“Don’t get hung up in the “used-to-be’s.” If you are a follower of Christ, your new identity is in Him – not who you were, or what you did before Christ.” – Ken Saxe
“Behold, I make all things new.” -Revelation 21:5
by Raul Rivera
I wrote previously about the pastor of a wonderful church that made a great impact in their community. As the leader of an excellent ministry, it was obvious to all that God’s hand was upon this man to fulfill a unique calling. Yet, as the years progressed, it became evident that he lost his way in the glory of success. I want to give you three very important keys that will help you build a structure for success.
Structure can be defined in many ways. I like to define it as a comprehensive plan that aligns the vision, mission, and ideals of the church in light of today’s legal environment. I often ask myself, “How can our church have maximum outreach potential while minimizing civil liability?” “How can our church multiply its finances in today’s complex business world, without falling out of compliance with tax-exempt laws?” And most importantly, “How can I experience maximum success and keep my heart humble and sensitive to the Lord?” You do it with structure.
Below are three things I did early in ministry to keep my heart in a place where I could receive correction if needed.
Accountability Board: When I pastored in Florida, I had an accountability board. This was a board separate from my board of directors. I carefully chose three men who were willing to hold me accountable for my actions whether those actions were in the church or outside of the church. In choosing these three men, I was careful to choose men who loved truth, without compromise. The accountability board was codified in the constitution and bylaws of the church and granted the authority to weigh out any accusations against me that were levied unanimously by the board of directors. The accountability board would determine whether I would be removed or disciplined. It is this type of structure that keeps one inside the lines.
Financial controls: When pastors lack the structure of excellent financial controls, they will soon lose their way. Good financial controls require the church to have a budget, spending limits on transactions, and frequent checks and balances. The constitution and bylaws ought to give the pastor significant day-to-day control over the direction of the church. However, when it comes to spending, setting a maximum limit on a transaction before getting board approval is a good restraint. While having a spending limit restraint is good, an active treasurer that keeps the books in balance on a monthly basis is the best check and balance a pastor can have. I was blessed with an amazing treasurer. He never allowed one month to pass without entering every transaction into our accounting program and balancing the checkbook. Knowing that I would have to explain transactions that were uncommon or questionable was enough to make sure I did not use any of it improperly.
Make Legal Compliance a Priority: Legal compliance is a risk that presents itself every day. Whether it is fraud, asset protection, or liability exposure, I have seen how a lack of legal compliance harms a church. Please do not wait until the IRS, a State Revenue Officer, attorney, or a civil dispute forces you to make compliance a priority. Like the pastor in this story, an unfavorable audit can lead to people and the community losing faith in you as their spiritual mentor. Conversely, when a church values legal compliance it is actually valuing God’s Word. The level of your church’s willingness to achieve legal compliance reveals the seriousness with which you take the mission and vision of the church. One cannot be surprised if the very thing that continually slows or prevents a church from growing is the failure to have a structure that values legal compliance.
The pastor in this story has been fighting for years in legal battles between him and the church he pastored. Instead of investing his life in impacting people’s lives and building the Kingdom of God, he has been sidelined being sued by his church. You probably know a pastor that has lost his/her way. I know you do not want to lose yours. I close with these simple instructions. Like Solomon once said, “My son, pay attention to my wisdom; listen carefully to my wise counsel.” The greatest testimony and legacy of your ministry will be that your heart always remained tender and teachable before the Lord. Therefore, put a structure around you so that in success you never lose your way.
The IRS defines benevolence using a supreme court decision that defines benevolence, under Section 102, as a gift given from “detached and disinterested generosity,” and also out of “charity or like impulses.” This current interpretation of benevolence allows the recipient to receive the gift tax free, in turn the church does not have to issue an IRS 1099-Misc form to those that receive the help. However, there are some very important steps that need to be taken in order to properly implement a benevolence program. Income Tax Regulation 1.501(c)(3)-1(d)(2) defines those who qualify for benevolence by stating:
“that persons who are financially unable to care for themselves as a result of sudden and severe or overwhelming financial burdens arising from events beyond their control are proper objects of charity because they are considered to be “distressed.””
Moreover, Income Tax Regulation 1.170A-4A(b)(2)(ii)(D) defines “needy” as describing a person who lacks the necessities of life, involving physical, mental, or emotional well-being, as a result of poverty or temporary distress.
Revenue ruling 56-304 clearly dictates that benevolence sponsored by the church or other tax exempt ministry must maintain certain records and meet certain criteria in order keep tax exempt status. Some of the most basic steps are as follows:
- Distributions are made on a true charitable basis in furtherance of the purposes of the church or ministry.
- The church or ministry must maintain adequate records and case histories to show the name and address of each recipient of aid.
- Record the amount distributed to each recipient and the purpose for which the aid was given.
- Record the manner in which the recipient was selected.
- State the relationship, if any, between the recipient and the church or ministry and all of its directors, members and givers who make substantial contributions to the benevolence fund.
- All distributions made to individuals must be substantiated upon request by the Internal Revenue Service.
Please keep in mind that these are just the bare essentials of properly operating a benevolence program.
Source: Raul Rivera, StartChurch
Important protections against money mismanagement.
by Dan Busby, CPA
By contrast, lack of wisdom or integrity in people who handle expenses will often have an adverse affect on a church budget. Giving should be to the Lord, not in relation to where or how the money is spent. Nonetheless, congregants may give less if they lose faith in how church leaders are spending money.
The senior pastor has a great responsibility to interpret—from the pulpit and in printed communication—the financial condition of the church. This includes providing information on both revenues and expenses. The church might also consider the following safeguards on the receiving and disbursement of church funds:
Controls on Expenses
Three elements are key to controlling the disbursement of church funds and safeguarding them from misappropriation:
- The person who approves purchases should not prepare the checks for payment.
- The person who prepares the checks should not be authorized to sign them.
- The check signer should not be the person who approves invoices for payment.
When the same individual performs all three of the above procedures, it could lead to a problem somewhere down the line. At the very least, a church should appoint different individuals to count weekly offerings as to pay the bills. But segregating the duties of expense and purchase approval, check preparation, and check signing is the best way to control the disbursement of funds.
Does your church or ministry board have robust discussions on key issues? Are the values and policies of the organization clearly articulated? Are annual evaluations, based on predetermined goals, made of the organization’s leaders (such as the pastor or executive director)? Does the board evaluate itself as rigorously as it evaluates the organization’s leaders?
Setting the biblical tone for financial accountability at the top:
Biblical financial accountability starts with the organization’s board and top leadership and permeates down through the staff. If the organization is a church, the accountability tone starts with the senior pastor or equivalent leader.
Source: Dan Busby, CPA – 2014 Church and Nonprofit Tax and Financial Guide