I work as an Office Assistant at a church. When I took this position it was a step down from any position, I'd had in years but I figured it would be an easy 9-5 and allow me a stable income and enough free time to focus on developing my business.

I love what I do and as with most Non for Profit organizations, I began to take on more and more in terms of web/graphic design, project and volunteer management and really doing the work to develop some of the outreach programs. Members noticed and I am constantly lauded for the quality of work.

I approached my boss about 6 months ago about changing my title to reflect what it is that I actually do. We bounced ideas around and he agreed that he would do a Memo of Understanding in the upcoming weeks. He then approached me and told me that instead of the new title, he wanted to promote me to a position that was even greater than that. He gave me the new salary range and even announced it internally at staff meetings and in front of volunteers. I was supposed to start in January, then he said June, then he came back and said March after my 2 year anniversary since I would be getting a merit increase at that time. Then about February, I was told that the position would have to be posted and that I would need to interview for the position like everyone else. There are no bylaws or rules within the organization stating that this is standard practice. I understand the organization wanting to seem transparent but this was a promotion into a new position within the organization. I'm not some person off the streets. I've proven that I can handle the role.
In addition, I have already began the transition into the new position and developing the frame work for it so all the leg work has been done.

They have posted my current position and began the interview process but have yet to post the opening for the new position. So they will ultimately have me train my replacement before the new position is even mine. I am also angry and afraid. What if I don't get the new position? I know they don't have it in the budget to pay 3 salaries for a job that I (1 person) was doing. I am also embarrassed because something that was presented as a promotion could potentially result in me not having a job.

What should I do?

Having to interview for a internal position at an employer is actually very common and is considered normal practice.

As far as could this end up costing you your job? Unless you have a written labor contract... the answer is possibly because you would be an At-Will employee.