I have performed many Financial Policies and Procedure Audits over the past three years and a subject that always seems to be a sore spot is the preschool. Some of the people I interview see the preschool as a ministry outreach to the community. Others see it as an income source and good use of the facility. Most of the time, these same opinions exist within the one church I am auditing at the moment.

I usually find that a committee of church members and parents has been given the role of oversight. Sometimes the preschool director simply reports to the minister. In some churches the church council is provided some financial reporting that reflects the income and expenses related to the preschool separately from the church. In others, the preschool activity is reported within line items of the overall financial reports for the church.

In almost every situation I have come across, the church leadership relies on the preschool director (and subcommittee if one exists) to manage the activities of the school and really only look to ensure the preschool is operating at an income level expected; which also varies from one church to the next from significant income for the church to a helpful addition.

I rarely find a church council that is actively reviewing metrics of a preschool to determine effectiveness. Here are some of the questions I ask that rarely can be answered by church leadership:

  • How does your preschool fit into your overall mission of the church?
  • How do you measure the success of your preschool?
  • How many part-time and full-time students do you have?
  • What capacity do you have for part-time students? Full-time students?
  • What do you use to monitor accounts receivable?
  • What policies are in place regarding discounts, fees, and assistance for families in financial crisis?
  • Does your preschool have a different personnel policy manual or do you address it within the church’s manual?

Your church council functions as the principal policy-making body of the church and is responsible for administering and interpreting the bylaws. It has all the powers and duties imposed upon Boards of Directors by the State of California. These include:

  • Duty of Care – Take care of the nonprofit by ensuring prudent use of all assets, including facility, people, and good will; and provide oversight for all activities that advance the nonprofit’s effectiveness and sustainability.
  • Duty of Loyalty – Make decisions in the best interest of the nonprofit corporation; not in his or her self-interest.
  • Duty of Obedience – Ensure that the nonprofit obeys applicable laws and acts in accordance with ethical practices; that the nonprofit adheres to its stated corporate purposes, and that its activities advance its mission.

In order to meet these responsibilities, a church council can form a committee to provide oversight to your preschool. However, it is very important that the church council regularly receive enough information to provide the oversight they are responsible to give the organization. The Church Council may determine that a committee will monitor the business and activities of the preschool, but to do so with a sense of passing the duties of care, loyalty, and obedience to another body is an inaccurate understanding of forming the preschool committee (or any other committee).

A preschool oversight committee should be delegated with responsibilities for the implementation of vision and strategy. This subcommittee of the church council can assist in monitoring compliance with federal, state, and local laws. It can assist in monitoring financial performance. However, the church council remains the ultimate body with authority and responsibility for the preschool whether it is seen as a ministry of the church or an income generating operation, supporting the church.

The church council must ensure that the accounting of the preschool is accurate and that the proper financial controls are in place to safeguard these resources. The church council is ultimately responsible for the policies and procedures that are in place to ensure compliance with law. The church council is ultimately responsible for the safety of the children, the teachers and the parents when they are on the property or taking a field trip.

While the preschool committee can make recommendations in all areas of the operation of the preschool, the church council cannot delegate its duties of care, loyalty or obedience. They, as the responsible governing body will be held accountable in the event something goes awry.

Ensure your church council is getting regular financial reports from the preschool. Have the financial reporting audited as part of your church’s financial controls and procedures audit. Educate your church council on the requirements that need to be met by a preschool and demonstrate how the preschool is in compliance. Include the preschool in your strategic planning. Encourage your council members to visit the preschool. Invite different members of the preschool committee to present to the church council occasionally.

If you would like to discuss your preschool situation and learn how Church Training Center can help you consider how to effectively govern this important part of your ministry, schedule a free initial coaching session here.