The landscape of church funding is rapidly and continually evolving, shaped by changing demographics, technology, societal norms, and economic fluctuations. To remain sustainable and effectively pursue your mission, the church must embrace innovative fundraising methods, engage with younger donors, adopt transparent financial practices, and form strategic partnerships. As the future unfolds, the power of compassion and generosity will remain fundamental in supporting the crucial work of the church worldwide. Through adaptability, innovation, and a commitment to your core values, your church can remain an essential part of making a positive impact on your community and beyond!