Secure health care coverage or face a government-imposed fee.
Sarah E. Merkle
Editor's Note: After March 31, 2014, individuals cannot enroll in a plan through the Marketplace unless they have a qualifying life event (e.g., relocation to another state, marriage, divorce, or birth of a child). Open enrollment for 2015 will begin in November 2014. If your church doesn't provide healthcare coverage, here is important information for church employees in search of their own medical insurance.
On January 1, 2014, the Affordable Care Act's requirement that all individuals secure healthcare coverage took effect. All individuals and families who can afford to purchase health insurance must do so. Those who choose not to purchase health insurance are subject to a government-imposed fee and in addition, are required to pay 100 percent of their healthcare costs. The government-imposed fee for uninsured individuals is known as the "individual shared responsibility payment."
The fee for not purchasing health insurance is 1 percent of an individual's yearly income or $95 per person for the entire year, whichever amount is greater. Additionally, the fee for uninsured children is $47.50 per child, with a cap at $285. These fees are not stagnant; they increase each year.
Does your church have clear guidelines for handling offerings?
An online story this week on ChristianityToday.com reports that "an estimated $600,000 was stolen from Joel Osteen's Lakewood Church." A statement from the church said the theft includes "cash, checks and envelopes containing written credit card information, and it is limited only to those funds contributed in the church services on Saturday, March 8 and Sunday, March 9, 2014."
We recommend that churches develop a policy and plan for how and where the church offering is safeguarded to prevent internal and external theft. Each church may have a different way that works best for them. In "Stunned by an Inside Job," Richard L. Bergstrom writes that his church, after dealing with church fraud, decided it would be best to leave the filled offering plates on a table in the front of the church for everyone to see during the service. "In many churches, an immediate counting in a secured room is more practical and just as effective," he says. "In our case, we felt a public demonstration of our accountability was in order."
Bergstrom offers eight questions worth asking when evaluating your church's policy on handling money:
A wise stewardship of funds is desired by today's young adult
Thom S. Rainer and Jess W. Rainer
Millennial Christians are not reticent to speak up about church finances. They often lament how many dollars of the church budget are directed toward looking after the needs of the existing membership and how few dollars go to the mission fields of the community, the nation, and the world.
"I call it Baby Boomer reflux," said Rebecca. The outspoken 26–year-old clarified: "The Boomers give money to the church, but it comes right back to them to keep them content. They hire the staff to do the ministry they won't do. The money goes to make the buildings more comfortable for them. And then churches begin all kinds of ministries for boomers and their families to keep them happy. Most churches today suffer from Baby Boomer reflux."
We didn't have to ask Rebecca if she would attend that kind of church. "I'll never go to that kind of church," she responded without a question. "That's not New Testament Christianity. That's a religious social club."
Banks look for these best practices, ECCU leader says.
As far as Randy Marsh is concerned, aerial skiing stands out more than any other event at the 2014 Winter Olympics. The speed, the agility, the flips, twists, and lands—they grab his attention unlike anything else he watches. And to stress the uniqueness of this sport, one of the event's medalists recently said that attaining the highest level of achievement requires training at the highest level of difficulty.
For churches that need capital to expand their ministry work, and navigate the flips and twists that come with that work, their best chances for success will only come from demonstrating their highest levels of financial management ability in good times and bad.
Was a church wrong for assisting a family with funeral expenses?
Q: Recently, one of our member's families lost their 15-year-old son. They contacted the church and asked if donations for the family could be handled through the church. We agreed and processed all donations received as cash exchange. At the end of each month we sent the family a check for the same amount of the donations received. The family is using the funds to help with funeral cost and to establish a scholarship in their son's name. Was this the best way to handle this request? Are there any legal problems in doing it this way? What problems would this present for the family or church?
A: Part of the mission of the believers is stated in Galatians 6:2: "Bear one another's burdens." This means that when a fellow believer is in need, the other believers should lighten their load. In financial terms, the fellow believers should give funds to needy believers to relieve their financial burden.
At least two churches have fallen victim to thieves in recent months.
Setting up a donation box at church may seem like an easy way to collect money for causes or the weekly collection, but it comes with risks. If left unattended, thieves may find a way to break into them. During the past few months, surveillance footage at two churches in different states shows exactly this.
In Missouri, a man was caught on camera walking into a church and breaking into a donation box, according to KFVS 12.
In a Florida church in mid-December, a man bowed his head in prayer until everyone left, then walked over to the donation box and broke into it, according to CBS 12 News.
"Many churches have baskets and boxes around the church building that have small amounts of money in them," Jeff Hanna writes in the downloadable resource Safe Money Management:
New report suggests stronger growth than company's algorithms projected.
Atlas of Giving, a company that tracks and predicts charitable giving, said overall giving—including giving to religious causes—grew in 2013, according to a Monday article in the Los Angeles Times.
The results were significantly different from what the Dallas, Texas-based firm projected a year ago, when it said religious giving would shrink and overall charitable giving would experience only slight growth.
According to the Times, Atlas reported "money for religious causes rose 8.6% in 2013 to $143.1 billion, up from $131.8 billion in 2012." Giving to religious causes remained the largest among the eight charitable sectors tracked by Atlas. However, the sector's overall slice of the charitable giving pie still shrunk, albeit slightly, the article said.
A look at what's driving lower pay for female clergy.
The number of female pastors in the U.S. has doubled since 1990, according to a 2009 Barna study. And yet, even though the prevalence of women in leadership roles in the church is rising steadily, women's salary levels are not keeping pace with their male counterparts. Church Law and Tax Report's most recent annual compensation study reveals a difference of $10,000, on average, between men and women. In some cases, the disparity is much wider. The pay gap shows up across positions, from a $25,000 difference in full-time senior pastor salaries to a $10,000 gap in full-time custodial salaries.
Minding the gap
For decades, research has shown a gendered pay gap in clergy salaries. Women tend to remain in "entry-level" positions while men move on to higher paying clergy positions. Women are more likely to serve at small churches in rural areas or small towns, while men move to urban areas with more affluent members, according to salary research. Nonetheless, a pay gap still exists even when congregation size and church budget are considered.
Often, [when confronted], the embezzler will confess in order to prevent the church from turning the case over to the IRS, the police, or to a CPA firm. Embezzlers believe they will receive better treatment from their own churches than from the government. And, in many cases, they are correct. Indeed, it is often astonishing how quickly church members will rally in support of the embezzler once he or she has confessed—no matter how much money was stolen from the church. This is especially true when the embezzler used the funds for a "noble" purpose, such as medical bills for a sick child.
In these situations, many church members demand that the embezzler be forgiven. They are shocked and repulsed by the suggestion that the embezzler—their friend and fellow church member—be turned over to the IRS or the police! But is it that simple? Should church leaders join in the outpouring of sympathy? Should the matter be dropped once the embezzler confesses?
These are questions that each church will have to answer for itself, depending on the circumstances of each case. However, before forgiving the embezzler and dropping the matter, church leaders should consider the following three points:
How to properly track and record an anonymous gift.
Q: How does a church handle an anonymous money gift given to a pastor or staff member?
A: In all instances, the church must approve the love gift and take control of the contributions. For example, if Ms. Myway wants to bless Pastor Loving by giving him a love gift through the church, then the church should not accept that gift. Ms. Myway is controlling how the money is spent. On the other hand, if the church decides to bless Pastor Loving with a love gift, it may accept the donation from Ms. Myway. If the church controls how the money is spent, then the donation qualifies for charitable contribution credit. On the other hand, if Ms. Myway is using the church as a conduit to give a personal gift to Pastor Loving, then she does not have a tax-deductible contribution and the church has risked its tax-exempt status.
Love Gifts for Employees
All love gifts are taxable to the employee, even if it meets the requirements to be a benevolent gift described above. However, this is not the end of the analysis. The church has a responsibility to assure that an employee does not receive more than a reasonable amount of compensation through a non-benevolent love gift.
A friend of mine who serves as an associate pastor for a local church emailed last week to see when our 2014-2015 Compensation Handbook for Church Staff would release. The reason: "I wanted to know if it will be available for our salary calculations this budget season."
Most churches spend half—or more—of their budgets on salaries and benefits for their pastors and staff. Like my friend, many of you will face critical decisions related to compensation in the weeks and months ahead.
Some churches now receive more than half of giving digitally.
In an upcoming report about church giving and stewardship that ECFA (Evangelical Council for Financial Accountability) plans to release soon, the organization learned the following about the electronic giving practices of churches based on a survey of ECFA member and nonmember churches:
93 percent offer online giving through the church's website;
80 percent offer giving via automated electronic bill pay;
75 percent offer electronic funds transfers;
73 percent offer credit or debit card payment options;
35 percent offer mobile giving options; and,
19 percent offer giving kiosks in their church buildings.
Online banking has proven to be an efficient, environment-friendly way to pay bills and manage bank accounts. For all of its benefits though, there are still safety precautions churches need to take to protect their money. Mark Jones, money management expert for Evangelical Christian Credit Union (ECCU), offers several tips for keeping online banking safe and secure:
Have dedicated IDs and passwords that you only use for online banking.
When you travel, don't use public Wi-Fi for online banking. Use things like VPN or air cards instead.
Avoid using automatic login features that save your user ID and password information.
Determine who needs access to your accounts and tightly control entitlements. Delete users when they leave your organization.
Utilize email or text alerts to notify you of specific account activity (e.g., incoming wires, balance notifications, and so on).
Don't fear financial audits—they can show better ways to use ministry resources.
Marian V. Liautaud
Audit. It's a dirty word among some church administrators. And we're not even talking about an IRS tax audit, which conjures up images of intimidating government agents whose sole mission is to uncover your financial misdeeds. We're talking church financial audits, the kind that provides invaluable feedback on the financial integrity of your organization. So why, if a financial audit is a good thing, do so many financial administrators dread the annual audit more than any other aspect of their jobs?
Certified Public Accountant Vonna Laue of Capin Crouse LLP, explains. "When we think of audit, we think of a process where someone is trying to catch you doing something wrong, like the IRS audit. While the word audit has negative connotations, we try to help churches understand that we're there to help them do their ministry the best they can while at the same time maintaining our professional skepticism."
Excerpted from "Surviving a Church Financial Audit," an article available for free to non-members of ChurchLawAndTax.com throughout October. Each day at noon in October, ChurchLawAndTax.com is unlocking another free article to offer non-members a view of this valuable, trusted, authoritative resource that helps churches stay safe, legal, and financially sound.
Even as this "shutdown" unfolds, payments and paperwork are still due.
Michael E. Batts
Editor's Note (10/17/2013): Congress passed a bill last night that ended the shutdown. President Obama signed the bill ahead of the default deadline that loomed at 11:59 p.m.
Due to the lapse in federal government appropriations (the so-called "government shutdown"), substantial portions of the Internal Revenue Service are closed for business. This closure does not, however, impact any due dates or obligations required under the law. The closure does, however, severely impact the ability to contact the IRS and resolve issues.
The IRS has announced, "While the government is closed, people with appointments related to examinations (audits), collection, appeals or Taxpayer Advocate cases should assume their meetings are cancelled. IRS personnel will reschedule those meetings at a later date."
In the event that an organization has a scheduled meeting or examination pending, it's highly recommended that the organization, under the advice of its tax counsel, attempt to contact the appropriate IRS officials about the meeting or examination and diligently document all such attempts.
Following is an excerpt of a statement published by the IRS related to the government shutdown:
Would such an arrangement help cover legal costs and settlements?
Richard R. Hammar
Q: Should our church have a reserve set up to help fund a defense effort if we're ever sued? This money would help pay legal expenses, church administrative costs to assist with discovery and other needs, and possibly even a settlement or awarded damages, if any arise.
A: There is no compelling reason in most cases for a church to have a reserve for legal expenses. This is why you have liability insurance. A reserve may be advisable if legal expenses are anticipated that are not covered by insurance (such as employment disputes). But the better response to these risks is to obtain insurance coverage.
There still may be some legal expenses that are outside of any insurance policy, but they will be rare. A small reserve fund that carries over from year to year would be an option. I have never seen a church do this, however.
Average spending by household surpassed 2008 peak, report says.
An interesting stat surfaced Tuesday via The Wall Street Journal: A new Labor Department report on consumer spending showed U.S. households spent $51,442 on average in 2012, which surpassed the prior peak of $50,486 reached in 2008.
Interestingly enough, the Labor Department says American households spent more in their religious giving. The Journal notes:
So what did Americans spend more on in 2012? Cars, for one: Spending on vehicle purchases rose more than 20% from 2011. Health insurance, for two: Spending on that category rose 7.2%. And, perhaps less obviously, faith: The average American household gave $734 to churches and religious organizations in 2012, up from $649 in 2011.
We've previously looked at giving for churches through our 2013 State of the Plate survey of Protestant churches nationwide.
I understand those who argue against the use of numbers in evaluating a church's health. We can get idolatrous of numbers, and numbers do not fully illustrate the condition of a church. On the other hand, numbers do matter.
One of my favorite writers is Charles Spurgeon, the famous 19th century pastor of the Metropolitan Tabernacle in London. Spurgeon, who emphasized the sovereignty and grace of God in saving non-believers—and who warned against the danger of overemphasizing numbers—also recognized the importance of church statistics. Read his words in his lectures in The Soul Winner, and take note of why numbers matter:
I am not among those who decry statistics, nor do I consider that they are productive of all manner of evil; for they do much good if they are accurate, and if men use them lawfully. It is a good thing for people to see the nakedness of the land through statistics of decrease, that they may be driven on their knees before the Lord to seek prosperity; and, on the other hand, it is by no means an evil thing for workers to be encouraged by having some account of results set before them. I should be very sorry if the practice of adding up, and deducting, and giving in the net result were to be abandoned, for it must be right to know our numerical condition. It has been noticed that those who object to the process are often brethren whose unsatisfactory reports should somewhat humiliate them. ... The fact is, you can reckon very correctly if the figures are honest, and if all circumstances are taken into consideration if there is no increase, you may calculate with considerable accuracy that there is not much being done; and if there is a clear decrease among a growing population, you may reckon that the prayers of the people and the preaching of the minister are not of the most powerful kind.
The same one who helps us open our hearts also helps us open our wallets.
Marian V. Liautaud
Churchgoers learn to be generous throughout their lives. Most develop the habit of generous giving when they're young, according to results from our latest State of the Plate research. We combined results from this and the previous four years of State of the Plate surveys to create a comprehensive look at the habits of tithers, people who give 10 percent or more of their income to churches, nonprofits, or benevolent causes. In the infographic below, we highlight the top ways people say they learn about generous giving. Who's the most influential person when it comes to teaching and inspiring generosity among churchgoers? The same one who helps us open our hearts to God also helps us open our wallets: our pastor.
Who's been most influential in your life when it comes to learning about tithing and how to manage your money biblically?
A close look at similar congregations can aid decision-making.
If you're ready to go beyond internal comparisons and start looking more broadly at your church's financial performance, comparative ratios are the next step. Ratios can be a key indicator of how well a church is functioning in comparison to its peers. Not only is the actual ratio important, but also understanding how it fits in the range of peers, and which churches are included as "peers."
If your financial information is compared to your peers', it may be helpful to calculate both the average (mean) and the mid-point (median). The benefit of calculating both the mean and median is to reveal the spread of results in the range. If both the mean and median are numbers that are close together, then most of the ratio results in the range are close together and the average is likely to be very useful. If the mean and median are far apart, then the underlying organizations' results are spread out and the average is less important.
An individual that works with church ratios extensively finds it useful to show a minimum and maximum in each range. This lets you know how close you are to the top or bottom of the range. Depending on the ratio observed (for example, average salary per full-time equivalent), it may be beneficial to know how close to the high or low your church is in the particular range.
Tips to help prevent crime related to counting the collection.
Earlier this month, an entire offering from an evening church service was stolen when the church board member counting it momentarily stepped away, according to NewsChannel 3. It's reported that he heard a door slam and then discovered the money was gone.
One step of fraud prevention is to require more than one person to be present while counting an offering, but this case shows that two people present may help with more than fraud prevention. It can also help protect against people who may know or see where the money is counted and might sneak in while someone is looking away.
Another way to protect the church offering is to "consider providing a secure location for counting church offerings," Steve Edmonds writes in Prevent Crime on Church Property. "While most cash control measures are procedural, this is another area in which a church's design can improve security. If a school for criminals existed, one of the primary lessons would be that churches collect money on Sundays and Wednesdays."
When I stand in line at my favorite coffee shop, I notice many people don't grab a wallet to pay anymore. Instead, they pull out a smartphone and present a phone app to the cashier to pay.
Each year, technology provides more ways to do a variety of tasks. It can be exciting, or possibly even overwhelming with the amount of change, but it's wise to take a step back and consider how and why churches may want to use these technologies.
At the annual National Association of Church Business Administration conference last week, speaker Mark Brooks urged church leaders to notice this trend, and to consider offering online platforms for giving if they haven't already.
Why an accountable reimbursement plan is critical for every church.
Richard R. Hammar
Q: I need help with a question regarding money requested for our Deaf Church Pastor for car repairs. The Deaf Church Committee voted to reimburse him for the car repairs but since this is not an actual church expense, it seems it should be considered a gift, and therefore taxable income. Their position is that it is a reimbursement and therefore not taxable. Help?
A: The answer largely depends on whether your church already has adopted an accountable reimbursement plan. This explanation on Page 332 of the 2013 Church & Clergy Tax Guide explains how an accountable reimbursement plan works:
Advice on how to approach the many details of ministry
Recently I had a chance to teach a class of Bible college students about church administration. As I was preparing, I spoke to a close friend of mine who had been an executive pastor at a huge church—and who now is the lead pastor at a large church—about the subject. He dryly said, "The #1 job of a church administrator is to keep the Sr. Pastor out of jail."
That was, of course, a joke (I hope). The following ten points are what I shared about administration with this class of up and coming church leaders. In 500 words or less:
These governance and stewardship guidelines are making a difference at three churches.
The Evangelical Council for Financial Accountability (ECFA) recently hosted a webinar focused on church governance, finance, and stewardship. The organization invited Eric Heard, the stewardship pastor of Mariners Church; Cathi Linch, the financial operations leader of LifeChurch.tv; and Mark Davis, former executive pastor and CFO of Calvary Chapel, to speak.
Heard, Linch, and Davis all bring unique experiences and perspectives to the often highly nuanced conversations surrounding church financial leadership and planning. One consistent thread emerged from their presentation: The need to create and maintain a healthy financial culture within the local church.
Churches of all sizes will benefit when they pay attention to these three areas in particular:
Randy Marsh, ministry development officer for the Evangelical Christian Credit Union, shared four poor responses church leaders make to money problems while speaking recently in Dallas at the 2013 XP-Seminar, a conference involving nearly 200 executive pastors from across the country.
The poor responses:
1. Demanding more. Some churches respond to financial challenges by overemphasizing the need for each person or household to give more, Marsh said. Churches want to cultivate generous members who do more out of a natural desire to give. But, calling upon members to give more out of compulsion won't cultivate such an environment--and, it may only backfire, especially when individuals and households are dealing with their own financial challenges, he said.
How clergy should handle multiple residences after the Driscoll decision.
Q: I know the recent Driscoll decision means a pastor can't claim two homes for his or her housing allowance. In a situation where a pastor answers a call in one state, but his or her family stays behind to sell the current residence and to allow the kids to finish school, which home should be used for the pastor's allowance provided by the new church?
A: As of March 2013, the regulations allow the housing allowance for the primary residence of the clergy. As a result, the expenses related to the place where the minister primarily resides qualify for the housing allowance. In this case, the minister's housing expenses at his new place of call will qualify for the housing allowance. The expenses related to the old home are not counted after the minister relocates.
These diagnostics can help gauge a church's effectiveness.
Thom Rainer (the president and CEO of LifeWay Christian Resources) recently offered his Top 10 rules of thumb for healthy churches in America.
Several caught our eye, including:
8. Effective giving: For every person in average attendance, including children and preschool, $26 in budget receipts. For example, a church with an average worship attendance of 100 should average at least $2,600 in weekly budget giving. This ratio is obviously greatly impacted by demographics.
9. Maximum debt payment budgeted: 33 percent of annual income for most churches. Up to 40 percent for fast-growing churches.
10. Maximum debt owed: 2.5 times the annual income of the church for the previous year.
How do these calculations compare with your church's preferences and realities?
A common practice may trigger unexpected paperwork.
Q: When we have youth from our high school youth group do childcare for church events, do they need to be put on the payroll? In the past we have just paid them from the ministry fund they are babysitting for.
A: Yes. Also, your church is covered by minimum wage and child labor laws. You need to make sure you are not violating any of the laws related to employing youth.
Six voices offer a wide range of perspectives on a difficult question.
We've previously covered the question of whether pastors should know what people give, and we featured one high-profile pastor's thoughts on knowing what people give. The question recently surfaced again in a national survey, and our sister publication Christianity Today took a closer look by asking six voices to weigh in.
Gary Moore, founder of the Financial Seminary, offered this response:
Biblical principles support faithful giving in secret. Moses commanded a flat tax where all supported the temple equally; Jesus said to practice charity in secret. The real stewardship question is whether we want to simply and pragmatically raise funds or biblically create disciples.
These ideas can help turn a traditionally difficult season into a blessing.
Churches have historically dreaded summer due to one thing: giving. That's because activities and costs peak with summer missions trips, camps, and Vacation Bible School just as regular weekly contributions wane. The challenge for every church leader is to survive slow summer giving with a balanced budget.
The good news: It's possible. The bad news: It will require more attention than you've likely given it in the past. If you want different results, you must be willing to shift your thinking, planning, and strategy.
There are, of course, the obvious tactics like boosting participation in online giving--especially recurring giving. As attendance during the summer months proves to be inconsistent, traditional giving during the weekly worship service can be dramatically affected. Recurring online giving can solve that.
Another often-overlooked idea to boost summer giving is to keep everyone connected to the church and church needs via e-mail. Too often, church communication is limited to what is spoken from the platform or what is printed in the church bulletin. While that is certainly efficient for the church, it is not necessarily effective when a portion of your congregation is expected to be transient.
These two ideas are a good place to start, but there is so much more you can do to boost your giving this summer. Consider these five ideas:
In which areas of the church budget do people give the most?
Marian V. Liautaud
This year's annual State of the Plate research combined results from this and the past four years to create a composite view of tithers--people who give 10 percent or more of their income. As the infographic below shows, most people give the majority of their tithe to their church's general fund, or operating budget. Beyond that, more than 80 percent of a church's most generous donors contribute to missions and the benevolence fund.
Each year we survey churches across America to find out about the state of their finances. In this year's State of the Plate survey, we asked more than 1,800 church leaders how much cash reserves their churches keep. About 20 percent have less than one month in reserve, and an equal number maintain two months.
More than 2,000 church leaders weigh in on church income, tithing practices.
Marian V. Liautaud
Each year for the past five years, Christianity Today has surveyed church leaders to see which direction the trend line is moving for church giving: up, down, or staying flat. In this year's State of the Plate survey, which we conducted with Brian Kluth of MAXIMUM Generosity, ECFA, and ECCU, the majority of churches reported that giving had increased in 2012. At nearly the midpoint in 2013, what are you seeing for church giving so far this year? Is income up, down, or flat?
For an in-depth look at the results of the 2013 State of the Plate, featuring responses from more than 2,000 church leaders nationwide, check out the new, comprehensive executive summary, 20 Truths about Tithers.
Subtle cues can go a long way toward winning the hearts of givers.
An interesting tidbit today from Taylor and Francis Online via the Harvard Business Review: The physical shape of flyers appealing for funds or donations matters to potential donors. A heart-shaped flyer, for instance, generated 50 percent more support for a food collection helping the needy than a rectangular-shaped one.
"A great deal of choice-making is unconscious and results from subtle cues in the environment," HBR says, citing the researchers of the project in France.
The takeaway for churches: Even seemingly small details can go a long way toward winning the hearts and minds of potential givers and donors. Think through the way you intend to convey information and requests, whether for a food drive, support for a missionary, commitments to a capital campaign, or something else. Don't shy away from creative techniques, but make sure the creativity reinforces the message in subtle ways without causing complexity or confusion.
A prime outreach opportunity raises financial, tax considerations.
Q: Our church's new community center includes a gym, and a coffee shop for people to fellowship and drink coffee while watching their younger children on our playground just outside the building. We also host a church basketball league involving other churches. All the fees from the basketball league and funds from the sale of coffee will be used to pay for supplies, electricity, janitorial supplies, and so on, for the events we plan. All money goes right back into our ministry for which the building is intended--to reach non-Christian families in a recreational environment.
Here are my questions:
Do we owe taxes in any way?
How are payments for referees handled? Contract or payroll? Cash or check?
Can we use waiver of liability forms for referees and/or players?
A: Athletic facilities have become common among larger churches. The tax consequences of such an operation is well beyond the scope of this forum. You should engage a competent tax professional for detailed advice.
It does not matter for tax purposes how the funds are spent. The only thing that matters for taxes is the transaction where the church received the funds. Churches may operate youth athletic leagues within its exempt purposes, so all the fees received from operating the leagues are exempt from federal income taxes. If the church allows another entity to operate the leagues, then the proceeds will likely be taxable.
The organization uses Bureau of Labor Statistics information, looking at payroll averages of nonfarm, nonsupervisory labor and adding a percentage for benefits. Although it's an imperfect measurement, it can help nonprofits determine some dollar amounts associated with the hours of volunteer time provided to them during the year. Rick Cohen from Nonprofit Quarterlyfurther explains:
Tight lending conditions may renew interest on a wider scale.
Editor's Note:This is the final post in a guest series from Dave Travis' book, What's Next?:2012 Edition. The first posts addressed church finances, financial accountability, the use of interns and residents, and outsourcing work. Travis is CEO of Leadership Network.
Church bonds have been around for many decades. Most of the time, they proved to be a reliable system of financing construction-type projects. Occasionally, a prominent scandal or failure would decrease enthusiasm for them.
Bond financing also tends to rise when banks set tight conditions and higher interest rates. For the first part of the last decade, credit availability was widespread. But things have changed.
These pitfalls can be avoided with the right preparation.
Last month, Frank Sommerville, CPA, JD, visited Christianity Today and spent time with our team. Frank is one of our Editorial Advisors and he spent time with us discussing some of the top risks churches face each day.
A couple of days later, he spoke nearby at a National Association of Church Business Administration (NACBA) local chapter meeting. Between our on-site visit with Frank and his NACBA presentation, it became abundantly clear that there are critical, ministry-killing pitfalls that threaten every church, and leaders need to be better educated on these risks:
‘Sobering message’ for tax-exempt charities, study director says.
A 2010 survey of local government leaders in Indiana shows one in four want churches to make “payments” or provide services in exchange for receiving tax exemptions on their properties.
The survey results, released for the first time on Monday, incorporated responses from 1,150 local government officials, including mayors, county auditors, and county commissioners. "The results of our survey send a sobering message to charities that are already seeing their tax status challenged in several states," said Kristen Grønbjerg, the study’s director, in a press release.
The Indiana Nonprofits: Scope and Community Dimensions project specifically focused on PILOTS—“payments in lieu of taxes"—and SILOTs—“services in lieu of taxes.” Some municipalities use PILOTs and SILOTs to generate additional revenue from tax-exempt entities. Many towns, cities, and counties continue to see their coffers languish as tax appraisals for commercial and residential properties remain below once-peak levels and as sales tax collections remain volatile, dependent on the employment, pay raises, and confidence of consumers.
Don’t turn the money discussion into a once-a-year event.
I recently sat through a workshop involving financial officers and business administrators from churches in metro Denver. A panel of three finance officers, convened to discuss cash flow and cash reserves, focused mostly on appropriate cash levels, metrics, and forecasts that churches should consider using.
At one point, one business administrator in attendance asked the panel whether they conduct annual pledge drives.
You may or may not be familiar with these efforts. At my church, usually in November and December (we use a January-December fiscal year), the church distributes pledge cards that allow households to indicate how much they expect to give every month in the upcoming year. Those pledges then help the church begin to anticipate what giving may look like and, to some extent, budget accordingly.
After this workshop, I wonder if the approach remains relevant.
Churches must handle finances in "the light of day."
Editor's Note:This is the second in a series of guest posts from Dave Travis' book, What's Next?:2012 Edition. The first post addressed how much--or little--the economy is to blame for church failures. Travis is CEO of Leadership Network.
Here is the issue: Do church leaders make decisions and handle money "in the light of day," or do things happen behind closed doors?
The degree to which this is an issue can vary, but it will increase in importance as an authenticator--not only for prospective members, but for the community at large and its local government.
Once upon a time, church members simply trusted their leaders. Some still do. But in the world we now inhabit, trust depends to some extent upon reasonable transparency. In the future, it could become a critical issue.
U.S. churches exist in a legal gray area. They are required to follow not-for-profit regulations in many areas, without being required to file reports and returns in the way other not-for-profit organizations do. They must follow rules on political activity, compensation, insider dealings and the like, but they are still given considerable leeway in the matter of financial reporting.
Even when denominations require their churches to file reports, the results may not be shared outside denominational offices.
Going forward, we feel that voluntary transparency will bolster churches in the eyes of the public--members and outsiders alike. Younger adults will insist upon it, being accustomed to detailed reports from other charitable organizations.
Only 16 percent received an estate gift in 2011, too.
According to a new study by LifeWay Research, the majority of Southern Baptist churches believe that Christians should provide for their church in their will, but 86 percent of churches provide no help or assistance for estate planning.
In fact, 84 percent of all Southern Baptist churches receive no estate gifts in 2011, and just one percent received three or more of these type gifts.
According to Warren Peek, the president of the Southern Baptist Foundation, “Two practical steps pastors can take to cultivate this type of thinking are to put a process in place to accept and dispose of gifts of non-liquid assets and to make available information on estate planning.”
Excerpted from the March 2013 edition of Ministry Briefing, a monthly, downloadable digest of headlines for church pastors and leaders edited by Matt Steen and Todd Rhoades. Used with permission.
The reasons a church fails often go beyond money problems.
Editor's Note:This is the first in a series of guest posts from Dave Travis' book, What's Next?:2012 Edition. Travis is CEO of Leadership Network.
The recession has left its mark everywhere--on our friends, our families, our cities, our churches. Leadership Network clients have not been immune, but we believe the damage has been greater elsewhere. We've heard the reports of foreclosure, layoffs, and other cutbacks.
In fact, the global financial crisis presents a ready scapegoat for failures of every kind. If a market segment struggles, blame the economy; if a church stumbles, same explanation. The truth is often a bit more complex. Looking a bit deeper into a specific situation, we might find church division, moral failure, or simply bad leadership decisions as the root issue. To our knowledge, we have no clients in foreclosure trouble.
Unfinished construction--churches as well as condo units--has been a sign of the times. We've heard of churches suspending building programs due to the lender's inability to fulfill commitments made to the church. Those driving by would assume the church was struggling, but it might well have been the bankers, who have, in fact, been hit the hardest during this recession.
Most of our clients seemed to reach the bottom of the trough in 2009, with conditions steadily improving since then. A board member explained it this way: "Seven fat years, followed by seven lean years." Looking back, he would appear to have it right, as we all enjoyed the go-go economy of 2002-2008, and the recession may end up matching it in length.
Association report provides three important reminders to leaders.
While preparing recently for a presentation to seminary students, I came across some interesting statistics from the Association of Certified Fraud Examiner's 2012 Report to the Nations. The information is particularly insightful for church leaders who are focused on minimizing the risks of fraud and embezzlement with church money.
ACFE releases its report every other year. Of note from the latest one:
Between January 2010 and December 2011, ACFE tracked 1,388 cases of "occupational fraud" worldwide:
Of the cases, 10.4 percent occurred within a not-for-profit organization, up from 9.6 percent in 2010, but down from 14.3 percent in 2008;
The median theft involved with the cases was $100,000, up from $90,000 in 2010, but down from $109,000 in 2008;
Of all the cases, 87 percent involved first-time offenders with no prior criminal records.
These details are interesting because they validate several things we consistently observe in the church world:
Church leaders evaluate numerous factors, making clear priorities a must.
Thom S. Rainer
In a previous post I noted different trends among pastoral search committees. As I stated then, I am using the phrase “pastoral search committee,” even though it does not apply to every congregation. Some churches receive pastors through an appointment system from denominational leadership. Some pastors are chosen from a body of elders. The methods of pastoral selection are numerous.
Every church, however, searches for a pastor in the course of its history. After speaking with dozens of search groups, I’ve noticed a pattern in how they are evaluating prospective pastors. There is nothing new in what they are evaluating. What is new is how they are evaluating.
In a significant number of searches, perhaps a majority, the pastor search process takes place in four layers or levels. While each is important, the church assigns the greatest value to the first. The process is more subjective than objective, but the result is a clear definition of priorities in how a church evaluates a prospective pastor.
Sixty percent say giving isn't keeping up with inflation.
Our colleagues at Christianity Today just posted a quick analysis of new research on giving at churches conducted by the Lake Institute on Faith & Giving at the Indiana University School of Philanthropy, the Alban Institute, the Indianapolis Center for Congregations, the National Association of Church Business Administration, and Maximum Generosity.
The study was based on responses from more than 3,100 congregations about giving between the first half of 2011 and the first half of 2012. The analysis concludes:
The majority of U.S. congregations reported increased giving throughout the economic recession ... But it's not all good news: Most congregations also reported significant spending increases—and less than half said their revenue kept up with inflation.
The analysis also indicates representation of mainline Protestant churches skewed heavy in the study while Catholic churches and black churches appear underrepresented. Representation of evangelical churches appears "close enough," according to Christianity Today.
Results from the 2013 State of the Plate, a constituency survey on giving trends of more than 2,000 Protestant churches for all of 2012, are expected to release soon. Christianity Today's ManagingYourChurch.com, Maximum Generosity, the Evangelical Council for Financial Accountability, and ECCU co-sponsored the 2013 State of the Plate.
Act mandates changes to FSAs, potentially affecting church cafeteria plans.
Richard R. Hammar
In March 2010, Congress enacted the 2,500-page Patient Protection and Affordable Care Act (the “Act” or “Affordable Care Act”) in order to increase the number of Americans covered by health insurance and decrease the cost of health care. Since being signed into law, it has been difficult for churches to navigate this new legislation, especially since new portions of the Act are being implemented each year.
In 2013, the main provision that will affect churches is the new limitation on health flexible spending arrangements under cafeteria plans. A flexible spending arrangement for medical expenses under a cafeteria plan (“Health FSA”) is health coverage in the form of an unfunded arrangement under which employees are given the option to reduce their current cash compensation and instead have the amount of the salary reduction contributions made available for use in reimbursing the employee for his or her medical expenses. The health reform legislation made the following change in Health FSAs effective for tax years beginning after 2012.
ECCU leader shares tips that helped many stay afloat.
Randy Marsh, ministry development officer for the Evangelical Christian Credit Union, shared four money lessons for churches while speaking Wednesday in Dallas at the 2013 XP-Seminar, a conference involving nearly 200 executive pastors from across the country.
Marsh said ECCU observed the following healthy patterns with churches that successfully navigated the "Great Recession":
1. Using savings and making changes. Marsh said a willingness to use available savings for short-term cash issues while simultaneously making changes in spending and planning helped many weather the storm. Those who used savings, but otherwise continued business as usual and didn't make changes (all on the hopes better times would come again soon) struggled.
What the IRS has said about these types of contributions.
Richard R. Hammar
It's a common scenario at local churches across the country: A member faces a significant medical condition, racking up major debt in the process. Others at the church learn of this challenge and wish to help. Can they donate to the church, designate their gifts for that member, and still receive tax deductions for the contributions?
The Internal Revenue Service has ruled on such situations many times. Such gifts likely can be treated as deductible if (and it's a significant if) donors and churches handle them a certain way. The IRS has stated:
Four takeaways for churches in the midst of projected declines.
A company specializing in computer-based reports and forecasts for charitable giving in the United States says giving to religion rose steadily in 2012 compared to 2011. The religious sector, though, has seen its share of the overall charitable giving market shrink, and a dismal outlook for 2013 likely will erode that share further, the firm says.
The Dallas, Texas-based Atlas of Giving on Tuesday said overall donations to nonprofits across eight sectors climbed 6.7 percent in 2012, fueled by notable gains in educational and environmental causes. The religious sector, which includes churches, synagogues, and faith-based organizations, climbed 4.1 percent.
But early signs point to a decrease in collections for the religious sector in 2013, the only one the company predicts will decline. "It's not good," said Rob Mitchell, chief executive of Atlas of Giving. "We're projecting giving to religion to be down 0.8 percent, or essentially flat-to-trending-slightly-down-from-flat."
Get $15 in church resources for taking our compensation survey.
Marian V. Liautaud
A few months ago, our friend Warren Bird at Leadership Network informally surveyed nearly 600 Protestant churches to find out their plans for hiring and pay raises in 2013. The survey results appeared encouraging: 74 percent expected to give raises and 62 percent expected to hire at least one new staff member this year, with the biggest increases (in terms of both compensation and hiring) coming in larger-sized churches.
Less than 3 percent anticipated cutting salaries.
The last time we surveyed churches in America about their compensation levels, our data showed a 1.7 percent increase in pay and benefits (compared to the prior year) for all 8,000 positions reported. In the 2010-2011 compensation survey, pay and benefits declined an average of 1.4 percent from the year before.
So churches appeared to be rebounding, at least slightly, on the compensation front. Will that hold true again this year?
Qualifying direct charitable IRA distributions made in January can count toward 2012.
Michael E. Batts
The so-called “fiscal cliff” law just passed by Congress and signed by President Obama, formally known as the “American Taxpayer Relief Act” (the Act), includes a little-publicized provision providing a very short window of opportunity for eligible taxpayers to make direct charitable distributions from their IRAs in January of 2013 and count them as made on December 31, 2012.
The Act also contains a relief provision for eligible taxpayers who took distributions from their IRAs in December of 2012 (not knowing that the direct charitable IRA distribution exclusion would be retroactively renewed). The Act allows those taxpayers to exclude those distributions from their taxable income (within the prescribed limits) so long as they transfer the distributed funds to a qualified charity by the end of January 2013.
Highlights and notable reader comments from the most-viewed articles this year
The church office is a busy place, as shown in this year’s ten most popular articles on ManagingYourChurch.com. These ten alone demonstrate that many church leaders are working hard to count contributions, show employees their appreciation, conduct board meetings, share space, give to the poor, engage social media, and comply with tax law, among many other tasks.
Read through the list below to see if you missed any of these tips for day-to-day work at church and legal and tax updates that affect the church. Feel free to leave comments on any of them.
When a church lacks funds to give raises, it can find other ways to reward and honor employees. Matt Branaugh interviewed Liz Ryan, who has decades of experience in human resources, to see what churches in this position can do. This article is also helpful for churches that can give raises and are looking for ways to recognize employee contributions.
Notable reader comment: “Our church has just implemented a Service Award policy. Along with the recognition of 5, 10, 15, etc years of service, there is a monetary award as well. And interestingly, it is based solely on years served.” - Ray
New "Outlook for Outreach" survey shows where congregations meet needs.
Where would Americans be if churches didn’t make outreach a priority? Many would feel the pain of unmet needs for basics such as food and clothing, not to mention a slow-down in disaster recovery efforts. For many hardest hit by Hurricane Sandy, it was churches that provided the first signs of relief. In fact, a new survey—Outlook for Outreach—shows that of the 58 percent of churches in America that provide hands-on assistance for causes throughout our country, 75 percent of them engage in national disaster relief efforts.
To better quantify how churches engage in outreach ministries to provide for physical needs within their local communities and the world at large, Christianity Today (CT) and Brotherhood Mutual Insurance Company (BMIC) recently conducted the joint national Outlook for Outreach study. Responses collected during the summer of 2012 from 1,486 church leaders and volunteers involved in outreach reveal that nearly all churches (96 percent) are serving those in their local community, especially in feeding and clothing the poor.
Panel offers 43 recommendations, sets 2013 release for political report.
An independent commission formed by the Evangelical Council for Financial Accountability at the request of Sen. Charles Grassley, R-Iowa, in January 2011 issued its first public findings today through a 91-page report that is available for free download.
The report touches on key areas Grassley asked the commission to examine, including pastoral housing allowances, compensation and excess benefit transactions, examinations of church leaders, donor accountability, and the possible formation of an IRS advisory committee for religious organizations. The commission said it will release separate findings on political activity by churches and religious organizations next year.
"The vast majority of religious and other nonprofit organizations in America operate with a genuine commitment to financial integrity and appropriate accountability," wrote Michael E. Batts, the commission's chair, in the report's opening letter. "Occasionally, we see a few exceptions."
Through public input, as well as the assistance of 80 legal and financial leaders representing a variety of faith traditions, including Richard Hammar, senior editor of Church Law & Tax Report, Batts says the commission formed 43 recommendations for Grassley and his staff to review.
"While self-regulation is a key element of addressing concerns about misconduct, critics
of self-regulation rightfully point out that non-compliant outliers have little interest in self-regulation," wrote Batts, managing partner of Batts Morrison Wales & Lee, P.A., and an Editorial Advisor for Church Law & Tax Report and ManagingYourChurch.com. "That’s where effective administration of existing law must come in, together with education about the law."
Watch for more articles regarding the commission's findings and recommendations in coming weeks on ManagingYourChurch.com.
Q: I realize love offerings need to be included in a pastor’s taxable income, however, should an individual receive tax-deductible credit for their gift if the church board authorized the collection? Also, what if an individual gives a love gift to a pastor on their own during the year by making the check payable to the church?
A: I address love offerings on page 177 of my annual Church & Clergy Tax Guide. Your specific questions bring two responses to mind:
The most important tax benefit available to ministers who own or rent their home is the housing allowance exclusion.
To the extent the allowance represents compensation for ministerial services, is used to pay housing expenses, and doesn’t exceed the fair rental value of the home, including utilities, ministers who own their home do not pay federal income taxes on the amount of their compensation that their church designates in advance as a housing allowance. Housing-related expenses include mortgage payments, utilities, repairs, furnishings, insurance, property taxes, remodeling expenses, and maintenance.
For ministers who rent a home or apartment, all of the above is true, with the only difference being the allowance is used to pay rental expenses, such as rent, furnishings, utilities, and insurance.
Tap into your congregation’s generosity now so you can finish strong.
Many churches look forward to a year-end giving bump to help make up for a budget shortfall. In the annual State of the Plate survey we co-sponsor, we know churches consistently count on December to boost total giving figures for the year, and in uncertain economic times, this can present challenges. For instance, among 1,500 churches who responded to the 2011 State of the Plate, nearly a third said year-end giving in 2010 missed expectations.
An end-of-year giving project can help maximize a bump up. It also can encourage long-term giving to avoid an overdependence on future Decembers.
“When it comes to generosity, we tend to leave story behind and rely on other motivations such as tradition, ‘ought to,’ and unhealthy manipulation,” says Brad Leeper, author of the eBook,So Much More, and principal of “generosity development” firm Generis. By sharing stories of God’s mission and personal narratives of giving, church staffs can encourage their congregations to consider the place of regular generosity in their own stories.
Here are four things to keep in mind as you plot the story of your end-of-year giving project:
Q: I recently read an article about when churches give Christmas gifts and have a question. If a church takes up a love offering at Christmas for its pastor and staff, is that reportable as income? This would not come from budgeted funds, and there is no predetermined amount. It would be miscellaneous, free-will donations made by members of the congregation. The church would simply tabulate the funds and write the checks. Is this reported as taxable income?
I. Thou shalt not allow the church’s intellectual property to be used for personal purposes.
Rule: Under the work for hire doctrine, any property developed within the scope of the job duties of an employee is the property of the employer.
Practice Tip: An intellectual property policy should be carefully crafted and adopted. It should address all areas of concern, such as curriculum, sermons, and music.
II. Thou shalt not have a substantial amount of revenue derived from unrelated business income.
Rule: An organization may have some unrelated business income, but too much can endanger the exempt status of the church.
Unrelated business income is generated from activities that are:
1. Regularly carried on.
2. Not substantially related to exempt purposes.
3. Trade or business.
Practice Tip: The rules are complicated and there is an exception to every exception. Each activity must be separately analyzed. The commercial manner in which an activity is conducted can create unrelated business income even if the activity seems to be related.
National Church Administration Day to focus on church finances.
Marian V. Liautaud
October 18 is National Church Administration Day (NCAD). In conjunction with this day, the National Association of Church Business Administration (NACBA) will feature local chapter meetings throughout the country focusing on the theme “Accounting Principles—Mechanisms to Manage Your Church’s Money.” These events will draw on the expertise of nationally known professionals in church finances, as well as local and regional experts who will share information at the NACBA chapter events in their areas.
National Church Administration Day will highlight five key areas related to managing money for ministry: budgeting and planning, reporting, internal controls, audits, and performance measurements. You can dig into these same five topics in the Essential Guide to Church Finances (Christianity Today), co-authored by Vonna Laue, CPA, and partner for Capin Crouse, the nonprofit accounting firm, and Richard Vargo, MBA, PhD, and a professor of accounting in the Eberhardt School of Business at the University of the Pacific, Stockton, California.
Here are five additional resources by Christianity Today to help you manage your ministry’s resources:
Questions to ask when your church is considering a new building.
I was so locked into my own idea of growth when we started this gig that I couldn’t imagine the opportunities God would reveal through our need. I had always equated big ministry with big buildings. If God had given us that right off the bat through our first planned building project, I don’t think we ever would have discovered what He really wanted us to do. Going big doesn’t have to mean building a new building. Therefore, there are several strategically important questions to ask before you plan to break ground:
10 steps for overcoming the most common challenges churches face.
Marian V. Liautaud
When Christianity Today and Brotherhood Mutual Insurance Company sponsored a webinar featuring Richard Hammar on Prevent Payroll Mistakes: What Churches Need to Know, a record number of church leaders registered for the event. That's likely because payroll taxes present complex and unique challenges for churches.
"It comes as a surprise to some churches that there are many reporting obligations that apply to them," Hammar says. "For instance, churches have to submit an annual corporate report to their Secretary of State office, and sales tax reports to the state. Plus now there are the new hire reporting requirements. Under federal law, if you generate unrelated business income, you're required to report it. But by far, the most important filings churches need to make are the payroll and tax reporting obligations."
Unfortunately, many churches are non-compliant with these filings. Unique circumstances for churches, such as the dual tax status of ministers, lead to common payroll errors.
The only time a church mortgage gives any cause to celebrate is when it’s burned. Otherwise, it’s a drain on resources. Interest payments can easily triple or quadruple the cost of a church building.
Beracah Bible Church decided to forgo the joy of mortgage burning for something better: no mortgage at all. Here’s how it did it:
When our church began, our board of trustees quickly agreed that the congregation would function on a “pay-as-you-go” basis. Simply put, this policy allows us to spend only the money already in hand.
Two factors led to this decision: (1) Several churches and religious organizations in our area had been financially irresponsible, thus tainting the reputation of the rest of us. They assumed huge debts for building projects as a “step of faith.” In reality, it was a step of presumption. They were convinced it was “God’s will,” but it became a stone of burden for the whole Christian community.
Their desperate appeals for funds and their defaulting on payments created a negative image. Banks were reluctant to foreclose on religious organizations, but they weren’t eager to deal with any new churches, either. (2) We had no significant borrowing power anyway. Our only collateral would have been the personal property of members, which is what banks were demanding. Rather than asking individuals to cosign, our trustees unanimously endorsed a policy of nonindebtedness. It has served us well for decades.
For the first 15 years, we were content to meet in a series of nine locations for nominal rent, sometimes only the cost of utilities. We started with five families who gathered for worship in a vacant bank building. Later we used the hospitality room of another bank and eventually moved into a house, where we grew to 125.
At first the makeshift locations didn’t bother people; they came for content, not surroundings. But soon the surroundings were interfering with the ministry. We literally had people sitting on one another’s laps.
After three more moves, our people were ready to forsake the nomadic life. The final straw came when we discovered we could be locked out; one Sunday, for instance, “our” meeting place was preempted by an antique show.
It was then that our policy against deficit spending got its greatest test. Already the cash policy had been successful in paying for several church automobiles, a van, and a parsonage. But the huge estimated costs for a modest auditorium and land to expand was a much larger challenge.
Event now will take place Wednesday, September 19.
Due to illness, Richard Hammar’s “Prevent Payroll Mistakes—What Churches Need to Know” webinar, which was originally scheduled for tomorrow (Wednesday, September 12, 2012), has been rescheduled.
In an effort to best serve you, we have rescheduled this free webinar to 11 a.m. (Central Time)/12 p.m. (Eastern Time) on Wednesday, September 19, 2012. Our hope is that this will accommodate as many registrants as possible. For those who can’t make the event because of this change, you will still receive free access to the recorded version of the webinar and the webinar handout. We will send out information regarding how to access the recorded webinar within 72 hours of the webinar’s conclusion next week.
You do not need to do anything in order to remain registered for this free event and its new date. Watch for an automatic notification from GoTo Meeting that confirms the new date for the webinar. This will be all that you need to log in and join us next week or to receive notification when the recorded version becomes available.
While this solution offered the least disruptive approach possible, we recognize the change still may create an inconvenience for some, and may cause a few of you to miss the presentation due to other scheduled commitments. We are very sorry for this.
Again, please watch for the GoTo Meeting e-mail regarding the new date of 11 a.m. (Central Time)/12 p.m. (Eastern Time) on Wednesday, September 19, 2012, for the “Prevent Payroll Mistakes—What Churches Need to Know” webinar with Richard Hammar.
What church leaders should know in an election year.
We've recently looked at the political activity of churches. In the upcoming September/October 2012 edition of Church Law & Tax Report, Rich Hammar revisits what the Internal Revenue Service says is--and isn't--allowed by churches when it comes to political candidates running for office:
The income tax regulations interpreting the limitation on political campaign intervention provide that neither a church nor any other organization can be exempt from federal income taxation if its charter empowers it “directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.” The regulations further provide that:
A recent Tax Court decision underscores the critical steps churches must take.
In the August 2012 edition of Church Finance Today, Richard Hammar examines a recent, high-profile case involving a couple whose substantial contributions to a church were denied tax deductibility by the Internal Revenue Service:
A married couple (the “taxpayers”) timely filed their 2007 income tax return. On Schedule A they claimed a deduction of $25,171 for charitable contributions made by cash or check. Most of the contributions were made by check to their church. Except for five checks totaling $317, the checks were for amounts larger than $250.
In 2009 the IRS sent a notice to the taxpayers disallowing their charitable contribution deduction for 2007.
Eligible churches could receive thousands of dollars for their coverage.
This morning's Supreme Court decision to largely uphold President Obama's health care reform legislation appears to preserve a health insurance credit for small employers, including churches, to help cover the costs of providing coverage to employees.
This means churches that meet certain criteria remain able over the next few years to apply for the credit.
To fully understand the credit and how it works, Richard Hammar recorded a brief video explanation last year and also wrote a Feature Report covering the numerous details of the provision. Eligible churches that use a fiscal calendar year ending December 31 will use May 15 deadlines, while those using a different fiscal year will use a deadline of the 15th day of the 5th month after their fiscal year closes.
Some churches who have applied for the credit have received thousands of dollars. Others have said they have encountered lengthy delays from the IRS with the processing of their applications.
The last steps of compensation planning—payroll withholdings and reporting
Elaine L. Sommerville
Editor’s Note: Today is the last part of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Last week we looked at how to determine the taxability of benefits and other compensation.
The final part of the compensation planning process actually has two steps. With all forms of compensation, you must determine the following:
The required withholding; and
The proper reporting.
Most people are accustomed to working with these two steps in order to do payroll. While most churches do complete these steps in regards to cash compensation, few seem to complete it correctly in regards to noncash compensation.
The plate reigns, but electronic options are gaining traction.
The graphic above, which appears in the July edition of Church Finance Today, shows the ways that people give to their churches, based on results from the 2012 State of the Plate giving survey sponsored by Christianity Today, Maximum Generosity, and ECFA.
The offering plate tops the list, but electronic giving options, such as automatic withdrawal, online giving, and cell phone giving apps, are gaining ground. Enough so that Brian Kluth, founder of Maximum Generosity, predicts one or more e-giving options will surpass the envelope packet--a mainstay for years at many churches--this year.
How is your church collecting tithes and offerings? Are electronic options making the same advances in your congregation?
Determining the taxability of benefits and other compensation
Elaine L. Sommerville
Editor’s Note: Today is part six of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Last week we looked at how to properly classify employees who are ministers.
Determining the parts of compensation that are taxable is the most crucial step of the compensation planning process and is also a step often missed in properly reporting compensation. There is a tendency to ignore all the benefits and cash that do not flow through the payroll system. The result is a tendency to underreport income. When a church fails in its duty to properly report taxable income, it places its employees in serious jeopardy of potential penalties, additional taxes, and even jail time.
Each element of the compensation package has to be evaluated to see if it is taxable. Remember, everything is taxable until a provision in the Internal Revenue Code says that it is not. Therefore, it should be presumed that something is taxable until it can be proven that it is not taxable.
Remember, when determining taxability, it must be determined for purposes of federal income tax, Social Security tax (FICA), and Medicare tax, if the compensation is for a nonminister employee. If it’s for a minister, then the employer is only concerned about the taxability for purposes of federal income tax.
How to properly classify employees who are ministers
Elaine L. Sommerville
Editor’s Note: Today is part five of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Last week we looked at how noncash benefits must count as compensation.
Classifying the employees who are ministers is a crucial step in the compensation planning process and must be completed at some point. Ministers have different tax treatment than other employees, and this treatment is mandated by law. It isn't optional, so it is important to know who qualifies as a minister for federal tax purposes. (At this time we are only dealing with defining ministers for federal tax purposes, and not for other purposes, such as those for the Department of Labor.)
Minister's Tax Status
Ministers have what is commonly referred to as "dual tax status." For federal income tax purposes, a minister is generally treated as a common law employee. Additionally, while subject to paying federal income tax, a minister is exempt from the mandatory withholding of the federal income tax. For payments into Social Security, the minister is always self employed. This translates into the fact that a minister can never pay into the Social Security/Medicare system the way a regular employee does through the traditional employee payment with an employer matching payment, better known as FICA/Medicare. This is defined by law under IRC Sections 1402 and 3121.
Your personal financial example sets the pace for your church.
The average church in America today has only one full-time pastor. This leaves the pastor to handle the majority of the church’s duties, including business matters. In referencing the qualifications for a pastor, 1 Timothy 3:4 says the leader should be one who rules his own house well. What does this mean? It means the pastor must manage his own family correctly, in a commendable way that leaves no room for blame.
The point continues with this rhetorical question: “If a man does not know how to rule his own house, how will he take care of the church of God?” (1 Tim. 3:5, NKJV). The answer is, he can’t. Ministers must be able to manage their own financial affairs in a God-pleasing manner.
Many important aspects are involved with the handling of business and financial matters. It is crucial that a pastor be able to conduct business in town, pay taxes, pay bills, and so on. The most basic part of your home’s business is a budget. Here are some ideas for creating and implementing one.
Editor’s Note: Today is part four of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Last week we looked at how to avoid costly penalties when setting pay.
Before an organization can move on to dealing with compensation issues, it has to know what it is providing an employee. Identifying all benefits may sound simple, but many organizations don't really do this. This requires a look at each employee to determine what is provided. A complete list should be made.
Making a List
List everything that benefits an employee, and don't worry about the tax effects at this point. Determining how to treat an item of compensation for tax purposes takes place later in the process. Additionally, don't forget to list the items that are noncash benefits. Don't limit the list to only cash items. Remember one of our first lessons: everything that benefits an employee is a form of compensation.
Although not all-inclusive, the following list has items to consider:
Editor’s Note: Today is part three of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Part one looked at why churches should carefully think through what qualifies as compensation and taxes on compensation. Part two described how to determine the compensation “umbrella”—the maximum amount that may be paid to an employee.
Nonprofit organizations, as a general rule, are prohibited from participating in transactions that are deemed to be excess benefit transactions. These are transactions that involve disqualified persons and the provision of benefits in excess of what the organization receives in return for the benefit.
An organization is not allowed to pay more compensation than is reasonable for the services provided by the employee. Any compensation paid above reasonable compensation or above the "umbrella" to a disqualified person is considered to be an excess benefit transaction.
Disqualified persons are generally officers, directors, trustees, and key employees of an organization. In addition, the term also includes the family members of any of these individuals. This group is generally the movers, shakers, and decision makers of the organization and their families.
How to determine the maximum amount that may be paid to an employee
Elaine L. Sommerville
Editor’s Note: Today is part two of a multiple-part series reviewing church compensation planning that complies with IRS guidelines. Part one looked at why churches should carefully think through what qualifies as compensation and taxes on compensation.
One of my mentors, a teacher and pastor, once taught me that people retain concepts that are associated with pictures. I try to incorporate this philosophy into my technical training since technical topics tend to be "uninteresting" and sometimes downright boring. Keeping in line with this teaching technique, I created the idea of the compensation umbrella.
The compensation umbrella is the amount of reasonable compensation that may be paid to an employee. In other words, it is the maximum amount that may be paid to an employee. It does not have to be paid, but it is the measuring stick used to determine the maximum that can be paid.
Defining the umbrella or the amount of reasonable compensation that may be paid should be accomplished using outside data compiled from an independent source.
The first in a series on important tax requirements that churches might miss.
Elaine L. Sommerville
Editor’s Note: This post first appeared on Elaine Sommerville’s blogElaine’s Tax Tips for Nonprofits. Today is part one of a multiple-part series reviewing church compensation planning that complies with IRS guidelines.
One of the most common areas that I speak on across the country is compensation. As a general rule, it seems that nonprofit organizations struggle with the intricate rules regarding the payment of compensation—and even defining compensation. This series will offer some much needed guidance. Join in to brush up on your knowledge in this area, and maybe learn a few new things along the way.
Compensation and the Overriding Philosophy of Tax Law
Perhaps the first stumbling block or hurdle to overcome in this area is to finally acknowledge how vast an array of information this topic covers. I generally find that the normal person does not realize one of the foundational truths of the U.S. tax code. This truth is based on two premises:
Christianity Today receives 43 honors for its print and online publications.
Today's post is a little different than the norm because we have some good news to share.
ManagingYourChurch.com received a top honor Friday from the Evangelical Press Association during the organization's 2012 conference.
The site received the Award of Excellence--the highest possible--in the Christian Ministry/Digital category. Judges said: "Top notch writing and editing; touches on SO many relevant, practical topics for church leaders—news, advice, legal, etc.; well-laid-out blog. Pleasing color palette. Easy to navigate; Follows many blog best practices, thus easy for new visitors to intuit; exceptional presentation all the way around."
ManagingYourChurch.com is owned by Christianity Today, a not-for-profit global publishing ministry. Its goal is to help church leaders keep their ministries safe, legal, and financially sound.
When churches receive tithes and offerings, there's more going on than meets the eye. Along with physically collecting people's money and bringing it to the bank, you should be tracking how much comes in, who it comes from, what it's used for, and how much each individual gives during a year.
This requires substantial record keeping and an effective internal control structure to ensure that the information is accurate and the money stays safe. Here are 10 ways to strengthen control of your cash receipts, and some tips on making cash disbursements:
Her piece is a beneficial 10-minute read for any church pastor or leader who wonders whether internal controls and other financial best practices are worthy of congregational time, energy, and resources. In short, they are. If standing unblemished before the Lord wasn’t enough reason to justify their efforts—and if the integrity of their witness wasn’t reason enough, either—then let Dagher’s piece provide this additional validation: influential outsiders are watching.
What they say matters, not just in the court of public opinion, but also in the minds of those coming through their doors now or in the future. It’s up to churches to answer the call.
Dagher interviewed a variety of fundraising consultants, financial counselors, investment managers, even a forensic accountant, to learn what ordinary people can do to make sure their tithes go where they should. Five lessons immediately jump out. They should sound familiar, and if they don’t, now is the time to make them familiar:
2011 data: Technology remains promising, but no panacea.
A report issued in February by a major provider of fundraising technology and consulting services offers some helpful insights for church leaders as it relates to online giving.
In short: Use of online giving continued to grow in 2011, however, that growth remains small relative to total dollars given. Adding an online giving tool should be done to diversify options for givers and provide convenience for those who desire it. But it won’t provide an instant remedy to any organization struggling to get its vision funded.
Before looking more closely at the 2011 Online Giving Report from The Blackbaud Index of Online Giving, two important disclaimers:
First, churches, ministries, and religious organizations aren’t included in the research because “the 990 tax data set available for this group is not considered representative at this time,” the report’s authors write.
And second, Blackbaud analyzed 1,560 small-, mid-, and large-sized organizations across a variety of sectors. Small means the organization had a budget of less than $1 million, while medium means a budget of between $1 million and $10 million, and large means a budget of $10 million or more. For our purposes, we’ll mostly discuss the results for small- and mid-sized organizations, which more closely resemble the budget sizes of most U.S. churches.
So, the lessons below highlight notable, general trends that aren’t necessarily apples to apples for churches, but more likely crabapples to apples. They’re still of value, though, given the 41 percent of churches who indicated they used online giving in 2011, based on our recent 2012 State of the Plate constituency survey.
With that in mind, here are five lessons about online giving for nonprofits that church leaders should note:
How to protect property, funds, and employees when ministering to the poor.
Around lunchtime on a Friday, a man entered a Boston-area church and soon left with the church secretary’s purse, according to a local news station. The man claimed he needed money to support his five children. After the secretary went to consult the pastor on how to respond, the man—and also her purse—were gone.
The man also approached another church with the same story. That church gave him a $50 Target gift card.
Fortunately, the police caught the man at a local store using the secretary’s credit card, according to Fox News.
Benevolence ministry, like all ministries within a church, presents risk. Property, funds, and employees are at risk when doors are open to the public to request money from the church. Policies and preparation can minimize these risks.
As church income and worship attendance increase, so do pay and benefits.
Marian V. Liautaud
Editor's Note: The 2014-2015 Compensation Handbook for Church Staff is now available. This resource details pay and benefits data for 14 church positions, including two new ones—part-time musician and part-time childcare provider. Each position is analyzed based on a variety of criteria, including education, experience, church size, and geography. The resource also includes step-by-step worksheets to help churches tailor compensation based on their unique circumstances. In the weeks and months ahead, watch ManagingYourChurch.com for graphics and short articles highlighting trends and other broad developments from the latest data.
The 2012-2013 Compensation Handbook for Church Staff, Christianity Today's bi-annual survey of compensation levels based on 4,600 participating churches, shows senior pastors' salary and benefits at an average $82,938 this year. This represents a 2.7 percent increase from the $80,745 average reported in 2010.
In general, as church income and worship attendance increase, compensation and benefits also increase.
While a salary in the $80,000 range looks good on paper, actual take-home pay for pastors may be much different, perhaps far less. The average base salary of a full-time senior pastor ranges from $33,000 to $70,000. Eighty-four percent of senior pastors say they also receive a housing allowance, which accounts for $20,000 to $38,000 in added compensation.
The graphic below highlights the breakdown of salary and benefits senior pastors receive.
How to deal with the fear of mismanaged funds in churches.
Fraud prevention in churches isn’t an easy subject to bring up. The topic naturally creates tension, pushing up emotion levels with staff, lay leaders, and volunteers. And for good reason: One significant prevention tactic requires two people—not one—to handle the money collected at services. So, tactfully explaining to a sole financial worker or volunteer why more people are needed can be awkward. And in some cases, finding available staff or volunteers, and matching schedules to handle financial duties, may not be easy, further complicating the process and creating frustrations all around.
This topic struck a chord last summer when Vonna Laue, one of our Editorial Advisors, listed the top three reasons fraud happens in church. Many readers responded in the comment section. One church secretary described the weight of being the only person working on the church’s finances and her hopes that her pastor would someday agree to put more safeguards in place. Another church staff member took measures into her own hands to protect herself: “I insist on a minimum segregation of duties. I write checks but don't sign and I have a volunteer who does the bank reconciliation. I'm regularly surprised by folks who say, ‘Don't they trust you?’" Others described how safeguards help prevent false accusations.
State of the Plate survey shows 51 percent experienced increases
A majority of churches reported giving increases in 2011, the first such occurrence in three years, according to results released today from the 2012 State of the Plate report.
The constituency survey of more than 1,360 pastors and leaders of Protestant churches nationwide showed 51 percent experienced increases in 2011 compared with 2010. Thirty-two percent said giving declined.
The reasons given for giving increases ranged from an improved local economy to increased attendance to more dedicated efforts to teach about giving and generosity.
With more funds, many churches expanded their budgets, spending more on missions, benevolence, and staff. Leaders also indicated an increasing acceptance of electronic giving options and a continued use of financial best practices to ensure accountability and transparency.
Watch for these warning signs as scam circulates country.
On Tuesday, we covered the latest "Dirty Dozen" tax scams the Internal Revenue Service flagged for individuals, businesses, nonprofits, and churches to avoid. Today, the IRS issued a new update regarding a specific scam circulating the country that targets senior citizens, working families, and members of churches.
The scheme carries a common theme of promising refunds to people who have little or no income and normally don’t have a tax filing requirement. Under the scheme, promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.
In recent weeks, the IRS has identified and stopped an upsurge of these bogus refund claims coming in from across the United States. The IRS is actively investigating the sources of the scheme, and its promoters may be subject to criminal prosecution.
And then later:
Typically, con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.
Pastors and church leaders should watch for this kind of activity in their midst. Even if no signs point to its existence, it's wise for leaders to remind church members, especially senior citizens, that any claims sounding too good to be true usually are. The IRS also offers these tips and warning signs to share:
The recent payroll tax holiday extension keeps a 2-percent reduction for employee and clergy Social Security withholdings in place throughout 2012.
We've already covered what those rates should be on paychecks. But the reason why it is so important for churches to get all payroll withholdings--the payment of employee income and entitlement taxes--right is illustrated by the Feature Article in the upcoming March edition of Church Finance Today.
A federal court in North Carolina recently ruled that a minister met the definition of a “responsible person” under section 6672 of the tax code, and therefore the IRS could assess a penalty against the pastor in the amount of 100 percent of the payroll taxes that were not withheld or paid over to the government by the church.
The 12 illegal or false claims that churches and leaders should avoid.
Each year, the Internal Revenue Service releases the top twelve tax scams that individuals, nonprofits, churches, and businesses should watch for and avoid. The newest list, issued by the IRS this month, reveals the latest "dirty dozen":
Return Preparer Fraud
Hiding Income Offshore
"Free Money" from the IRS and Tax Scams Involving Social Security
Churches must verify employee withholdings are correct.
Congress on Friday voted to extend the payroll tax holiday through December 31, 2012, adding an extra $20 per week on average to paychecks for 160 million workers.
President Obama previously pledged to sign any extension into law once it was passed.
The payroll tax cut involves a 2-percent reduction in employee withholdings for Social Security. The holiday was originally passed toward the end of 2010 for the 2011 year; just before it expired on December 31, 2011, a temporary extension through February 29, 2012, was passed.
With the extension now approved for the remainder of 2012, employers, including churches, need to make certain they're meeting withholding requirements. Employees who are eligible for Social Security should have 4.2 percent withheld, as well as 1.45 percent for Medicare, for a combined 5.65 percent on each paycheck. Ministers are self-employed for Social Security with respect to their ministerial services, so their combined withholding rate for Social Security and Medicare is 13.3 percent.
The national deficit will grow by another $126 billion over five years as a result of the extension. Supporters of the extension said employees will not see lowered Social Security benefits in the future as a result of the reductions, although in recent weeks, debate about that has grown.
A little more than a year ago, Sen. Chuck Grassley (R-Iowa) asked the Evangelical Council for Financial Accountability to oversee an independent commission tasked with evaluating several financial and tax matters related to churches and nonprofit ministries. The goal: Determine whether more oversight—possibly administered through new legislation and regulation—is needed to curb any abuses and to foster clearer communication and relations between the Internal Revenue Service and religious organizations.
The formation of the Commission on Accountability and Policy for Religious Organizations came just as Sen. Grassley's office completed a three-year inquiry into the financial practices of six media ministries.
One year later, the commission is taking input from churches and ministries as it works to develop recommendations for Grassley. One method is through an online form available through March 31; the other was through a live, 90-minute town hall meeting broadcast online last week. Church leaders are invited to participate.
Churches will need to verify employee withholdings are correct.
Congress appeared close late Tuesday to passing an extension of the payroll tax holiday through December 31, 2012, for millions of workers. A bill may be finalized Wednesday and put before President Obama for signature by the end of the week, the Associated Press reported.
The payroll tax cut involves a 2-percent reduction in employee withholdings for Social Security. The holiday was originally passed toward the end of 2010 for the 2011 year; just before it expired, a temporary extension through February 29, 2012, was passed.
Employers, including churches, need to make certain they're meeting the requirements of the temporary extension, withholding 4.2 percent for employees who are eligible for Social Security and 1.45 percent for Medicare, for a combined 5.65 percent on each paycheck. Ministers are self-employed for Social Security with respect to their ministerial services, so their combined withholding rate for Social Security and Medicare is 13.3 percent.
With an extension, these rates will continue through December 31, 2012, putting $20 into an average worker's paycheck each week, the Associated Press reported. The national deficit will grow by another $100 billion, but lawmakers have previously said employees will not see lowered Social Security benefits in the future as a result of the reductions.
Receive $125 in resources just for taking our short survey.
My church's annual meeting took place a couple of Sundays ago. We're a modest bunch—about 125 in weekly attendance and a general budget of about $375,000.
God has done some remarkable things in our midst during the past year, despite our size (or perhaps because of it?). He has used a strong staff and lay leadership to cast a vision that integrates our church's presence into the surrounding community and provides an open, inviting environment, especially for young families.
And the people who attend have faithfully respond. Giving in 2011 for the general fund exceeded budget by 24 percent. Meanwhile, a capital campaign, launched in late 2010 to fund a building expansion in response to the growing number of young families in our midst, raised 94 percent of our church's $250,000 goal—well ahead of schedule.
And yet our church, which uses a congregational structure for making its decisions, acted in what I consider a prudent manner, passing a 2012 general budget at the annual business meeting that measures 2 percent less than in 2011.
How did giving go at your church in 2011? What are the prospects for 2012? Our annual State of the Plate survey is underway, and I hope you'll share what your church experienced. I pray you saw God move in small and big ways, and I pray you'll share how your church has responded to challenges inside and outside the building.
By taking 15 minutes today, you'll receive--for free--more than $125 in resources offered by our team, as well as Maximum Generosity and the Evangelical Council for Financial Accountability, the survey's other sponsors.
The past two years, we've received thousands of responses. The results become informative and educational for church leaders as they seek to understand giving trends at other churches, as well as the ways churches have responded to ups and downs. Get started now.
A federal appeals court ruled Wednesday that the ministerial housing exclusion in the Internal Revenue Code is indeed limited to a single home.
The ruling overturns a split Tax Court decision (Driscoll v. Commissioner, 135 T.C. No. 27 (2010)) in which the lower court had ruled that the minister could exclude allowances paid to him for both his primary home and a lake home.
The lower court had based its ruling on its determination that the phrase "a home" can mean more than one home. Not so, said the 11th Circuit Court of Appeals on Wednesday. In an opinion that reads more like a grammar lesson than a court ruling, the appeals court ruled that "a" is, in fact, singular.
The appeals court decision restores the state of the law to what it was widely understood to be before the Driscoll case—one home.
It is possible that Driscoll could further appeal the matter, although we consider it unlikely. We will continue to closely monitor the case for that possibility.
Across all paid church positions, men are paid 28 percent more than women.
Marian V. Liautaud
Editor's Note: The 2014-2015 Compensation Handbook for Church Staff is now available. This resource details pay and benefits data for 14 church positions, including two new ones—part-time musician and part-time childcare provider. Each position is analyzed based on a variety of criteria, including education, experience, church size, and geography. The resource also includes step-by-step worksheets to help churches tailor compensation based on their unique circumstances. In the weeks and months ahead, watch ManagingYourChurch.com for graphics and short articles highlighting trends and other broad developments from the latest data.
Which positions in the church pay best for men and women?
Churches should note upcoming February 28 deadline.
Editor's Note (02/21/12): A previous version of this post incorrectly stated the deadline for Form 1099s that are mailed. The correct dates are now shown in the post.
Form 1099s that are mailed are due on February 28, 2012, for the 2011 tax year (April 2, 2012, for those filing electronically), and churches that need to issue these forms should take note this year: a failure to send them on time has doubled from $50 per form to $100 per form.
If you do not have all the information needed to complete a Form 1099 (such as a Social Security number), you can still file it incomplete by February 28. As long as you secure the missing information and file the amended Form 1099 before August 1, 2012, then no penalties will apply. By the way, if you file the Form 1099 within 30 days after February 28, the $100 penalty is reduced to $30. If you file Form 1099 more than 30 days after February 28, but before August 1, 2012, the penalty is reduced to $60 per form.
The IRS projects collecting big bucks from these penalties over the next few years. Churches should check—and double check—to make certain Form 1099s are issued to all unincorporated businesses that provided services of $600 or more to them during 2011. This includes sole proprietorships, partnerships, and limited liability corporations (LLCs). You can verify the business information via a Form W-9.
4. “Professional development. People are dying for this. Any kind of denominational conferences and events—find out what you can do. These are often more affordable than what’s offered in the outside market. Doing this also enrolls people philosophically and emotionally into the mission of the denomination at the national and international levels. It allows them to network and learn. People come back fired up from these things. For the most part, people are really excited because it’s an investment in their future.
Two separate reports released within the past week on electronic banking and giving patterns underscore the shifting preferences among adults when it comes to their finances.
Last Thursday, the Pew Internet & American Life Project released its Real Time Charitable Giving report, which shows 1 in 5 American adults have made a charitable contribution through a website and nearly 1 in 10 have done the same via mobile phone text. On Monday, global accounting giant PricewaterhouseCoopers LLP projected digital systems will become the preferred method for banking by adults by 2015, according to a Bloomberg news report. That's based on a PwC-led study of more than 3,000 banking customers worldwide.
This shift to embrace electronic financial tools isn't new and it isn't going away. The takeaways for churches are many. A year ago, Brian Kluth explained the seven reasons churches should offer e-giving options now. At least two church leader discussion boards recently carried threads about e-giving as a percentage of total giving, with many indicating the electronic options represent anywhere from 10 percent to as high as 30 percent of their weekly collections.
As 2012 unfolds, what's the split between e-giving and more traditional methods, such as checks and cash, at your church? How is that split changing your church's thinking, if at all, about how tithes and offerings are collected?
One workplace expert offers several ways to honor employees.
Editor’s Note:Liz Ryan spent 20 years as a corporate human resources leader. During that time, she saw the best and worst of how employers treat their employees. She’s now a full-time writer and consultant on workplaces and writes a regular column for Bloomberg Businessweek, all with the goal of “bringing more humanity into the workplace,” as she puts it. And she has a unique perspective on church culture—as an accomplished vocalist, she often tours churches in Colorado where she lives. Through those visits, she has gained an appreciation for the dynamics at work with church pastors and personnel.
She recently sat down with Matt Branaugh, editor ofManagingYourChurch.com, to talk more about how churches as employers can reward and honor their employees. As the 2012-2013 Compensation Handbook for Church Staffhighlights, raises are hit or miss, depending on place, position, and person. Not to fret, Ryan says. There are a lot of positive things church leaders can do—whether or not money is available for raises.
In Part 1 today, Ryan talks about the first four ways churches can reward and recognize employees when raises aren’t possible. In Part 2, she talks about the final three ways and her thoughts about the how and why of implementation:
What is one immediate thing many churches can do to reward staff, absent of a pay raise or a new health benefit, but might overlook?
Survey shows an average increase of 2.7 percent in pay and benefits.
Marian V. Liautaud
How much are the pastors of Protestant churches nationwide earning these days?
The chart below shows the national averages for compensation and benefits earned by full-time senior pastors, based on Christianity Today's biannual survey of 4,600 churches nationwide. The survey provided valuable, detailed data on 13 church staff positions (including compensation levels based on personnel characteristics like years employed, denomination, region, gender, and education) for the 2012-2013 Compensation Handbook for Church Staff.
Among the findings of the survey: Senior pastors reported salaries and benefits that, on average, were 2.7 percent higher than those reported for the preceding 2010-2011 Compensation Handbook for Church Staff:
Why these procedures are vital to a church's financial system.
In this two-minute video, Vonna Laue, an Editorial Advisor for Christianity Today's Church Management Team, discusses why adequate financial internal controls are critical to the operations of the church.
The management of church money is a complex task for any church finance manager, treasurer, business administrator, bookkeeper, or pastor. The Essential Guide to Church Finances will help you strategize, organize, measure, communicate, protect and audit the financials of your ministry—available at YourChurchResources.com.
Creating more accountability for your church operations.
Vonna Laue, a partner with Capin Crouse and an Editorial Adviser for Christianity Today's Church Management Team, discusses why financial transparency creates a more trustworthy financial department for your church.
Watch the two-minute video below:
The management of church money is a complex task for any church finance manager, treasurer, business administrator, bookkeeper, or pastor. The Essential Guide to Church Finances will help you strategize, organize, measure, communicate, protect and audit the financials of your ministry—available at YourChurchResources.com.
Simple things every church can do to end the year well
If your fiscal year-end is December 31, you have to complete all the necessary steps for closing the fiscal year while also preparing W-2s, 1099s, and donor giving statements. With a little planning though, you can avoid long hours and frustrated staff, no matter when your fiscal year ends. Here are the top 10 things you can do to make the end of the year easier:
Church leaders followed these stories most this year on ManagingYourChurch.com.
I’ve said it before, and I’ll say it again: I’m a sucker for lists. And the end of a calendar year always brings opportunities to reflect on the top stories and headlines from the year that was.
So it’s only natural to share the top ten articles for ManagingYourChurch.com in 2011 based on unique page views. Each post is highlighted below, starting with the tenth-most uniquely viewed post and building up to the first-most. Each highlight also includes the post’s title, author, and date, as well as a brief description and, if available, a notable reader comment.
See what caught the interest of church leaders nationwide, and feel free to weigh in with your thoughts on these legal, financial, and management topics:
Social media tools continued to proliferate in 2011, and no new addition created a larger stir than the summer unveiling of Google+. Many early adopters viewed Google+ as the first legitimate threat to Facebook’s status as the social networking site of choice for the masses. Christian author Margaret Feinberg dove in to Google+ immediately and shared her initial thoughts about how it works, and the way its features may be useful for churches.
Notable reader comment: “I definitely see the strengths of G+'s Circles. Love the idea of Hangout, etc all being built in. My concern is that FB would only need to make a few changes to do the same thing. And so far, my Incoming on G+ is DEAD. Very little updating going on.” —Richie Allen
What church leaders should note heading into the new year.
On Saturday, the Internal Revenue Service announced its recommended optional standard business mileage rates for 2012. These recommendations are ones "employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes," the IRS says.
Many church treasurers also use these recommended rates to reimburse business miles logged by pastors, staff members, and volunteers for the use of their personal vehicles to drive hundreds of miles each month for visitations, home visits, retreats, community meetings, and conferences, among other things.
Beginning January 1, 2012, the IRS says the 2012 standard mileage rate remains at 55.5 cents per mile for business uses, is reduced to 23 cents per mile for medical and moving uses, and remains at 14 cents per mile for charitable uses.
Moving forward, it's important for church treasurers to periodically check for updates on the rates from the IRS. For instance, in June, the IRS increased the standard mileage rate from 51 cents per mile to 55.5 cents per mile for the second half of 2011 to address increased gas prices around the country.
In the February 2012 edition of Church Finance Today, Richard Hammar sheds more light on mileage rates, including a more expansive review of the best practices regarding reimbursements for vehicle uses by church staff.
How you run the business of church speaks loudly to your community.
Editor’s Note: Christianity Today recently reported that a church refuses to pay mortgage payments for expansion and filed for Chapter 11 bankruptcy, even though it has the money to make its monthly payments. The president of the Association of Christian Economists thinks churches need to remember the way their actions affect others. Rich Kirkpatrick shares how church staff should remember this on a day-to-day level too, especially with how it relates to how others view the body of Christ:
After serving in ministry leadership as a paid staff member for over 20 years of my life, I have observed some very disturbing practices that go on in many church offices. These are the kind of things that we dare not whisper, because they actually are quite embarrassing. Many who work in ministry, including myself, are culpable to some degree.
Sometimes, it seems our workplace ethics stink in the local church.
How best to track church laptops, power adapters, and other moving items
Asset tracking is part of church stewardship. Planning ministry events and activities is easier when there’s a clear list of the availability and location of church equipment. Insurance companies ask for an asset list when there’s an emergency. Audit and financial statement preparation requires this list, too.
But some assets are hard to track due to constantly being in the pockets, cars, and houses of church staff. Laptops and power adapters are often moving like this, pointed out Nick Dusenbury while participating in the Evangelical Council for Financial Accountability webinar “5 Hot Topics for Church Business Administrators.” Dusenbury is currently the director of finance for Forest Hill Church in Charlotte, N.C.
After using them extensively for a long time, church staff may inadvertently think small, movable pieces of church property are their own. If a power adapter is $100, and this happens ten times, that’s $1,000 of cost to the church, Dusenbury said in the webinar.
Five reasons church treasurers should keep accounts to a minimum.
Question: Our church changes deacons and session members every three years and this question seems to come up every time there is a change in elders. About nine years ago, we had five or six checking accounts throughout the church; the church's name was attached to the accounts for these various groups. Our finance team decided to close all of these checking accounts and instead run all funds through the treasurer's office. As a result, we are constantly asked by deacons, choir leaders, and multiple groups within the church to give them their checkbooks back. What are the pros and cons of allowing groups to open up checking accounts with the church's name attached to them?
Answer: It's not surprising to hear you're getting these types of requests. At first glance, it seems the most convenient to let each group have an account so that they can tap into their budgeted money when needed. But such an approach isn't advisable. The conventional wisdom in the church finance world is for churches to limit the number of bank accounts the church uses. Ideally, a church should use only one or two. The logic is generally based upon the following five tips:
A church in Centralia, Washington, lost nearly $7,000 from its weekly collections recently when a staff member accidentally left the bag containing the collected funds on top of her car and headed to the bank.
Fortunately, a man driving in this small community located about an hour south of Tacoma spotted the bag and picked it up. The man told KomoNews.com, which reported on the incident, he contacted the church and returned the funds because an honest mother and son returned his lost wallet some 40 years earlier.
"I could have done a lot with it, but I couldn't bring myself to do that," he told the outlet.
Until electronic giving and mobile giving options become the dominant methods for transactions among members and visitors, churches of all sizes will handle varying amounts of cash and checks every week. Although the risk is small, the opportunity exists for these offerings to get lost or stolen. If a weekly trip to the bank is necessary, make certain to have two people (preferably unrelated) go together during daytime business hours (in 2009, a couple was robbed while making a night deposit on behalf of a South Carolina church).
Churches also should look into remote-deposit capture technology offered by many financial institutions. A device provided by a bank will scan checks and send the information electronically; churches usually pay for the scanner and a monthly service fee based on volume.
Simple reminders can help members with end-of-year giving.
Richard R. Hammar
To avoid jeopardizing the tax deductibility of charitable contributions, churches should advise donors at the end of 2011 not to file their 2011 income tax returns until they have received a written acknowledgement of their contributions from the church. This communication should be in writing. To illustrate, the following statement could be placed in the church bulletin or newsletter during the last few weeks of 2011, or included in a letter to all donors:
IMPORTANT NOTICE: To ensure the deductibility of your church contributions, do not file your 2011 income tax return until you have received a written acknowledgment of your contributions from the church. Some of your contributions may not be tax-deductible if you file your tax return before receiving a written acknowledgement of your contributions from the church.
Keep your congregation informed about the rules for substantiating charitable contributions by ordering the2012 Charitable Contributions Bulletin Insertsby Richard Hammar. The insert is designed as a one-page summary explaining the rules of most importance to church members and can fit easily in church bulletins, newsletters, or contribution statements. The inserts are available in quantities of 100 or can be purchased for electronic download. Call 1-800-222-1840 or visit YourChurchResources.comto order.
Why word choice may undermine tithing and other acts of worship.
Editor's Note: Dan Kimball originally wrote this piece for his blogVintage Faith. He allowed us to publish an edited version here as a guest post:
I have become very aware of the power of words—and the power of defining words. In the Christian culture we have created, I don't believe we can ever assume we mean the same thing anymore when we say terms like "gospel," "Jesus," "salvation," "inspired," "evangelical," "evangelism," "missional," and so on. I have learned (sometimes the hard way) that you need to ask someone their definitions of terms with specific meanings to understand how theirs may differ from yours.
One of these terms is "worship."
I question how we have overwhelmingly defined "worship" to primarily mean music and singing, often to the detriment of other acts of worship, such as giving.
Getting a handle on the weekly ups and downs with tithes.
Vonna Laue, a partner with Capin Crouse and an Editorial Advisor for Christianity Today International's Church Management Team, discusses key points for why churches encounter giving declines, how to track giving, and how to encourage additional giving.
Watch the four-minute video below:
The management of church money is a complex task for any church finance manager, treasurer, business administrator, bookkeeper, or pastor. The Essential Guide to Church Finances will help you strategize, organize, measure, communicate, protect and audit the financials of your ministry—available at YourChurchResources.com.
At times you may find the need to “shop” banks. For example, if your church is ready to secure a loan to begin a large building project, such as a renovation or even a new facility, you will want to contact several local banks, provide them with the information they need, and go with the bank that offers you the best rate. This assumes the bank has a good reputation and is willing to work with your church. The obvious advantage of shopping banks is that you will likely get a better rate, especially if the bank knows you are shopping.
Our advice is to shop banks when you’re looking for a large loan. If you find a bank that’s willing to give you a better rate than your existing bank, then use this as leverage. Approach your current bank and ask if they’ll match the other bank’s offer. If they refuse, then you’ll need to decide whether to go with the new bank for the new loan but stay with the old bank for your existing services or move to the new bank entirely. (To provide you with a special rate, most banks will ask that you move all your accounts to them.)
So you should consider whether the better rate is worth changing banks. How much will you really save?
Churches are prime targets for embezzlement. This is partly because churches are some of the most trusting organizations, a quality often abused by paid staff and volunteers.
Embezzlement not only robs a church of money; it also damages its reputation, calling the ministry's integrity into question by the public. A church's own congregation might even disagree on the response to embezzlement—grace versus punishment. This is why one of the biggest challenges of embezzlement in a church setting is determining how to respond when theft is discovered. Here are six steps that may help you navigate the disturbing discovery that your church has been embezzled:
Advice on expensive church projects in a time of economic turmoil.
Editor’s note: Churches continue to consider new building projects, even as the economy remains challenging. Church Finance Today recently created a new training resource to help churches navigate this difficult time of fundraising during a down economy. This interview was excerpted from that resource:
Church congregation growth may run on God's timing, not the economy's. The ability to deal with that growth, though, is more dependent on earthly funds, and the dollars in a church budget may be fewer when members are losing jobs and savings.
So what happens to church growth campaigns when the economy is going downhill?
Bill Walter is president of Church Growth Services, an organization that helps churches plan capital campaigns for building and growth projects. Walter has been in the business for over 30 years and offers a historical perspective on what seems to be the current recession and how it could affect churches.
Read excerpts of their answers here, then tell us your views on credit cards:
"It's a lack of faith. ... Financial choices and predicaments are always symptomatic of other issues. Some of the more common issues that lead to credit card debt include a lack of contentment, a lack of self-discipline, the search for security, and the search for significance.
The bottom line is that we should avoid putting a lender in the place of God by depending on them to meet our needs, and we should not play God in our own lives by deciding that the only way to meet our needs is to borrow.
Our local newspaper ran a front page story that examined a local church's financial turmoil. Faced with a steep drop in giving that began years ago, the article detailed how leadership made changes to cope with this crisis in order to keep the doors open and serve those who attend.
One of their changes deserves more than glancing consideration. Specifically, the church has eliminated staff positions and covers important tasks with volunteers. Not a groundbreaking strategy, I know. But cut and paste this situation outside the church walls and you'll see a timely opportunity to make a difference in others' lives—an idea worth a second look for any church.
To start, consider this prediction: Your state has cut the K-12 education budget and further cuts appear in the budget currently under consideration. Like the church in the news, local administration will need to make changes to cope with these steep drops while keeping doors open and serving the children who attend school.
I make no claims to understand the particulars of state and local education budgets. But I do claim to care about the impact on children.
More safe predictions: As your local schools deal with budget cuts, services will begin to dwindle and disappear. Support staff positions will face elimination. Class sizes will increase. Programs will go away. Activities will stop—especially as the number of adults serving children decreases.
Can you see the opportunity?
Your church can provide much-needed, sure-to-be-appreciated volunteer assistance to a school. Imagine the impact of a school, and the community it serves, recognizing your church as a solution to problems. The greatest resource a church can share with a community is love, as delivered through the active involvement of those who attend.
"Do people really notice?" you ask.
Click here to continue reading "One Solution to Education Cutbacks" on BuildingChurchLeaders.com.
Churches often receive calls for financial help. The most difficult part of these conversations is determining the honesty of the person on the other side of the phone line.
When churches in Florida received a call from a man claiming he needed financial assistance to travel to be with his dying child, a dozen churches called their County Sheriff’s Office fraud hotline, according to a CBS news station. Other churches and individuals gave money to the man without knowing that he was lying. Fortunately, the man has been arrested.
Dan Busby, president of the Evangelical Council for Financial Accountability (ECFA), says that creating a policy may protect against this: “Your church would be wise to establish criteria for individuals who may receive assistance. It should also adopt policies on how benevolence funds should be disbursed. A board-approved benevolence fund is an excellent way to handle gifts for needy individuals.”
If free money sounds too good to be true, it probably is.
Editor's Note (August 15, 2011):Naomi Martin, a reporter with The New Orleans Times-Picayune wrote this article for the newspaper on Sunday. It provides additional details on how some of these scams approach church leaders.
In July, the IRS urged its Twitter followers to be leery of tax scams convincing taxpayers to apply for rebates or credits. And Forbesreported that there’s been a recent “flurry of schemes in the South and Midwest” targeting local churches. Scammers convince churches that free money is available from the IRS through large tax credits or rebates, requiring minimal paperwork—a substantial reward for little effort and an offer truly too good to be true.
Unfortunately, churches are falling for it.
In 2008, Richard Hammar cautioned churches about several scams included in the IRS’s annual “Dirty Dozen,” a list of common tax scams all taxpayers should be aware of. Out of the twelve, Hammar focused on five that were relevant to churches. These five are still relevant, according to the IRS’s 2011 Dirty Dozen. Read about the five below, and view the complete list at irs.gov.
Five To Watch
Phishing. Identity thieves use this technique to acquire personal information in order to gain access to the financial accounts of unsuspecting consumers, run up charges on their credit cards, or apply for loans in their names.
Giving is a part of discipleship—and many churches miss out.
Just as a major error in discipleship is focusing discipling conversations on the needs and interests of the student, an especially common—and major—error in discipleship related to financial giving involves focusing conversations on the giving interest and passions of the student rather than on the curriculum of Christ embodied in the lived experience of the teacher—that is, if discipleship conversations on financial giving happen in the first place.
Of all the Works of Mercy and Piety, discipleship conversations related to financial giving are, regrettably, the most rare. Western Christians in particular consider it a kind of virtue or personal courtesy not to talk about money. Some cite Jesus’ admonition in Matthew 6:3, “But when you give to the needy, do not let your left hand know what your right hand is doing,” as reason enough to stay quiet about the specific nature of their generosity. But this overlooks the fact that the passage in question is indeed a sterling example of Jesus having a discipleship conversation about giving practices with his students.
Giving, like every other Work of Piety or Mercy, is learned through explicit teaching and guided practice, especially in reflection on the body of lived experience of Christian teachers who are growing to full maturity in Christ in their financial generosity.
The discomfort related to conversations about money typically stems from a reluctance to name actual numbers, amounts, and percentages. But discipleship conversations on financial giving should emphasize the point stressed repeatedly throughout this book, namely, that the Scripture itself dwells surprisingly little on questions related to specific numbers, amounts, and percentages. Instead, it dwells on the hows and whys of giving. The focus is on the presentation of the Christian’s whole life as an offering. God is less concerned about the total dollar amount of one’s donations and more about who one is becoming as one makes them.
The most important financial report your church needs each month.
Church board members are charged with fiscal oversight of the church coffers. But not every board member or finance committee member is a CPA and schooled in finance. Many treasurers and bookkeepers make the mistake of providing too much information and detail to board members. This only muddies the waters and leaves your committee members feeling less equipped to make good decisions. In order to get an accurate picture of the church's financial standing and make good decisions based on this information, your church board and finance committee need the right information presented in the right way.
The single-most important report you can bring into a finance meeting is the cash availability report.
Embezzlement in churches is on the rise. Regardless of a church's size, three factors can make it more vulnerable to fraud.
1. Lack of segregation of duties. Churches often fall victim to embezzlement when they rely on one person to handle too many tasks related to handling the cash. For instance, even if Jane, the church bookkeeper, is able to sign checks, if she also has access to the check stock and the general ledger, she is in a prime position to steal money from the church. Her duties are not sufficiently segregated. A better practice would be to have Bill, the treasurer, sign the checks. By dividing the duties, there's a greater degree of accountability and oversight.
Supreme Court ruling may hurt standing of FFRF's case.
Last month, Richard Hammar wrote an article detailing new developments in the constitutional challenge to pastoral housing allowances under way in California.
In a separate case in Arizona, the Supreme Court ruled the plaintiffs there lacked standing for their case to proceed. The logic applied in that situation likely will apply to the plaintiffs challenging the pastoral housing allowance in California, Hammar says (Hammar further explains the ruling's meaning and how it may prevent the Freedom From Religion Foundation from successfully advancing its case to trial).
The defendants in the housing allowance case likely will file a motion for its dismissal. If the motion succeeds, it will thwart what had otherwise become a growing concern for religious communities, churches, and pastors across the country.
In the latest issue of Christianity Today, a new article also examines the development in the Arizona case, quoting Hammar as well as several other religious and First Amendment experts, including Notre Dame law professor Rick Garnett and University of Virginia law professor Douglas Laycock. Garnett reinforces Hammar's analysis; Laycock says the decision, though helpful for the defendants in Arizona (and likely California), may create a "squelching" affect for any future cases arguing violations of the Establishment Clause, according to the article.
It's time churches share their stories to local communities.
A little more than a year ago, Bill Maher hosted actor Ashton Kutcher, author and editor Jon Meacham, and Florida Congresswoman Ileana Ros-Lehtinen on his HBO program, Real Time. A YouTube clip from the program circulated recently throughout social media circles.
Church leaders might find the clip particularly interesting—and not just because of Maher's well-documented skepticism of religious beliefs (for instance, in 2008, he released Religulous, a feature film with a title combining the words "religious" and "ridiculous.")
Rather, it's a question he raises to his guests.
At one point, Maher asks Meacham, Kutcher, and Ros-Lehtinen whether churches should be taxed. Without hesitation Meacham says yes, offering his own church—one located on valuable New York City property—as an example to support his position. After Maher quips about the "invisible" product churches "sell," Meacham adds they're only open one hour per week anyway.
Kutcher suggests churches should be judged based on their philanthropic worth before determining their tax status, a "luxury tax" of sorts. The congresswoman remains silent on the subject throughout the clip.
Conversations like this only underscore the growing chorus of opposition to the tax-exempt status of churches. One need only read the YouTube comments below Maher's clip to see how hostile that chorus has become.
It's time churches responded, joining the conversation in an active, productive way. Lest Maher or any of his guests think otherwise, churches already pay many types of taxes, despite their exempt status, whether it's payroll taxes for employees, fees for local services, or taxes on substantial amounts of unrelated business income.
One insurer says it may limit payouts on costly thefts.
Copper remains a hot commodity. On Thursday afternoon, one pound of the industrial metal was worth nearly $412, according to Bloomberg. And because of the metal's increased value, thieves see a prime opportunity to swipe copper from air conditioning units and home and commercial construction sites, then turn around and sell their spoils to scrap metal dealers for quick cash.
Churches remain a primary target.
For instance, Southern Mutual Church Insurance, South Carolina's largest insurer of churches, says it paid more than $707,000 in claims to 113 churches through April. In 2010, it paid $1.2 million to 174 churches for the entire year, according to The State.
Thieves hit one South Carolina church twice, causing more than $100,000 in damages. That church's insurer, unidentified in the article, stopped insuring it altogether, one of the church's leaders says.
Southern Mutual Church Insurance says the problem has grown so large that it may limit payouts on future coverages to any church that suffers damage from a copper theft and refuses to put protective measures in place.
A protective cage around an air conditioning unit is one such measure. Other steps can thwart thieves, according to this ChurchSafety.com article, which also points out that rooftop heating, ventilation, and air conditioning (HVAC) units, gutters, pipes, and electrical wiring are also at risk:
Among the nearly 3,000 Millennials between the ages of 20 and 35 surveyed, 93 percent gave to nonprofits in 2010. Most gave to more than one nonprofit.
More than half of these Millennials gave in response to a personal request for support. Pastors and church leaders feeling uneasy about asking personally for donations might take comfort in knowing that informal, personal conversations about the ministry, and ways to support it, may build the relationship in a way that encourages future giving.
Three Christian leaders weigh in on a difficult giving question.
In the March edition of Christianity Today, three men with backgrounds in church and personal finances were asked whether the jobless should tithe on their unemployment benefits. Read their answers, then share how your church has (or hasn't) addressed this question as the unemployment rate remains at or above 10 percent for many parts of the country:
"Yes, if joyfully. ... There are some reasons for jobless people—or anyone, for that matter—not to tithe. Do not tithe out of joyless obligation to law. Do not tithe if your soul requires nothing short of a New Testament demand to tithe (there is none). Do not tithe under the assumption that God will owe you anything. Do not tithe if you expect to default on a debt. Do not tithe if you will resent God for asking sacrifices of you—unless you intend the tithe, in the spirit of "I believe; help my unbelief," as your invitation for God to purge your resentment." —Douglas LeBlanc, editor at large for The Living Church magazine and author of Tithing: Test Me in This. Read his full answer here.
"Yes, with generosity. ... Scripture does not speak directly to the topic of tithing on an income that is not your own, so I am reluctant to say firmly, "Yes, give this much." But the Bible has much to say on the subject of generosity and gratitude. There are four questions church leaders and others can ask to help someone struggling with tithing on their unemployment benefits:
Most people, no matter what their age, now prefer to make charitable donations online, according to a new study of more than 17,500 donors.
The survey by Cygnus Applied Research, in Chicago, found that more than half of donors who are 65 or older now prefer to make their gifts online, with much higher percentages of younger donors saying the same.
It was the first time in the three years the survey has been conducted that a majority of donors in all age groups said they preferred to give online.
What’s more, two-thirds of donors said they want all their communications to be electronic.
Two reasons this caught our attention:
Churches that don't offer online giving tend to suggest a primary reason they don't is the lack of interest or participation in online activity by older members. In the 2011 State of the Plate, 36 percent of the more than 1,500 church leaders surveyed said they offered automatic electronic payments (EFT), and nearly 30 percent accepted donations through their websites, during 2010;
Interest in electronic communications, such as e-newsletters and the like, appears to be growing among seniors, which churches—especially those that don't offer any form of electronic communications--should note.
The ramifications of higher gas prices for churches.
A new report issued last week by the Oil Price Information Service shows the average American household spent $368 in April on gas, according to this CNN article.
If church leaders haven't already done so, it's time to think about the possible ramifications of unprecedented gas prices on attendance and giving this summer. People, already pinched by rising prices, small (if any) wage increases, job losses, and the like, may struggle to give what they normally would. And a need to cut down on car trips to conserve fuel for work and school commutes may prompt some to skip the drive to church some weekends.
Challenging economic times offer opportunities to speak of the blessings that come from faithful weekly commitments. It's also wise to anticipate the possibility of decreased giving.
Practices church leaders can use to protect funds.
A woman in Missouri pleaded guilty last week to stealing nearly $140,000 while serving as the treasurer of a local church and its denomination’s local governing organization. According to a Kansas City-based news website, the woman wrote checks to herself, overstated various expenses, or received reimbursements for expenses that never occurred. She faces severe penalties, including up to 10 years in prison without parole.
As lawmakers closely study financial accountability in local churches, it’s important to note that these types of cases are the exception, not the rule, across the country (although two more headlines emerged here and here this week, sobering reminders that the threat remains real). Leaders must build healthy practices and procedures at their churches to protect the money entrusted to them by those who attend.
Larry permitted us to offer it today as a guest post:
One subject that’s always good for a little controversy is a discussion of whether or not a pastor should have access to congregational giving records. Years ago, I was a proud, card-carrying member of the “I-don’t-know-who-gives-what” tribe. But I changed my mind after being challenged and realizing that:
I had a hard time explaining why a pastor is any different from other ministry leaders (think missionaries, parachurch ministries, Christian media, seminaries, and the like).
I had a hard time explaining why capital campaigns are different. No one seems to object to the pastor knowing about large commitments and gifts to a building project. So how is this different than gifts to the general fund?
I found nothing in the scriptures supporting my viewpoint. Frankly, all the verses I used to support staying in the dark could just as well be applied to missionaries or anyone leading any ministry—even the church treasurer—something that no one I know of advocates. The idea that a local church pastor is somehow different is simply not Biblical.
Even though I took pride in not knowing, I still made subconscious assumptions. I couldn’t help it. It’s human nature. But once I had the facts in hand, I was amazed at how inaccurate most of my assumptions were.
Awhile back, I was discussing this with a group of pastors at a gathering I was hosting. The very next day I had an experience that showed once again why having the facts is always better than making assumptions—and how having the facts radically changes (and should change) the way we deal with individuals.
As cities and counties continue to eye possible taxes and fees for churches and religious organizations, interesting new research from The University of Pennsylvania's Ram Cnaan examines the economic value of a congregation to its surrounding community.
Using information from congregations in Philadelphia, Cnaan says churches, on average, provided $476,663.24 of services in 2009 to their surrounding communities.
He's now about to release information from a pilot study of 12 historic churches in Philadelphia, with one estimated to provide $6.1 million of services to the community (nearly 10 times its annual budget). Here's a graphic from the April issue of Christianity Today, our sister publication, detailing how Cnaan's research led to that conclusion.
Something else to note: Cnaan describes himself as "nonreligious," according to Christianity Today.
"Holy Toll" shows Great Recession's effects on 11,000 congregations
More data about church giving last year in the United States has emerged since the release of the 2011 State of the Plate survey results.
The "Holy Toll," based on the 2010 Faith Communities Today research conducted with 11,000 congregations by the Hartford Institute for Religion Research's David A. Roozen, shows some interesting trends, according to this USA Today article:
In the April edition of Church Finance Today, Richard Hammar previewed the possible repeal of the expanded 1099 reporting requirement included with the Patient Protection and Affordable Act (last year's health care reform legislation).
The requirement would have required all persons or entities engaged in a trade or business (including churches and nonprofits) who make payments to a "non-employee" in any year of $600 or more to report it to the IRS on Form 1099-MISC. As Rich explains, the requirement was designed "to improve tax compliance based on the assumption that payees are more likely to correctly report their taxable income if they realize that payors are reporting that income to the IRS."
Controversy erupted because of the requirement, largely because many believed it would "impose a crushing administrative burden on countless nonprofit and for-profit entities as a result of the obligation to file billions of new 1099 forms," Rich explains.
Earlier this month, the Senate passed legislation that included a repeal of the requirement. On Thursday, President Obama signed it into law.
Rich will cover this development more extensively in an upcoming issue. For more updates on the health care reform for churches, join Rich on May 4 through this special live webinar co-presented by Christianity Today International and the Evangelical Council for Financial Accountability.
Potentially thousands of dollars available from health care provision.
Editor's Note (September 29, 2011):A church business administrator in Colorado shared the following update regarding his church's application for this credit: "We submitted form 990-T claiming the credit (approximately $7,100) in late April. We received a request for more information from the IRS late August. Yesterday, the IRS told me that they are still working through a massive amount of applications, and it could take up to 60 days from now to receive our refund, if we are deemed qualified. They said they have 5 agents working on the applications, which is taking them longer than expected. So for those of you still waiting like us, it may be awhile before you see your check. The IRS contact said you are welcome to call 877.301.5153, select option #2, to check on your status (the IRS contact was courteous and professional)."
Editor's Note (August 12, 2011):The 11th Circuit ruled today that a key part of Obama's healthcare reform is unconstitutional. Watch for future updates here, onChurchLawandTax.com, and inChurch Law & Tax Report to learn what this means for churches.
Is there really a "tax credit" available to churches based on last year's health care reform? For those offering health care to employees, the answer is quite possibly yes. The deadline for the first opportunity to take advantage is approaching fast, though.
Some churches say they have received more than $10,000 from the provision, so it's worth investigating what it involves. Richard Hammar provides further information in this short video update below.
Results of a survey given by the National Association of Evangelicals to its 100-member board of directors show a minority--42 percent--believe the Bible requires tithing, while the rest do not. Leith Anderson, pastor of Wooddale Church and president of the NAE, said in a prepared statement he was "a little surprised" by the results. In the same statement, David Neff, editor-in-chief of Christianity Today (our sister publication), added, "Anything less [than 10 percent] seems like an ungenerous response to God.”
Not surprisingly, secular media outlets have picked up on the story, ranging from metropolitan newspapers, such as The Denver Post and the Minneapolis Star Tribune, to national news networks, such as CNN.
Dan Gilgoff, CNN's religion editor, wrote a short piece detailing the background of tithing and interviewed Dan Olson, who studies tithing as a sociology professor at Purdue University:
Several voices weigh in on an important tax benefit for clergy.
The newest issue of Christianity Today poses an interesting question: Should Congress change pastors' housing allowances?
Expect to hear a lot more on the topic in the weeks and months ahead. Since the conclusion of Sen. Charles Grassley's (R-Iowa) financial investigation of six large televangelism ministries, the Evangelical Council for Financial Accountability (ECFA) has been chosen to lead a commission responding to Grassley's eight remaining questions about ministry finances, including "Should there be specific guidelines controlling pastoral housing allowances?" The current tax code excludes the rental value of a home from pastors' taxable income.
Christianity Todayposed the question to a variety of people involved in theological, nonprofit, and church leadership, including our own Richard Hammar. Read these three responses, then weigh in with yours:
"In the paradoxical Christian spirit that a little sacrifice by some assures a more abundant future for all, reductions could reflect typical mortgage deductions by phasing out the allowance for pastors who make more than the typical American while leaving the allowance for the rest."
—Gary Moore, founder, The Financial Seminary
"I'm all for saving tax money, but I do see the legal complication of giving tax breaks just to ministers, structured the way it is. A lot of ministers depend on it, and I don't want pastors to suffer. I hope it's retained, but at the same time it's hard for me to find reasons why it should be."
—Gene Edward Veith, provost, Patrick Henry College
"The courts have consistently upheld the constitutionality of state and federal grants and loans that flow to clergy and ministerial students attending seminaries. Why? Because the beneficiary is the individual, not 'religion.' The housing allowance is similar."
—Richard Hammar, senior editor, Church Law & Tax Report
State of the Plate survey suggests concerns--but are those valid?
One angle covered by secular media during the recent release of the 2011 State of the Plate survey results: The possible affects of a current "federal proposal to reduce tax deductions for charitable donations among wealthy Americans," as CNN.com reported Wednesday.
Cathy Lynn Grossman with USA Today's "Faith and Reason" blog focused extensively on that question and response from the survey in a piece also published Wednesday:
Since the recession in 2008, many U.S. churches have seen a decline in giving. But the tide may be changing. The third annual State of the Plate constituency survey of 1,507 churches revealed that 43% of these churches experienced an uptick in giving this past year (up from 36% the previous year). Overall, 6 in 10 churches reported giving that was flat or up in 2010—encouraging results given the nation’s stalled economy.
Smaller churches (under 249 people in worship attendance) saw giving declines (40% in churches under 100 people and 43% in churches with 100-249 people). Giving dipped most in Southeast states, rather than among Pacific Coast states as it did in previous years.
Question: Our church provides an auto allowance budget line item for vehicle expenses for our pastor. The pastor leases a vehicle that he uses for church-related business. He has asked to use the budget line for reimbursement of the expenses associated with the leased vehicle's use.
The pastor submits receipts for expenses associated with the leased vehicle for reimbursement (i.e. lease payments and maintenance). What are the IRS guidelines in such an instance?
Answer: “If you lease a car that you use in your ministry, you can use the standard mileage rate or actual expenses to figure your deductible car expenses. You can deduct the part of each lease payment that is for the use of the car in your business. You cannot deduct any part of a lease payment that is for personal use, such as commuting. You must spread any advance payments over the entire lease period. You cannot deduct any payments you make to buy a car, even if the payments are called lease payments. If you lease a car that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the car. To do this, you do not add an amount to income. Instead, you reduce your deduction for your lease payment.
Rejection is no fun under any circumstance. It can be especially disheartening for a church when a lender rejects its initial loan application for a capital construction project. But the first "no" does not necessarily doom your chances to finish the project. Your church can pursue another lender, adjust the project, improve its financial situation, or a combination of the three.
Lenders will refuse a church's loan proposal in more subtle ways than an outright "no." Instead, a lender might reduce the amount it is willing to offer. In other scenarios, the lender has more clear reasons for the rejection, and the unsuccessful church should ask for reasons why.
"Listen. As that lender is telling you no, they are really saying 'not that way' or 'not now' or 'not that much.' If you can hear them out, they will usually give you some clues about what to do next so that your future request might be approved," says David Van Winkle, vice president of sales for the Evangelical Christian Credit Union.
Radio interview touches on pay, benefits for pastors and staff
John Clemens with IRN USA Radio recently interviewed Matt Branaugh about Christianity Today International's National Church Compensation Survey. In this six-minute clip (which aired on more than 1,100 stations nationally), you'll hear more details about the importance of this survey, and why every church leader should care, including:
How boards can effectively use the data gleaned from this survey to set pay packages;
How pastors and others can use the data to understand their own pay situations;
How churches possess a unique opportunity to set examples in their communities regarding fair pay.
How the economy, and dying counties, may hamper church-building plans.
Editor's Update (4/26/2011):The Nonprofit Quarterly pointed this morning to a Boston Globe article reporting 40 of the city's largest nonprofits, with property valued at $15 million or more each, have received letters from the city "requesting them to make regular and voluntary tax payments based on the value of their holdings.
"Boston is not alone is seeking to raise revenues from nonprofits ... In Boston, nonprofits are especially tempting targets, because as the Globe notes, they own about 52 percent of the city’s land area," the Nonprofit Quarterly continues. "Under the new plan payments would rise from $15 million, which they paid this year, to $48 million over the next five years."
_______________________________ Editor's Update (4/4/2011):The Nonprofit Quarterly pointed this morning to a Times-Picayune article covering the recommendations of a mayor-appointed "Tax Fairness Commission" in New Orleans. One of the three recommendations:
"...changes to the state’s constitution that would allow cities statewide to collect taxes from nonprofits as part of a larger effort to bring in more revenue from untaxed property ...
... If adopted by lawmakers and voters statewide, the most sweeping of those changes, according to The Times-Picayune, “would allow local governments to collect taxes on as much as half the assessed value of properties that long have paid nothing because their educational, religious, cultural, fraternal or other missions qualify them for exemptions.”
Up until last week, there's a good chance most people hadn't heard of "natural decrease." But newly released U.S. Census data reveal a near-record number of counties in the country are dying, and the term describing the phenomenon has quickly gone mainstream.
"In all, roughly 760 of the nation's 3,142 counties are fading away, stretching from industrial areas near Pittsburgh and Cleveland to the vineyards outside San Francisco to the rural areas of east Texas and the Great Plains. Once-booming housing areas, such as retirement communities in Florida, have not been immune.
West Virginia was the first to experience natural decrease statewide over the last decade, with Maine, Pennsylvania and Vermont close to following suit, according to the latest census figures. As a nation, the U.S. population grew by just 9.7 percent since 2000, the lowest decennial rate since the Great Depression."
What's the significance for church leaders? Well, beyond the obvious ministerial needs and challenges that churches located in dying counties can help meet, there's another separate-but-significant connection. The AP says two primary reasons for "natural decrease" are an aging population and a poor economy.
It's the second reason that church leaders should especially note. As municipalities--dying or not--continue to struggle with shrinking tax revenues, and aggressively look for ways to survive, churches and nonprofits will only find it tougher to avoid taxes and tougher zoning restrictions.
A year ago, we saw the question of taxing churches unfold publicly in places like Utah, Ohio, and Indiana.
On the zoning front, challenges with ordinances appears, as one attorney puts it, to be "heating up" for churches because of the economy (and that's saying something--zoning issues are already one of the top five reasons churches go to court each year).
The article goes on to explain the very real chance American workers will receive bigger pay raises this year:
With corporate America sitting on large piles of cash and manufacturers seeing a surge in exports to fast-growing emerging markets, signs are mounting that some of the benefits will start trickling down to employees.
This could mean average wage gains of as much as 3% in 2011, compared with 1.7% in 2010—enough to boost consumer spending, which accounts for more than two-thirds of the economy, but not so much that it would stoke concerns of an inflationary spiral.
In addition, a recent issue of Kiplinger highlights the U.S. economy is on track for GDP growth of 3.5% this year, up from last year’s 2.9%.
While I doubt many churches are sitting on large cash reserves, these headlines make me wonder—will churches give pastors and staff members raises this year? A couple of weeks ago, my church approved 3% raises for the senior pastor and staff (we’re a congregation of about 120 people). Will yours?
It’s a serious question. If you chair a church board, it’s worth a long, hard look. After a multiyear recession, many churches implemented pay freezes to help weather budget challenges. A recent article on ChurchLawAndTax.com illustrates why now is the time to reevaluate:
As February fast draws to a close, you may be encouraged to know that you get an extra three days to work on 2010 filings. From this morning's Richard Hammar's Essential Reminders:
"Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15," reports the IRS.
We’ve given the site a fresh, new look to serve church leaders like you even better. You’ll find an updated Archives of the Church Law & Tax Report newsletter through 2010 (that's nearly 25 years' worth of past editions) and extensive updates to the Legal Library, a comprehensive, fully searchable reference written by Richard Hammar for pastors, board members, and church leaders. We’ve also revolutionized the Weekly Lessons quiz feature to improve your learning experience.
A new, free Updates section of ChurchLawAndTax.com highlights information pertinent to church leaders and includes:
Upcoming resources to help wade through tax laws that affect clergy.
The "The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010," passed by Congress and signed by President Obama in mid-December, triggered a domino-like effect of changes for tax-filers--so much so that even the Internal Revenue Service delayed its efforts to process returns (it finally began doing so on Monday).
For pastors, the tax-filing process already is a cumbersome one. As Richard Hammar notes in the upcoming edition of Church Law & Tax Report, there are at least 20 common tax-filing mistakes that clergy make each year, either because they filed their own returns and didn't understand how various laws applied or because they used a tax professional who didn't understand the unique complexities that apply to clergy. Among the mistakes frequently made:
Eight voices weigh in on the generosity of American Christians.
Last week, we pointed to research data highlighted by our sister magazine Christianity Today regarding average tithing levels among Christians. This week, we point to a series of short quotes obtained by Christianity Today from a variety of evangelical voices based on this question: Are American evangelicals stingy with their giving?
Of the eight responses, here are two—one answering an emphatic "yes," the other an emphatic "no":
A new, free PDF offers helpful payroll tax reminders for churches.
Looking for a helpful—and easy—way to remember federal payroll tax reporting requirements as a church? Check out this handy, printer-friendly PDF we've prepared titled "Ten Steps to Tax Reporting."
Here's a sneak peek:
10) Complete Forms 1099-MISC and 1096. Must be issued to any nonemployee who is paid compensation of at least $600 during any year.
9) Determine the amount of income tax to withhold from each employee’s wages. The amount of federal income tax the employer should withhold from an employee’s wages may be computed in a number of ways—the most common are the wage bracket method and the percentage method.
Average income given to churches appears on the decline.
Our sister publication Christianity Today magazine published some interesting new data from church giving research in its February issue.
Specifically, the average percentage of income given to churches appears on the decline, measuring 2.43 percent in 2008 (compared to 2.59 percent in 1985 and 3.11 percent in 1968). The magazine smartly includes additional data on all religious giving (not just to churches), which helps paint a more representative picture of the many ways that Christians give.
We're watching this subject particularly close this week as we launch the survey for the 2011 State of the Plate. We're hoping to hear from church leaders like you about how tithing went during 2010, and any effects on the budget--bad or good. Do you see commonalities between the decline in average income given to churches reported by Christianity Today and your congregation? What did that mean for your church in 2010, and how are you preparing for 2011?
How Social Security taxes, other benefits are affected.
On December 17, Congress passed the "The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010." After President Obama signed it into law, numerous tax provisions that were about to expire were kept alive. And a significant benefit for many employees--a lower Social Security tax rate for 2011--also became reality.
In this short video, watch Richard Hammar cover some of the significant developments from the Tax Relief Act, and what it means for church leaders as they prepare for 2010 returns and plan for 2011. From there, pick up the 2011 Church & Clergy Tax Guide. This must-have reference includes all of the latest information and forms, including items affected by the Tax Relief Act, as well as Rich's unparalleled analysis.
What churches should note for 2011 housing allowances.
Late in 2010, the United States Tax Court ruled a pastor could apply a housing allowance toward expenses incurred from a primary residence and a vacation home.
What are the implications for church leaders? Well, while many may not own a vacation home, many may find themselves in positions where they answered calls to ministry in other communities, only to fail selling their former homes. For pastors in these situations, and others, the decision may have significant relevance.
Watch as Richard Hammar explains the important ramifications of this ruling:
Sen. Charles Grassley, R-Iowa, has asked the Evangelical Council for Financial Accountability to head an independent commission that will obtain feedback about the financial practices and oversight of churches and religious groups nationwide.
The goal is to help determine best practices and changes that encourage compliance with federal tax laws and maintain financial integrity within the religious community while avoiding new laws mandating such behavior. But those involved say it’s too early to tell how the commission’s work will affect any changes—or whether it can prevent any new laws—and how long it will take.
In a press conference called this morning in Washington, D.C., ECFA leaders outlined requests made by Grassley, who yesterday released his final report of a three-year inquiry into the financial activities of six high-profile media ministries. The issues to be explored “could potentially affect every house of worship and every member of the clergy in America,” said Michael Batts, an ECFA board member who will chair the special commission.
Grassley’s office contacted the ECFA three weeks ago to indicate its report of the six ministries—in which only two fully cooperated with investigators and no ministry received a penalty—was imminent.
How different churches are responding to plastic for giving.
As more churches embrace electronic giving for their congregations, a number find themselves asking an intriguing question: Should they use e-giving options that allow people to tithe with credit cards?
We asked a number of church leaders whether credit cards are appropriate due to the debt people take on when they use them. Many said they didn't see the issue as a problem, citing a number of reasons. Chief among them: A belief that many people in their congregations responsibly use credit cards; that they pay balances off fully every month as a means of pocketing the points and other incentives offered by banks (and, in many instances, they pocket these rewards and donate them to the church, such as airline miles for missions trips).
But we also found a couple of examples of where church leaders said credit cards were unacceptable.
In an informal, unscientific poll conducted on YourChurch.net, 44 percent said credit cards were an acceptable option for church giving, while 34 percent said debit cards were fine, but credit cards were not, and 18 percent said plastic of any kind was a no-no.
The key law, tax, finance, and safety issues readers cared about this year.
Last week, we took a moment to highlight the Top 10 most-read articles from Your Church magazine's website, YourChurch.net. As we continue to count down the days to 2011, we now offer the Top 5 most-read posts from TheYourChurchBlog.com during 2010:
These Your Church Today articles drew the most traffic.
As 2010 comes to a close, it’s time to get all nostalgic and look back at the year that was. That includes reviewing the articles that interested readers throughout the year. Based on Internet traffic patterns, these 10 articles from YourChurch.net (Your Church Today magazine’s website) led the way:
10. Is My Church Covered? We noticed many church leaders seemed to be taking a hard look at their church insurance policies, their premiums, and any possible savings they could make in light of tightened budgets. Our Summer 2010 cover story reviewed the changing landscape of church insurance, including key coverage changes to note, terms to know, and a brief look at the biggest church insurance providers.
9. State of the Plate Results A detailed look at the results from the 2010 State of the Plate survey, which Christianity Today International conducted with Maximum Generosity to see how 2009 ended for American churches. Among the findings: More churches missed their budgets in 2009 compared to 2008.
8. Debunking the Clergification Myth Respected author and researcher Ed Stetzer examines the prevailing models of church staffing structures and argues for changes that place less emphasis on paid staff and more emphasis on an empowered lay leadership base.
Why an offering plate and giving box can't cut it alone anymore.
For many years, churches pondered (and even debated) whether to collect offerings by placing a box in the back of the sanctuary or by passing the plate. Today there is a much more important issue that is transforming how people give and how churches collect offerings: various forms of electronic giving, such as websites, mobile devices, electronic funds transfer, and more.
To dramatically illustrate my point, consider what would happen if you went up to the average 28-year-old and asked that person to write you a check for something. In most cases, he or she would look at your strangely and say something like, “Checks? Ahhh, I don’t use checks.” But the truth is, whether someone is 28, 38, 58, or 78, fewer people are using checks and instead are using various forms of electronic options for all of their financial and giving transactions.
So, let’s take a look at the top 7 reasons your church must offer (more) electronic giving options:
1. Scripture instructs ministers to “collect” people’s offerings. When I have been in other countries, I have sometimes seen churches use VERY LARGE offering baskets (as big as waste paper baskets!) to collect people’s offerings. People were taught to “give from what they had,” which often included eggs, bread, rice, money, and so on. The baskets had to be large enough to hold everything people brought. In some cases, I saw churches that built “tithe houses” so people could bring the best portion of their harvest to the church.
The biblical mandate is that ministers “collect” people’s offerings and churches and ministers need to use whatever methods are available and most helpful to empower their people to be faithful and generous givers.
Act now so that pastors can receive this tax benefit in 2011.
Churches must designate a portion of each minister's compensation as a housing allowance by December 31 in order for ministers who own or rent their homes to receive the full benefit of a housing allowance exclusion for calendar year 2011. The designation should be adopted during a regular or special meeting of the church board, and should be contained in the written minutes of the meeting.
Churches should designate a parsonage allowance for any minister who lives in a parsonage and who is expected to pay some of the expenses of maintaining the parsonage (e.g., utilities, furnishings, repairs, improvements, yard care). For sample housing and parsonage allowance resolutions, see chapter 6 in the 2011 Church and Clergy Tax Guide, available for January shipment.
Churches and clergy face at least 64 tax changes come January.
In an upcoming issue of the Church Finance Today newsletter, senior editor Richard Hammar relays a comment made by Douglas Shulman, U.S. Commissioner for Internal Revenue, during a speech given earlier this fall to the American Institute of CPAs: “The sheer girth and complexity of the tax code continue to grow, in spite of efforts to simplify it. There have been an astonishing 4,400 legislative changes to the code from 2000 to September of this year.”
Every year, Rich combs through pages of tax code looking for changes that directly affect churches and clergy. It’s a massive undertaking, but one that thousands of church leaders across the country appreciate, given the “sheer girth and complexity of the tax code” as Shulman puts it. For instance, how would any of us know about the 64 significant changes or additions that church leaders should note for the tax filing season upon us?
Rich highlights these changes in greater detail for our January/February issue of Church Law & Tax Report. But let me also encourage you to pre-order Rich’s 2011 Church & Clergy Tax Guide, the tangible fruit of his yearlong labor. This exhaustive book not only will guide you during tax season, but it also will serve as a trustworthy resource to reference time and again throughout the year.
New charitable giving report suggests strength for some ministries.
Our friends at the Evangelical Council for Financial Accountability recently released a report showing charitable giving to its members has remained steady, especially among its largest members, despite the recession.
But there were signs of challenge for ECFA members with smaller budgets and revenue.
In its first-ever “2010 ECFA Annual State of Giving Report,” total charitable giving to ECFA members (comprised of about 1,400 Christian nonprofits, charities, and churches) was $12.10 billion in 2009, compared to $12.11 billion in 2007, before the current recession kicked into high gear.
The data, taken directly from members' independently audited financial statements, showed organizations with annual revenue greater than $10 million fared best, reporting a 1.4 percent increase in donations compared to 2007. However, organizations with annual revenue less than $10 million reported a 6.9 percent decrease in donations compared to 2007.
Advisors host webinar on handling end-of-year charitable contributions.
Michael Batts and Dan Busby, two members of our Editorial Advisory Board, will co-present a 60-minute webinar on Tuesday, December 7, about the ins and outs of year-end giving and receipts. Batts is managing partner with the CPA firm Batts Morrison Wales & Lee. Busby is president of the Evangelical Council for Financial Accountability, which is hosting the webinar. Both are highly knowledgeable and articulate regarding a wide range of church tax and finance issues, including the handling of charitable contributions.
Among the topics they plan to cover:
• What is required and not required on year-end giving statements
• Cut-off dates for receipting of cash/check gifts
• Noncash gift reporting, including recent cases and IRS correspondence as well as valuing noncash gifts
• Form 1098-C issues with respect to gifts of autos, boats and airplanes
• How to acknowledge quid pro quo gifts
• How to handle Christmas gifts to staff, love offerings raised for staff, and gifts restricted/designated for staff
A new tool that can help with online giving without tempting those who abuse credit cards.
Bryce Collman started a business to help churches save money on electronic payment processing. Rather than use the bundled rates many larger processors charge to process payments by credit and debit cards, he offered interchange rates, which can save customers significantly.
Then he learned how many churches oppose credit card use.
"We heard repeatedly that they'd really like to take advantage of online giving, including the recurring component [which allows automatic tithing, even when people don't make it to church], but they're opposed to having their congregants use a credit card [since so many people are trapped by credit card debt]."
Other online giving systems accept debit cards, and some churches use PayPal as a way to offer a debit-based option. "But they didn't have any way to control that situation," he says, so if someone chooses to use or misuse credit, the church can't prevent it.
Collman's response is Ardent Giving Solutions, which prevents the use of a credit card for online giving.
This article first appeared in Leadership Journal. Click here to continue reading.
One of the best resource books for determining church staff pay, The 2010-2011 Compensation Handbook for Church Staff, now offers a free, easy-to-use tool for church leaders. The "Free Compensation Handbook Worksheets Download," walks church leaders through The 2010-2011 Compensation Handbook for Church Staff, helping them identify a range of values that they can use to determine a starting salary for a new hire or a raise for a current employee, or to make an assessment of how fair—or unfair—a pastor or staff member's current pay is.
Based on a national survey of nearly 5,000 churches, The 2010-2011 Compensation Handbook for Church Staff provides reliable church employee compensation breakdowns for a variety of scenarios, including part-time and full-time positions. This information can be used to compare a church's payroll plan, or an individual's salary situation, with information from those of thousands of other church workers nationwide. The information is organized by position, as well as other factors, including geography and demographics. Compensation profiles are then organized by categories so you can easily determine base salary, retirement, health insurance, and housing allowance.
Using the new "Free Compensation Handbook Worksheets Download," church leaders can take personalized church data, such as worship attendance, church region, education level, years employed, and denomination, reference The 2010-2011 Compensation Handbook for Church Staff’s range of data using helpful step-by-step instructions provided in the worksheet, and then develop a unique compensation package range for most any church staff position.
Does such information create temptation toward favoritism, or a needed discipleship tool?
A question on XPastor.org's Google Group asked whether pastors should know who gives what to the church. Is it primarily an issue of privacy, potential partiality, or accountability and pastoral care?
Churches must decide whether the pastor needs to know, such as for providing specific counsel and spiritual development tied to members' tithing. Once the church determines who has access, it needs to disclose this to the congregation so that donors "will have a realistic expectation of privacy," Sommerville says.
Here is how three XPastor.org members say their churches handle this question:
This article first appeared in our sister publication, Leadership Journal. Click here to read the rest.
Churches that serve the community may be eligible for outside funds.
Are there corporate or foundation grants available to fund your church building campaign?
There may be, depending on who you serve and how church facilities are used. Your best chance of securing this kind of funding is if your congregation is building or renovating spaces that are (or will be) primarily used for community ministry programs serving people from the larger community. These spaces are often multi-purpose—used by your church members on Sunday for spiritual formation classes or Sunday school, then used during the week, for example, for after-school programs or a health clinic.
Grants like this don't replace the need for individuals in your church to support your building campaign. Grants might make up a third or less of total campaign support. Often, it is the last funding received—like the "frosting on the cake." Most grants like this are local, so identify funders that give in your city or state to find ones that fit. Look for the grantmakers association in your state (at http://givingforum.org)—many of these groups produce indexes of grant opportunities by state or region. You will need to look at funders that make "capital grants" and that give in the program areas in which your church works (health, education, job training, and so on).
The church has a level of responsibility when caring for creation.
Walmart placed an ad in the New York Times stating, "every company has a responsibility to reduce greenhouse gases as quickly as possible." Walmart recently began green retrofits of hundreds of older buildings and is incorporating wind turbines, wildflower meadows, and many other techniques in new stores.
They are not alone. In fact, many of the world's 500 largest corporations want to build and occupy real estate reflecting environmental care and sustainability.
Three key reasons include market demand, financial return, and corporate responsibility. Churches should consider parallel motives for going green.
Market demand / Cultural relevance
Years ago corporations realized customers frustrated by pollution, sprawl, and traffic were open to marketing messages conveying some level of environmental responsibility. For example, hotels found they could avoid replacing and laundering towels daily by mentioning reduced water consumption and chemical use.
More recently, The National Center for Smart Growth Research and Education indicated homebuyers will pay a premium of 16 percent to live in a "New Urbanist" community which preserves open space by increasing density and decreasing house/lot size.
As the debate on global warming shifts from "if" to "how fast," a staid politician has become a rock star (Al Gore) and rock stars have dabbled in politics (Bono, among others—U2 concerts combine rock and roll, church, awareness of the AIDS crisis in Africa, and Greenpeace calls to action).
Because environmentalism has been identified with both the New Age Movement and the liberal left, evangelicals tend to respond with suspicion, ambivalence, or both. We may be losing evangelistic opportunities by placing yet another unnecessary barrier between culture and Christ. Pursuit of sustainable church design not only helps the planet, it lends credibility to the Christian message.
Continue reading "The Green Wave" at our sister site BuildingForMinistry.com.
Sale in honor of church administration day on October 21.
Our friends at the National Association for Church Business Administration have designated Thursday, October 21, as "National Church Administration Day." As NACBA explains it on its website:
"The idea behind National Church Administration Day is for seasoned church leaders to share their expertise with anyone – whether clergy or laity – performing administrative duties in any congregation, with the goal that all churches become more effective and responsible."
In appreciation of church administrators, Christianity Today International’s YourChurchResources.com store is offering a 30% discount from now through October 21, 2010, in honor of National Church Administration Day. Customers can apply the 30% off promotion code “cad30off” when they place their orders for any products at YourChurchResources.com.
Can churches legally designate medical allowances for pastor health plans?
Question: We are entertaining the idea of changing our health care coverage to a HSA (Health Saving Account)-compatible policy. Presently our three pastors receive a designated amount of medical allowances each year to help them cover the costs of out-of-pocket moneies that go toward their deductible. Is it legal to still set aside a designated medical allowance within our budget if we go to a HSA-compatible policy?
Answer: Health Saving Accounts (HSA's) are medical reimbursement accounts that are regulated through the IRS. An HSA is generally only permitted in conjunction with a high deductible health plan. So, depending on how you use the medical allowance, it may impact whether it is legally permitted.
I'm assuming with your current plan, the pastoral staff submits receipts for medical expenses and then is reimbursed up to a designated amount. When you switch to a high deductible plan, it makes sense to take the designated money and deposit it into their HSA account. This is legal as long as all of the pastors are part of a high deductible health plan (i.e. they don't have a traditional health plan with co-pays somewhere else). One other item to be aware of is that the IRS sets limits on how much may be contributed into an HSA account. The IRS changes these limits each year.
One pastor shares how to best allocate church budget money.
"Pastor, we don't have a budget. We just do what the Lord leads us to do."
These words were spoken to me soon after I agreed to be the preacher at a small rural congregation, which used seminary students to fill the pulpit. When the church voted to hire me, they called me "pastor," but I did not function in that capacity. I was at the church only on weekends, and they knew I would probably leave as soon as my seminary days were over.
As an idealistic young student, I liked the thought of having no budget; it created in my mind the picture of a congregation sensitive to the Lord's leadership, without the bureaucracy associated with a budget.
After a few weeks, I mentioned to one of the leading men that I intended to introduce a new ministry in the next church business meeting, which was held at the conclusion of worship. This man asked me several questions about the ministry idea.
Then he said, "Don't bring up your idea this month. Wait at least a month, until I've visited with some of the men of the church. Your idea has merit, but it may not fit in with what some members think."
I found out later that he had called two other men, and they had talked about my idea. They had looked over the church's financial condition and decided I shouldn't broach my idea in the coming business meeting.
I realize now that these three men were not stubborn or unreasonable but practical. My idea wasn't that great, and the church was in more need of other ministries.
What I especially learned, though, was that the church did have a budget! It was in the mind of the three leaders who in conversation determined the financial priorities of the church.
A church budget is simply someone's priorities for use of church funds. These may or may not be the congregation's priorities, or even the present leadership's, but someone or some group has priorities that determine how money is allocated.
Since every church has a budget, we are wise to recognize it and consciously shape it. It may be efficient when a select two or three determine the budget, but it is not healthy.
Of course, once you open up the process to the congregation, even through their elected leaders, you've got to answer the question, "So, how much should we give to each ministry and line item?" Answering that question is not always easy, but it is what setting a budget is all about.
Here are some principles I use in helping a church settle that question.
How a California court may alter a long-standing ministry benefit.
Earlier this month, we covered eight federal issues that local churches should watch closely during the remainder of 2010 and into 2011, according to recent remarks from Dan Busby, president of the Evangelical Council for Financial Accountability. Busby, one of our editorial advisors, is based near Washington, D.C. His role at the ECFA includes advocating on behalf of ministry interests on Capitol Hill, so he’s uniquely positioned to see national tax and finance developments unfold that can influence church leaders.
We took notice when we heard the first item on Busby’s list: a California lawsuit, filed by the Freedom from Religion Foundation Inc., challenging the constitutionality of tax benefits associated with the housing allowances that churches provide to pastors.
The significance of housing allowances isn’t lost on church leaders. For decades, churches have used them to recruit and retain pastors. It’s an especially handy tool that churches with limited means, especially small congregations, can use to lure a gifted person. And at a time when the country slogs out of a multiyear recession, it’s perhaps as useful of a benefit as ever. The down economy has challenged weekly giving and strained budgets for many congregations, making pay raises remain small, even nonexistent in some places.
“The three most common housing arrangements for ministers are (1) living in a church-provided parsonage; (2) renting a home or apartment; or (3) owning a home. The tax code provides a significant benefit to each housing arrangement … The rules … represent the most significant tax benefits enjoyed by ministers.”
Given the importance of housing allowances, we asked Hammar to give us a deeper sense for where the California case will land.
At the moment, the signs aren’t favorable. Church leaders should begin thinking now about a future in which housing allowances for pastors do not receive federal tax exemptions.
Tips church leaders can use before their next project.
Cogun, a North Lima, Ohio-based company that helps churches with building, recently released the "10 Things Every Church Should Know about Expansion (in 140 characters or less)." Here are the first three (you can read all 10 in the brief electronic booklet offered here):
1. Clarity is king. Know who you are, who you're called to reach, and then over-communicate it. This is the rudder that will allow you to end up with the right expansion when it's done.
2. Expansion options abound. Churches can add ministry space in multiple ways--additional services, multi-site campuses, church mergers, building expansion/relocation.
3. Understand the budget. When you build new facilities, the amount for the building itself is only part of the total cost. Non-building costs can add up to 20% to 40% of your total costs.
Read all 10 things in Cogun's e-booklet. Also check out BuildingForMinistry.com, a partnership between Christianity Today International and the Cornerstone Knowledge Network, of which Cogun is a co-founder.
Why now is a good time for your church to build a safety net.
Cash reserves. If you’re like me, your eyes glaze over when these two words are used together. It’s certainly not the most exciting topic. But, what we have found through the current economic downturn is that cash reserves are more important than ever for ministries.
Why do ministries need cash reserves? Consider these actual situations:
• During the past winter, I received calls from about 50 churches that were panicked by outrageous heating bills running two to five times their normal averages. Some churches in Charlotte, North Carolina, and Atlanta, Georgia, where snow rarely falls, canceled services some weekends because of snowfall, and therefore took in virtually no offerings.
• The earthquake in Haiti created massive need. Many churches wished they could help but didn’t have the extra cash to do it.
• July was the hottest month on record in some parts of the country. Three churches I work with had to replace multiple HVAC units.
These are just a few recent examples of situations where adequate reserves could have allowed ministries to move forward instead of only wishing they could, or prevented them from having to pull funds from other parts of their ministry to pay unexpected bills.
Building cash reserves is actually not as daunting as it may sound. Churches can increase reserves by increasing revenue or decreasing expenses and not spending the difference.
Beyond that, here are four specific examples of ways a church can get on the path to building adequate reserves:
As hard as it may be to believe, churches are not immune from embezzlement. In fact, the widespread belief among church leaders that such a crime "could never happen in a church" makes churches an easy target. Economic downturns make the risk even greater. Here are seven reasons to prevent fraud from happening at your church:
Removing temptation. Churches that take steps to prevent embezzlement remove a source of possible temptation for church employees and volunteers who work with money.
Protecting reputations. By taking steps to prevent embezzlement, a church protects the reputation of innocent employees and volunteers who otherwise might be suspected of financial wrongdoing when financial irregularities occur.
What other church leaders are reading and using to keep their congregations safe.
ChurchSafety.com provides expert guidance and risk management information on a broad range of safety topics. We’ve compiled the Top 10 most-downloaded resources from ChurchSafety.com during the past year. Find out what other church leaders have read and used to train staff and volunteers and to develop a safe environment for ministry:
While the number of incidents involving guns at churches remains small, information and preparation are still vital. Begin by assessing the current security of your church. This download gives helpful advice on how to plan for the unexpected, whether or not your church should hire a security guard, and how to deal with the media in the aftermath of violence.
Children are often the most vulnerable members of our congregations, and their presence also presents some of the most serious liability risks. Most churches use minors to assist in various children's or youth programs. Screening these workers will help prevent youth-peer sexual harassment. Institutions can be found guilty of negligence in these cases for not providing security against such abuse. Learn practical steps to properly screen underage workers and access helpful templates for references and interviews.
When crisis arises, are you prepared? Don’t be taken by surprise next time. Learn to respond appropriately to situations ranging from common medical emergencies to crisis involving gunfire. Every church can benefit from forming a safety team that is trained to respond appropriately to various emergencies. This download will discuss the importance of having a team that can handle situations requiring security intervention, medical response, or evacuation.
The topics that most interested readers like you during the past year.
I love milestones. And I'm a sucker for top 10 lists (thank you very much, David Letterman). Since today is August 26, it means the TheYourChurchBlog.com turns 1. Naturally, I went back and looked at our 10 most popular posts for the first year.
But before I do, a few observations about our past year:
1. Subject popularity appears diverse: 3 of the Top 10 posts fall under the Law Category, with 2 each under Finance and Safety, and 1 each under Staff and Office (the other post was a general one and didn't fall under one specific category);
2. Our highest traffic day came on February 23, on the heels of our post "Oregon Case Provides a Powerful Reminder to Churches," which reviews the implications of an appeals court's ruling that allowed a pastor's victory in a defamation lawsuit against his former church to stand.
3. The post garnering the most comments was "Where You Work Best," which discusses the pros and cons of worshipping at the church where you also work.
Without further delay, here are TheYourChurchBlog.com's Top 10 posts during its first year:
10. Legally Host a Super Bowl Party: If your church is hosting a Super Bowl party this year, you will need to abide by three simple guidelines to avoid violating copyright law ... read more
9. The Top 7 Resources to Combat Church Embezzlement: Earlier this month, we looked at two recent cases of church embezzlement, and the "zero tolerance" stance judges are starting to take against these crimes. Unfortunately, yet another big headline has since emerged ... read more
8. 10 Questions to Ask About Your Church's Communication: As you approach 2010, consider these 10 questions to discuss your church’s communication efforts ... read more
7. What Will the New Health Care Bill Mean for Churches?: Now that President Obama has signed the health care reform bill into law, many churches are wondering what the impact will be on staffing costs. ... read more
4 questions with Mike Bonem, author and executive pastor
I recently posed four questions about organizational theory, leadership—and how those influence church giving—to Mike Bonem, executive pastor at West University Baptist Church in Houston and co-author of Leading from the Second Chair. Here is what he shared with me:
1) What connection exists between organizational theory and funding as it relates to churches?
In the for-profit world, money is the measuring stick of success. Increasing the bottom line by growing revenue is the driving factor behind business decisions, and they have developed sophisticated approaches for doing so, such as new products launches, market segmentation, customer retention initiatives, brand loyalty programs, and more. Businesses are also willing to look at strategic, long-term investments for the future, spending money today on something that might not pay off for two or more years.
For the church, financial resources are not the end but a means. The mistake that some churches make is to take a very simplistic approach to money as if it’s a dirty word. For example, we talk about discipleship strategies to move someone from a not-yet-believer to a fully devoted follower of Christ. We assume that their financial giving will grow as they mature, but perhaps we should have more explicit strategies in this regard. Or perhaps we should consider using cash reserves for an “investment” that is likely to bring in new members, people whose giving will “pay back” this investment in future years.
I am not suggesting that a congregation’s decisions should be run through the same financial filter as a business. There will be many decisions with no expectation of financial return, such as a low-income medical clinic or a ministry to college students. I am, however, suggesting that we could grow the resource base that is available for ministry if we learned from the corporate world.
What church leaders around the country plan to do next year.
Christianity Today, our sister publication, recently asked several financial advisers, researchers, and other observers to weigh in on whether churches should increase their operating budgets next year. Here are their responses:
"What we see is cautious optimism on the part of our church members. Donations seem to be trending upwards somewhat. Some of them are still down five to 10 percent compared to a year ago, but there is increasing optimism on the part of churches as we see some positive trends in the giving."
Dan Busby, president, Evangelical Council for Financial Accountability, and an Editorial Advisor for Your Church
"The years of prosperity concealed underlying internal issues that are the real reason giving is down at some churches. During the time the economy was good and offerings were increasing, statistics say the offerings were not increasing on a per-giver basis. … They were growing their operating budgets by growing numbers of people. When the lean resource environment sets in, scarcity begins to clarify everything. For some of these churches, it clarifies that they haven't been healthy for a while, and the abundance of money was just covering it up."
Jim Sheppard, CEO, Generis
"Our church will not. In October 2008 there was a tsunami that hit Wall Street, and almost overnight there was crisis. That did not happen to churches. Churches do not experience tsunamis, but they are experiencing rising floodwaters of financial challenges. It isn't like bam, they all got slammed; it's like people aren't giving as much. Some of our people are out of work. There's not any one cataclysmic event, but rising floodwaters of economic difficulties that are more and more affecting churches."
Brian Kluth, founder, Maximum Generosity, and a Contributing Editor to Your Church
Read responses from Crown Financial Ministries' Chuck Bentley, The Financial Seminary's Gary Moore, Barna Group's David Kinnaman, Leadership Network's Chris Willard, LifeWay Research's Scott McConnell, and Generosity Monk's Gary Hoag at the full article here, then tell us what your church anticipates for its 2011 budget.
Midway through 2010, survey shows signs of struggle and hope
Three out of four Christian households experienced stagnant or declining income levels during the past year. However, many of those households have managed to keep debt levels under control, according to results from the second annual View from the Pew, a constituency survey of 1,029 Christian households conducted during the first half of 2010 by Maximum Generosity and Christianity Today International.
Only 23 percent of households saw their family’s income increase from the previous 12 months. Meanwhile, as the U.S. economic recession continued, 44 percent saw their income stay the same and 33 percent saw their income go down.
Challenges with income did not necessarily result in higher levels of debt, however. The primary debt obligation for 64 percent of respondents was a home mortgage, according to the survey; only 35 percent of households reported car payments, and 70 percent said they actively pay off their credit cards in full every month.
“It’s a sign that a growing number of people are learning to actively eliminate and avoid debt,” said Brian Kluth with Maximum Generosity.
The View from the Pew results are consistent with ones uncovered earlier this year through the second annual State of the Plate, another constituency survey conducted by Maximum Generosity and Christianity Today International.
H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act, P.L. 111-152), is a massive overhaul of the U.S. health care system affecting nearly all taxpayers, many employers, and many elements of the health care industry. The Reconciliation Act modifies legislation signed into law on March 23, 2010 that contains the bulk of the health reform law, H.R. 3590, the Patient Protection and Affordable Care Act (Health Care Act, P.L. 111-148).
The federal health care reform law and other recent tax acts will have a substantial impact on churches and ministries. Here are the main issues you may wish to consider:
1. Which organizations are subject to the employer mandate to offer "minimum essential coverage" under a health plan? Only an "applicable large employer" (employing an average of at least 50 full-time employees during the preceding calendar year) is subject to the requirement to offer coverage beginning in 2014. Most small organizations, since they have fewer than 50 employees, are thus exempt from the employer requirement.
How different churches plan to approach pay increases in 2010.
An interesting post recently surfaced in the Church Admin discussion group hosted on Yahoo:
"Situation: Our church is currently very close to our income and expense
budget for the current year (fiscal year end in December). Last year, the board chose NOT to give any pay increases, but this year, some of them want to do so in next year's budget.
One board member feels that since some of our congregants are out of work, that we shouldn't give salary increases, even though according to our budget projections, there is no financial reason not to. He is very vocal that we shouldn't even consider raising anyone's pay.
Is anyone willing to share whether or not they are giving pay increases, and the rationale behind their decision? I'm especially interested in hearing from churches who are doing okay at meeting their budgets, and whether or not they are considering pay increases."
The administrator's question is an interesting one. If the economy is beginning to thaw—and there is still debate about whether that's actually the case—then should churches currently meeting their budgets consider pay raises for staff? Our 2010-2011 Compensation Handbook for Church Staff, which surveyed nearly 5,000 churches across the country, showed a small decline in salaries in 2009 (after a slight gain in 2008). This means many church staff members haven't received a bump up in pay in quite some time.
Here's how other church leaders responded to the question:
A special webinar this week covers important financial controls.
Back in December, we ranked the Top 7 Resources to Combat Church Embezzlement. Six months later, I’m reminded of why, and with another unfortunate headline emerging last week, it’s an opportunity for me to highlight a special online event we’re hosting this week that you can attend.
At the time of our December posting, a couple of recent headlines had caught our eye, including the “zero tolerance" stance judges are beginning to take in cases involving embezzlement at churches, and a $1 million embezzlement allegation against an individual who oversaw a Connecticut church’s investments.
In Your Church magazine’s Spring 2010 issue, many of our Editorial Advisors cautioned leaders about the ever-present threat of fraud to church finances, a problem compounded by a reluctance by some to institute stronger financial controls, or by an ongoing presumption that safeguards aren’t necessary because those in their church office are trustworthy.
Last week, we were reminded again of this threat—this time in our own backyard. The pastor of a storefront church in Aurora, Illinois, just minutes from our offices, was arrested, accused of swindling $470,000 from three men, including a member of his congregation, through a church real estate investment scheme.
Last week, we published "Weighing Fair-Trade Coffee," on YourChurch.net, the home website for Your Church magazine. We became more interested in this topic several months ago, after Kevin Miller connected with Troy Jackson, pastor of University Christian Church in Cincinnati, Ohio. University Christian partners with a Guatemalan village called Santa Maria de Jesus in a direct-trade relationship. That relationship produces La Armonia Hermosa (The Beautiful Harmony), a coffee awaiting fair-trade certification, which the church sells.
In my days as a business reporter and editor, I often witnessed the volatile debates that occur from conversations pertaining to certification and food. In the early 2000s, there were hotly contested discussions among natural foods circles about "organic" certification (many of those discussions still remain). I knew the same held true for the "fair trade" label, as this Wikipedia entry will attest. I anticipated we'd receive a variety of responses after we published the fair-trade coffee article, even though the purpose of the Your Church piece wasn't to take a position on the topic. Rather, it was written to generally define the topic and give some basic parameters for church leaders to understand as they shop coffee options.
Nevertheless, the responses began to arrive. I've posted three of them below. In the meantime, what better place to continue the conversation than here? Should churches buy fair-trade coffee?
Why outreach ministries may be affected by a looming deadline.
(Editor's Note: Since posting this on May 14, the IRS has issued a statement urging small nonprofits to still file, even though the May 17 deadline has passed).
We recently fielded a question from a reader regarding the Internal Revenue Service's Form 990-N.
Tax-exempt organizations that average $25,000 or less in gross receipts during the previous three years are required--annually--to file a Form 990-N with the IRS through a free electronic form. When an organization misses a filing for one year, or even two, the IRS will send a reminder. But if the organization fails to make its filing for a third consecutive year, the IRS will revoke the organization's tax-exempt status.
It's a big deal this year because 2009 represents the third tax year since certain law changes went into effect. And the deadline for filing for the 2009 tax year looms near.
The reader wanted to know whether the Form 990-N affects churches. The short answer is no.
But there are situations that church leaders should note because they could trigger a need for ministries and organizations related to their churches to comply. And in those situations, a filing must be made, either by Monday, May 17 (the deadline for organizations that use a January 1 fiscal year is normally May 15, but because that date falls on a Saturday this year, it pushes back to May 17), or by November 15 (the deadline for those that use a July 1 fiscal year) at http://epostcard.form990.org.
Use safety precautions when planning your next fundraiser.
Before you launch your next fundraising effort, be sure to consider some aspects that may be putting your church and your members at risk. Use the simple tips below as a checklist for your next fundraiser.
Outside Vendors. Most vendors are reputable. However, some may be inexperienced or unprofessional. Be sure to select vendors who have references. Utilize a written contract outlining their duties and get proof that they have adequate insurance.
Our quarterly church management magazine receives four honors.
Many of you may not know this, but Your Church magazine, like many other publications at Christianity Today International, is a member of the Evangelical Press Association, "the world's largest professional organization for the evangelical periodical publishing industry," as its website reports.
Each year, the EPA honors the best work from the prior calendar year. On Thursday, we learned Your Church received four awards for work performed in 2009. In all, the EPA judged 734 entries representing 87 publications:
Your Church magazine, along with two other publications, received Awards of Merit in the Christian Ministries publication category (Your Church's sister publication, Leadership journal, received an Award of Excellence, the top honor for the category);
Remote-deposit capture is an efficient way to handle Sunday offerings.
The buzz surrounding electronic giving options continues to grow as online donation capabilities improve and text-messaging campaigns take hold. The American Red Cross, for instance, says it raised $35 million within 48 hours of the January earthquake in Haiti, with half arriving via its website and $5 million through texts.
But a lesser-known technology called remote-deposit capture may provide significant benefits to churches as they sift through the large number of checks still given weekly. A February survey of 750 Christian households by Maximum Generosity, Church Finance Today, and Leadership shows 90 percent still primarily use checks for their weekly offering.
Remote-deposit capture first gained acceptance among retailers wanting to speed the clearing of checks. In recent years, banks like Christian Community Credit Union, Bank of the West, and Evangelical Christian Credit Union began offering it to churches.
Three experts weigh in on a church's budget crisis.
Mark Buchanan, Gary Fenton, and John Koessler
Mike Newson* and the rest of the leadership of Trinity Church were at a crossroads. It was January—midway through the fiscal year—and Trinity’s income projections weren’t looking any better. It seemed like cuts were inevitable. But the timing of this conundrum was especially awkward.
It was only back in October when Don Farfrae had stepped in as Trinity’s new senior pastor. The previous pastor had retired after a fruitful 18-year tenure. It was a seamless transition, with Don overlapping one month with his predecessor. The congregation was at peace—in fact, they were excited to welcome Don.
In November, Don launched a project to “refresh” Trinity’s mission. The church’s board would go through months’ worth of exercises, discussions, meetings, and retreats to evaluate the direction of the church. Mike, who was the executive pastor, was excited for the church to clarify and affirm its mission. So he, along with the rest of the board, was prepared to be patient and do this right; the process was expected to last a year and a half.
By January, however, the financial situation looked grim. The downward income trend they had seen for some time wasn’t improving. Out of the church’s $10.1-million budget, it appeared as though cuts in excess of $1 million could be necessary. This would probably include laying off as many as 20 full-time employees, as well as some part-timers.
As Mike and the rest of the board faced these numbers, they saw a new problem come to the fore. Cutting more than $1 million from the budget—no matter which staff or programs were affected—would significantly reshape the structure and focus of the church. And yet the church was only two months into their 18-month-long mission re-alignment. If the church made decisive changes now, would it short-circuit their long-term strategic discernment? No one on the board wanted that.
What churches might learn from those that spend less on staffing than the national averages.
With many congregations facing tighter budgets as they weather the worst economic recession in decades, a recent survey of U.S. church leaders shows that a small percentage of churches are able to continue doing ministry while keeping staffing costs—the single-biggest expense for nearly every church—well below national averages.
The “Lean Staffing” survey was conducted in January by Christianity Today International's Your Church magazine and Leadershipjournal, and Leadership Network. It was taken by 735 leaders of Protestant and evangelical churches.
The results show that 1 in 7 spends less than 35 percent of its annual budget on staffing costs. Historically, churches in recent years spend, on average, about 45 percent of their total budgets on staffing costs—and sometimes more.
The “Lean Staffing” study separated 539 respondents to generate the "lean staffing" comparison: 15 percent of that group spends less than 35 percent on staff, while the rest spend between 35 percent and 65 percent. The study used 35 percent or less as a benchmark since it represents a sizable decrease from national averages and it helps with statistical comparisons, said Warren Bird, director of research at Leadership Network.
Besides identifying churches that spend less on staffing, the study also found “lean-staffed” churches typically spend more on ministry efforts outside of their walls, Bird said.
“There are churches that seem to be healthy and outreach-minded that do, indeed, have a lower percentage of their budget going to staffing costs. It can be done,” Bird said. “That was very affirming.”
Also, you can listen to a 12-minute podcast between Warren Bird and me (note: free registration is required to download the podcast), and read Warren's blog post about the research (and the next steps to further research the topic).
Now that President Obama has signed the health care reform bill into law, many churches are wondering what the impact will be on staffing costs.
“Does the church have to pay 100 percent of the employee’s premiums?” “Will we be required to cover our entire church daycare staff, which currently does not receive medical insurance as a benefit?” “Will we have to pay large fees and/or provide heathcare for our employees? Health insurance is very expensive and being forced to pay could mean we no longer can afford our small staff.”
These are the kinds of questions and concerns that are surfacing on discussion boards and through readers’ questions to us.
I can appreciate the trepidation many churches are feeling. We are in a very dynamic period, with several state attorneys general having filed legal challenges to the new law in recent days, and Senate Republicans engaging in parliamentary maneuvering. No one can say what the results of these efforts will be.
And, note two additional considerations: First, if the Republican Party regains control of the House of Representatives in the mid-term elections later this year, it will have the authority to defund implementation of many, if not most, of the provisions in the new law. Second, even if none of these roadblocks stop this legislation, many of the provisions in the law do not take effect immediately. Some do not take effect for several years.
The bottom line is that it is premature to say what all of the ramifications of this bill will be.
I am currently reviewing the impact of each provision in this 2,500-page bill on churches, while at the same time monitoring the potential obstacles to full implementation. I will be sharing the results of my analysis in upcoming articles for Church Law & Tax Report and Church Finance Today.
In the meantime, if you have questions on this new legislation, please feel free to submit them to: CLTReditor(at)christianitytoday.com.
Why a once-strong budget month may be on the decline.
In the latest “State of the Plate,” survey, in which we worked with Maximum Generosity’s Brian Kluth to poll 1,000 church leaders on the health of their churches’ finances in 2009, an interesting pattern emerged—December didn’t save the day for many congregations the way it typically does.
Is it a new reality? Or yet another anomaly in a year wrought with economic firsts? That remains to be seen.
One down year alone doesn’t indicate a trend. But when I interviewed attorney Frank Sommerville, a veteran of nonprofits and churches, last November for the Spring 2010 Your Churchcover story, he projected an “ugly” December, and said it very well may be a sign of the times: “Don’t bank on December. (Churches) need to know the reality is that it’s not going to be as easy for them to raise money in December as it has been in the past.”
We’ll have to watch closely in 2010, and for good reason. December brings increased attendance to many churches because of the holidays. And in the past, many who showed up often did so with a year-end bonus or other financial windfall in hand. That led to a surge in giving to churches, which then typically helped them meet their annual budgets just as the year came to a close.
That didn’t happen for many in 2009, though. And if the pattern continues in 2010, it may change the way churches view giving initiatives year-round, not to mention the ways they budget for expenses—and when.
The “State of the Plate” told us the following about December and the start of 2010:
A pastor's worst nightmare leads to a new beginning.
Ralph Neighbour III, with Jim Wilson
My lawyer said, "Just follow my lead and answer the questions he asks, and everything will be okay." I clung to his advice as I entered the smartly decorated boardroom lined with towering bookshelves. The first thing I noticed was the videographer and stenographer setting up their equipment. Then the opposing counsel, who to me represented evil incarnate, walked into the room.
"Please state your full name for the record." His tone and mannerisms suggested this was strictly routine. For the others in the room, this was just another work day. They pushed buttons on the camera, they typed on the stenograph machine, they served coffee, they represented their clients—this was a 9-5 job for everyone in the room. Everyone, that is, except me.
I cleared my throat and said, "Ralph Webster Neighbour III."
"I am sure your lawyer has explained to you the deposition process, but let me explain it again for the record …"
There was that phrase again—"for the record." I thought: This is high stakes. The church's reputation and my future are on the line here! I also knew this deposition was just the beginning; we would walk at least another year through this legal maze.
I couldn't believe this was happening to me—a seventh generation pastor. But here I was, giving a deposition in a sexual misconduct lawsuit. This was not what I signed up for!
This article first appeared in Leadership journal. The full version is available atLeadershipJournal.net. For additional resources on embezzlement and sexual misconduct issues for churches, please visit:
Here are the Internal Revenue Service's top 10 tips that will help your tax filing process “run smoother than ever this year.”
1. Start gathering your records. Round up any documents or forms you'll need when filing your taxes: receipts, canceled checks and other documents that support an item of income or a deduction you're taking on your return.
2. Be on the lookout. Gather any W-2s and 1099s that were mailed to you by your employer. You'll need these to file your tax return.
3. Try e-file. When you file electronically, the software will handle the math calculations for you. If you use direct deposit, you will get your refund in about half the time it takes when you file a paper return. E-file is now the way the majority of returns are filed. Last year, 2 out of 3 taxpayers used e-file.
“State of the Plate” shows debt levels, giving patterns for families.
What really matters in an economy is not what the media says, but what people’s personal wallets say. As part of the second annual “State of the Plate,” 750 Christian households provided an inside look into their income, employment, debt, and giving/tithing.
I'm conducting this research with Christianity Today International’s Church Finance Today and Leadership journal. Based on preliminary results of this research, I've found that the average Christian family, though directly impacted by the economy, remains committed to faithful and generous giving to their church and ministries as a major priority.
Here's a closer look at four findings:
1) Income: The majority of families have either lost ground or remained flat financially this past year. For many years, most families saw their income increase. This is no longer the case as more and more families that completed the survey personally felt the effects of the sluggish economy:
- 33 percent of households said their incomes went down this past year.
- 43 percent of households saw no increase in their income.
- Only 23 percent of households saw their income increase.
2) Jobs: The negative effects of the economy are being felt in people’s homes and church. Almost everyone knows someone who has been negatively impacted by the economy. This financial pain has been felt in people’s immediate families, and everyone is mindful of other families in their church who are facing financial and employment struggles, too:
- 97 percent knew someone in their church who had lost a job in the past 12 months.
- 42 percent indicated they know people in their church who had to move away to find work.
- 33 percent of families had someone in their household whose job was negatively impacted by the economy.
- 30 percent know people personally who have lost their homes.
- 26 percent personally know people who declared bankruptcy.
Nearly a third say December giving fell short of expectations.
A “new normal” is emerging in the church world when it comes to giving, budgets, and generosity initiatives, according to an ongoing survey conducted by Maximum Generosity and Christianity Today International’s Church Finance Today and Leadership journal.
Five major developments are emerging from the survey, which asks church leaders and pastors to report on how their giving efforts concluded in 2009 and began in 2010:
1) The poor economy is hurting a growing number of churches. While the headlines may say the economy is improving, its impact hasn’t shown up yet in the offering plate:
- The number of churches reporting a decline in giving this past year has increased to nearly 36 percent of churches surveyed, compared to 29 percent at the same time a year ago.
- Only 38 percent of churches saw giving increase this past year, compared to 47 percent a year ago.
2) Many churches say December year-end giving fell short. While Rick Warren’s December appeal to more than 100,000 e-mail recipients helped his church adequately close the gap on a year-end budget shortfall, many other churches weren’t so fortunate. In the “State of the Plate,” 30 percent of churches surveyed said that their December year-end giving “missed” their expectations. Only 24 percent of churches indicated that year-end giving surpassed their expectation. With nearly a third missing expectations at the end of 2009, many churches likely entered 2010 looking for ways to slow their church spending.
What churches should remember while seeking outreach funds.
If your congregation plans to seek grant funding for programs in 2010, keep in mind that the grants picture has changed quite a bit in the past 12 months due to the economic downturn. As I research local (Minneapolis-St. Paul) and national funders for several clients, and talk to a variety of churches and ministries about their grant-seeking efforts, I notice the following developments. They are worth noting in the weeks and months ahead:
Grantmakers generally have less money to give. Due to the downturn in the stock market, and reduced corporate profits during the past year, available funds are down. Funders are handling this in several different ways. Some are not making grants to any new organizations, which means if you don't already have a relationship with the funder, 2010 will not be a good year to try. Others are cutting the size of their grants. I occasionally encounter one organization that plans to stop making grants altogether for the coming year. So, when you call or e-mail a funder about applying for a grant, it will be important to ask, "Will you be making grants to any new organizations this year?"
It is important to frequently check funder websites. A number of funders have changed their guidelines and focus areas, sometimes without much notice. The foundation that looked like a perfect fit for your after-school program six months ago may have changed its focus to programs providing food and shelter. A few months ago, one foundation that I monitor abruptly changed its focus areas over a weekend, taking everyone (including the foundation staff) by surprise!
Budget shortfalls bring tax-exempt status under fire.
Marian V. Liautaud
Like countless other municipalities throughout the country, Fort Wayne, Indiana, is struggling to find ways to bridge the gap between declining tax revenue and the costs of maintaining infrastructure and services.
What makes Fort Wayne stand out is the city’s mayor, Tom Henry. Henry is leading the charge for the Urban Mayor’s Caucus of Indiana to tax nonprofit and church-affiliated ministries to help solve his region’s revenue shortfall.
CTI invited well-known and well-respected members from church legal and financial circles to an Editorial Advisory Board to bring authoritative and qualified eyes to its work.
The 14 advisors will regularly contribute to the church management division’s publications, websites, and resources, and also will regularly provide ideas, thoughts, and feedback, shaping the articles, videos, books, blog posts, and other resources that guide church leaders on important legal, financial, safety, and administrative decisions.
Noted church and business leaders who will lend their expertise include:
New LifeWay research says churches ''still waiting for recovery."
Ed Stetzer, president of LifeWay Research in Nashville, wrote a post today highlighting new research regarding continued economic pressures on U.S. churches. LifeWay gathered the research in November through phone surveys with 1,002 church pastors.
The overarching message: Churches are still waiting for a recovery.
"Effects of unemployment tend to lag a bit for churches that emphasize tithing, but as the unemployment rate continues to increase, more congregations will get hit financially. Churches need to be ready for this impact," Stetzer said.
Fast-forward to the new LifeWay research released today and covered by USA Today and the Christian Post, among others:
There's something psychologically important about writing a check and putting it in the plate.
Sarah Pulliam Bailey
I stopped tithing a few months ago. Okay, no scandal here. I got married in September, and my husband and I moved to a new area and wanted to find a church. As we slowly combined our finances, it became painful. (He’s a cheapskate, and I didn’t want him to see every pair of earrings I splurged on.)
Within a few months we found a church that we really liked for various reasons. As the new year approached, we resolved to streamline our finances. Eager to get in our giving before 2009 ended for tax purposes, we talked about back-tithing. We decided to tithe the four months we had been married, which felt like a lot of money. It was daunting to put the check in the offering plate and watch the money pulled from our bank account. I then vowed to talk with someone about having our tithing automatically deducted from our account so we wouldn’t think twice about it.
On one hand, you could argue, “It’s not your money to begin with, so pretend like you never had it.” On the other hand, there’s something psychological about physically writing a check and putting it in the brass plate. If we all paid our taxes once a year instead of having them automatically deducted from our paychecks each pay period, we would probably feel the pinch much more. I often wonder whether I should stop the deduction so I could invest the money during the year and then pay up later. (But that, of course, requires some self-control.)
The authors of Freakonomics, economist Steven Levitt and journalist Stephen J. Dubner, report that economist Milton Friedman came up with automatic tax withholding from employees’ paychecks. Americans weren’t paying their income taxes, as I would imagine it’s hard to remember to save up a huge chunk every year. Levitt and Dubner also write a lot about the importance of incentives: We need a really good reason to eat our vegetables (think Vitamin C) and to resist the temptation to speed (think a $100 ticket).
Understanding how lean personnel costs are--or aren't.
How lean is your church staff? How does it compare with other church staffs? If you've ever wondered about these questions, here's your chance to find out.
The editors of Christianity Today International's Your Church magazine and Leadership Journal are collaborating with Leadership Network to learn about healthy ways churches keep staff costs down. If you'll take a few minutes to tell us about your church, you'll receive a copy of the findings, showing you what other churches have said.
Your replies will be held in the strictest confidence. The final report, and any subsequent articles and presentations, only will give group totals.
Please complete the survey by January 25, 2010. If you have questions or comments, there is contact information provided on the first survey page.
Two pastors debate the merits of church buildings.
An interesting debate between Pastor Dan Kimball and Ken Eastburn, a leader of a house church network in Orange County, California, began this month on Out of Ur, the blog of our sister publication Leadership Journal.
On December 2, Kimball wrote a piece entitled, "I Was Wrong About Church Buildings." In it, he discusses his journey as a church planter during the past eight years, and his gradual realization that church buildings can, in fact, enhance and advance ministry, not just drain resources.
Two weeks later, Eastburn published a response. Here's a quick highlight of what Eastburn wrote:
"I am writing this because the subject of the necessity of buildings is a crucial topic to discuss all across the Church. You do indeed describe good uses for buildings … but what is good, may not be best – either for your church or for the Body of Christ worldwide. Allow me to explain. After you listed good uses of both your church’s building and others’ (i.e. Compassion International), you made this statement:
'These missional opportunities would not be possible without a building.'
There are three reasons why I think you’re mistaken."
Eastburn then goes on to say:
"Churches around the world manage to be missional, make disciples, and spread the good news, without any building whatsoever. Even more, they are doing it better than churches in the West with buildings. You see, it is not buildings that create a consumer-mentality, it is just the opposite. It is our consumer-mentality that causes us to think we need buildings. Buildings can be great tools, but the Church gets by…no, the Church thrives … every day without them."
In Your Church's 2009 Church Budget Priorities Survey, buildings are the second-biggest expense for most churches, trailing only staff expenses. Given Kimball and Eastburn's discussion, are buildings one of the best uses of church resources--or not?
Looking back at the articles you read most this past year.
Last week, we wrote about the Top 10 most-read posts on TheYourChurchBlog.com during 2009. This week, we're taking a look at the Top 10 most-read articles from YourChurch.net, the website for Your Church magazine.
For a year riddled with bad economic news, there are a few surprises in these results (hint: Our No. 1 ranked story has nothing to do with the economy, or finances for that matter). What can we conclude from this? Probably not much. Except the fact that church administrators, executive pastors, pastors, and lay leaders wrestle with a variety of challenging, and often complicated, questions on a wide array of topics.
A look at the hottest topics facing pastors and administrators.
As 2009 draws to a close, here's a fun look back at the year's 10 most-read posts on TheYourChurchBlog.com. Doing this kind of review often helps us understand the most pressing issues facing church administrators, executive pastors, pastors, and leaders.
And, it's a nice way to showcase topics that you may have missed the first time around.
Best practices and guidance to protect your church's money.
Earlier this month, we looked at two recent cases of church embezzlement, and the "zero tolerance" stance judges are starting to take against these crimes.
Unfortunately, yet another big headline has since emerged—this time, the leaders of a 150-member Greek Orthodox Church in Connecticut discovered someone potentially embezzled more than $1 million. Federal authorities investigated the claims, and in an arrest made Tuesday, authorities say the suspect, who oversaw the church's investments (including managing the building fund and endowment) allegedly used the money for his businesses, according to the New Haven Register. The church's attorney, and federal documents released with the arrest, allege the 50-year-old man stole more than $2 million from three parishoners, and potentially millions more from the church, the paper reported.
As incidents such as these continue to spring up, we've compiled the Top 7 resources church leaders should use to prevent embezzlement opportunities and combat individuals who might attempt to steal:
The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.
Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:
* 50 cents per mile for business miles driven;
* 16.5 cents per mile driven for medical or moving purposes;
* 14 cents per mile driven in service of charitable organizations
A sad story emerged last week out of Indiana, where a 37-year-old woman accused of stealing more than $350,000 from a church while working there as an employee received the maximum sentence allowed by the state.
According to an article in the Greencastle Banner-Graphic, the local paper, the woman was convicted on six counts of Class C felony charges and six counts of Class D felony theft, resulting in 10 years in the state jail, followed by 5 years of probation.
The woman began stealing from the church shortly after getting hired in late 2004 as the church's financial and administrative secretary, according to the article. She forged signatures on 192 checks, doctored bank receipts to cover it up, and also made unauthorized charges on church credit cards, the paper said.
This case is similar to one covered by Richard Hammar in November's Church Finance Today in which a woman employed as a church office manager for seven years stole $450,000. She received a 15-year sentence, which included an upward adjustment "for misrepresenting that she was acting on behalf of her church," according to the article.
What's the takeaway for church leaders from these cases? Aside from the need to implement strong financial controls, if such controls aren't already in place, Richard explains three reasons why church leaders should learn from cases like these:
Key questions an administrator or executive pastor should consider.
In early 2008, we made the decision at Fairhaven Church to move forward with an $8 million construction project, even as the signs of recession popped up everywhere. Reports of other churches delaying or canceling plans for expansion were easy to find. We concluded that we should move ahead carefully, yet confidently.
Why? What questions did we wrestle through that led us to conclude that moving forward was the right decision?
Below are 10 questions to help you galvanize the issues that are important in balancing the uncertainties of the economy with the need for building expansion:
Walk the streets of Disney World, and visitors are transported into a magical world of creativity and inspiration. Mel McGowan, a former Disney Imagineer and now president of Visioneering Studios, a national church architecture firm, brings this same expectation for creativity and inspiration to ministry facilities.
When McGowan speaks at the Cornerstone Knowledge Network conferences, WFX, and other facilities-related events, he shows slides of churches he has designed. Invariably there is murmuring in the crowd: "Those are really neat churches, but they must have cost a fortune." "We could never afford a church like that?"
At first glance, people assume the level of excellence represented in these church designs equates to top-dollar budgets. McGowan is intent on busting this myth. With the right materials and intentional design, he contends, churches can create sacred space that captures their uniqueness within the parameters of their budget. Case in point: Crossroads Christian Church in Corona, California.
An executive pastor suggests a different analysis of expenses.
Paul Clark, one of Your Church's contributing editors, wrote an interesting post this week on his blog. Paul is an executive pastor who at one time spent several years in a managerial role with General Electric. His business background gives him an interesting perspective on how churches operate.
This week, Paul challenges three common questions often asked among church administrators: What percentage of a church's budget should go toward personnel expenses? Facilities? Ministries?
"Those are great questions, but they are a bit narrow in their scope. The reality is that a church budget is a reflection of the overall strategy and focus of the church in a given calendar year. That focus can change from year to year and consequently, the budget percentages will change accordingly."
Paul then illustrates what he means, making the case for projecting expenses further into the future to truly understand overall budget ramifications.
The average breakdown in expenses for church operating budgets, based on responses from 1,168 church leaders:
- 38% toward salaries and wages
- 12% toward buildings/facilities
- 8% toward utilities
- 7% toward ministries and support
Our survey participants mostly hail from small- to mid-sized churches; organizations like NACBA and Leadership Network, both of which typically survey larger churches, report salaries and wages, on average, take up 45% to 50% of church operating budgets.
Like Paul asks, how does your church assess these expenses, and how those expenses reflect--or don't reflect--the church's direction now and in the future? Is an analysis like Paul proposes more instructive for current and future church budget planning?
Current legal trends that can help your church assess its vulnerabilities.
Richard R. Hammar
For many years, I've closely reviewed litigation involving churches to identify patterns that pastors and leaders can use to assess their own risks and potential vulnerabilities. In 2008, the following five types of cases brought churches to court more than any others:
1. Sexual Abuse of a Minor (15 percent of cases). Sadly, this type of case is typically the No. 1 or No. 2 reason churches wind up in court every year.
2. Property Disputes (13 percent of cases).
3. Zoning (10 percent of cases).
4. Personal Injury (9 percent of cases). This is a Top 4 issue every year.
5. Tax (7 percent of cases).
Based on this ongoing analysis, churches should note the following major risk categories they face and work to evaluate (and to minimize) their own risks:
More than three-fourths of those surveyed hail from Protestant denominations, the two organizations said.
Nearly 37 percent of congregations said their collections grew during the first half of 2009 compared to the same period of 2008, while another 34 percent said their collections remained flat year-over-year, the research showed.
The remaining respondents said giving declined in the first six months of 2009 compared to the same period a year ago--up 8 percent compared to survey results from a year ago, the two organizations said.
Is your church struggling with a mortgage? Some tips on how to act—now.
A headline I read earlier this week from the newswire service United Press International gave me pause: “More Churches Face Foreclosure.” Upon reading the piece, I quickly understood why: While the rate of foreclosed church properties continues to climb, thanks partly to some widely publicized defaults in Naples, Florida, and Temple Hills, Maryland, among others, the overall number remains small.
As the article points out:
“The scope of the problem is difficult to measure. Most of America’s 335,000 churches are well established, building costs paid off long ago. The situation among a minority of congregations, however, is certainly worse than it was last March, when the New York Times found that 0.31 percent of the 82,441 churches it studied were facing foreclosure.”
Not many can say 2009 delivered a banner year, but these types of headlines suggest a widespread financial problem among churches, which just isn’t the case. (As Dan Mikes from Bank of the West pointed out to me, his division has $1.3 billion in direct church loan exposure “without a single delinquency, loss, or foreclosure.”)
Nevertheless, these headlines remind me that some churches are struggling with how to make a mortgage payment. To help, we asked three lenders to tell us what churches facing a financial crisis should do if they aren’t able to make mortgage payments. Here are their responses.
Most churches don't use a program budgeting method--and they're missing out
Richard Vargo and Vonna Laue
Earlier this year, we released The Essential Guide to Church Finances by Richard Vargo, a professor of accounting in the Eberhardt School of Business at the University of the Pacific, and Vonna Laue, a partner at nonprofit accounting firm Capin Crouse.
Below is a free excerpt, which discusses the advantages of program budgeting and why churches that use incremental budgeting strategies put themselves at a disadvantage (and, if you like what you see from this excerpt, you can order your copy of Essential Guide to Church Finances here).
An interview with Brian Kluth on teaching members to give to God.
Some estimate giving to churches is on a 40-year decline. In contemplating the reasons why, here's a thought that should give church leaders pause: A church budget usually is set to the level of its people's unfaithfulness.
That's one of the messages Brian Kluth is taking to churches around the country.
Brian spent 10 years as the senior pastor of the First Evangelical Free Church of Colorado Springs. Nine out of those 10 years, the church ran a surplus budget. In the four years prior to Brian's arrival, the church never met budget.
Earlier this year, the church commissioned Brian to become a "generosity minister at large." In addition to developing his resources and writing a book, Brian now is touring with the Evangelical Council for Financial Accountability and its 14-city "recession-proofing churches and ministries" workshops.
Brian recently visited Christianity Today International and sat down with me to share more about the tour, and about developing a culture of generosity in your church. In our short interview, Brian makes several interesting observations, which you can hear by clicking the link below (the audio player you need appears with the rest of this post).
Research underscores the power of relationships for church leaders.
A new study about the best ways to secure larger gifts from donors strongly reinforces the central theme of “Asking for Big Gifts,” an article in the current issue of Your Church: face-to-face time matters. A lot.
In fact, it matters so much, the study reveals “donors to religious organizations gave an average of $2,904, or 42 percent more, when they were asked in person by someone they know,” according to an article published Wednesday by Philanthropy Journal.
That stat provides a tangible reminder of the power of relationships. Of course, when it comes to ministry, face-to-face time should matter more than just to land a big-dollar donation. We were created for relationship with the Lord, and for relationships with each other. Relationships matter a great deal to Him. We should strive to maintain healthy, edifying ones with all congregants, regardless of their financial situations, because the fruits of such efforts are eternal.
Keeping that in mind, there are people in your congregation who feel the Lord has blessed them in terms of finances and resources. For a church leader, the key is to learn more about these people by listening to them, and to hear about how their passions might align with the church's vision.
How church administrators can prove—and increase—the worth of their roles.
In this uncertain economy, with so many churches scrambling to reduce expenses, the role of the church administrator inevitably will come under the bright light of scrutiny. Because of this uncertainty, church administrators need to spend time reflecting on ways to showcase—and increase—our value to the churches we serve.
Nearly half of the 1,168 churches surveyed by Your Church magazine earlier this year indicated giving at their churches was on the decline (click here for the full report). Personnel costs usually consume between 45 percent and 60 percent of a church’s budget, so that makes it fertile ground for reducing expenses. And as a senior pastor or key decision-maker looks across the staff, the cost of the church administrator might appear more tempting a fruit to pluck off the vine than other staff positions because the perception is that the administrator does not have the direct impact on ministry that other church positions offer.
The administrator usually doesn’t preach, doesn’t counsel, doesn’t meet with new families, doesn’t lead programs, or possess nearly as public of a face as other staff members. It could be suggested, albeit incorrectly in my opinion, that a church could release a church administrator and not see a direct impact to the ongoing ministries of the church. That kind of reasoning is wholly short-sighted, but perhaps understandable in tough economic times like these.
That’s why we must demonstrate our value and find ways to further expand that value, not just to lessen the likelihood we’ll lose our jobs, but also for the far more noble desire to increase our impact in Christ’s Kingdom. We want to become more valuable because we can and, because in so doing, we’ll gain the fulfillment that comes from knowing we have made a difference in our world through the Gospel.
The role of church administrator is one of efficiency and productivity. It allows the church organization to function smoothly and effectively. It involves processes and systems that indirectly, yet significantly, impact the people we serve in our churches. The church administrator often works behind the scenes to ensure resources are wisely and efficiently used. The church administrator also creates and implements policies and systems that promote harmony, decrease ambiguity and confusion, and allow for greater productivity and impact toward the church’s mission.
Here’s how to showcase these very important qualities and raise the bar even higher:
Survey: Pastors, church staff nationwide see slight pay declines.
About half the nation’s full-time pastors report they received no salary increase in the past year, continuing a downturn in salaries among top leaders in churches, according to a new survey published by Christianity Today International. In fact, the extensive survey, publishing this fall in the 2010-2011 Compensation Handbook for Church Staff, shows a slight decline or stall in pay levels for the majority of every church employee surveyed this year.
The Compensation Handbook was developed to provide church leaders and employees with a current and reliable picture of compensation practices across a broad spectrum of American churches. It presents survey data from nearly 5,000 churches representing more than 10,000 staff members in 13 ministry positions, both full-time and part-time, ranging from pastors to childcare positions. The survey was conducted in February and March from subscribers of various Christianity Today International magazines, e-newsletters, and web channels, including Church Law & Tax Report, Church Finance Today, andLeadership, a journal for pastors and church leaders.
Among the findings:
• After a slight bump up in salaries in 2008, the new survey finds a small decline reported in 2009.
Tips and tactics to remember when it comes to contracts.
John R. Throop
The deal sounded good.
About 50 churches in the Washington, D.C., area leased interactive electronic kiosks for their entrance areas so that members and visitors could check on activities and news and register for classes and meetings. The selling point? Church leaders say the kiosks were presented to them as “cost-free,” with the chance for their churches to potentially earn revenue from advertisers interested in reaching church audiences.
But in April, a lawsuit filed against three commercial leasing firms, an online services firm, and an interfaith digital network services firm by the District of Columbia churches suggested the deal wasn’t a good one. The churches say they received lengthy—and costly—leases and faulty equipment, as well as fees and termination expenses. All told, the lawsuit estimates hundreds of thousands of dollars in combined losses for the churches.
Officials from at least two of the firms deny the allegations. News reports indicate that the companies must prove the charges and expenses were disclosed—in the “fine print”—even as the equipment was advertised as cost-free.
The situation underscores why it’s important for church leaders to review any contract before signing it. Legal experts concede that contracts and agreements can be tough to navigate, but necessary to do nonetheless.
“One insurance coverage contract I reviewed was over a thousand pages long,” says Frank Sommerville, a Christian attorney based in Houston. “There was a lot of complex language surrounding liability coverage and exclusions, and that could create a lot of potential issues for the church.”
Church leaders don’t want to find themselves on the wrong end of a deal. Details really do matter. For that reason, it may be especially important to secure an attorney’s help with reviewing larger contracts. In addition, these seven items are important to remember when it comes to reviewing purchasing and leasing deals:
During tough economic times, many churches are looking at cutting all travel for training and events, but that may not be the wisest decision. Here’s why:
Care. The church is about people caring for people, so your most important resource is people! They need to be trained and equipped to not only care, but guard and protect. They need to know how to identify young leaders and raise them up. They need to develop an eye for gifting and calling as well as those on the margins. Investing in people is one of the best investments you can make.
Creativity. Conferences and events are a great way to infuse your staff with engaging, innovative ideas and energy. Many events offer workshops and practical advice on how to handle the challenges of economy as well as do big things on small budgets. In addition, conferences often provide a gold mine of best practices. Skipping out may cost you more in the long haul.
Communication. Conferences and events provide your staff with a common language. Staff members sometimes struggle to put into words what they want to see changed or developed in their church. When staff members attend events together, they develop a common vocabulary and shared experiences, which are critical ingredients for innovation, growing a team, and developing a healthy congregation.
Close proximity. More conferences and events are looking for regional options in 2009 and 2010. Like Passion a few years back, more events, including Catalyst, are looking at more regional, coastal, and one-day events. That means you may be within driving distance to an enriching event—saving time and money. Keep your eyes open for events and conferences in and near your area and encourage staff to attend. In addition, keep an eye out for conferences and events that offer online attendance options or let you purchase DVDs and CDs to share with your staff.
More than ever, now is a time to embrace best practices, innovative ideas, and the encouragement of gathering with others facing similar challenges in ministry.