Because of dependence on the Whack-a-Mole management strategy, many churches seldom look past their current situation. Unlike ancient sailors who took periodic “soundings” to determine how close they were to shore, many churches take few, if any steps, to determine if they are headed for rocky waters. Unfortunately, a rising number of them do not realize they are in trouble until they run aground.
It is true that the Bible cautions us to not presume on the future. (James 4:13-15) But, churches are also called to be good stewards. As long as the church is acknowledging God’s will in the matter, part of good stewardship includes making some long-range plans. Failure to do so could result in disaster.
Operating without a master plan in regard to land and facilities
Several years ago at one of PSK’s church business administrator breakfasts, we invited the local fire marshal to speak on fire safety. He mentioned one thing that surprised me and another thing that made me think of the importance of master planning.
The surprise? Other than petroleum or chemical fires, the fires feared most by firemen are church fires. Because churches are filled with combustible items, paper, wood, fabrics etc. a small electrical problem can quickly ignite into a raging inferno. But what he said next made me realize that poor master planning can be deadly as well.
How does this tie into master planning? The factor that endangers firemen the most is not the presence of combustibles. It is the fact that too many churches are a hodge-podge of different structures. Without an integrated building plan which looks to the future, church structures tend to become a series of additions added one to another. The result is a confusing maze of hallways, cubbyholes and dead-ends. (Tragically, in some cases this has been too literal).
This can be avoided if churches take the time to plan for the future.
Operating without a formal, written accounting and management policy manual
In addition to a budget, a formal management document is a must to help insure that the church makes appropriate and effective short-term decisions. Written policies and procedure documents assist churches in the administration of activities by helping to set forth in clear, unmistakable terms the mission of the church and how it will be carried out. The manual will also establish and reinforce the organizational structure of the church by providing a clear delegation of duties and responsibilities. It also will serve as a guide to direct and oversee the carrying out of Church activities.
One of the purposes of written policies is to head off problems before they arise. And, in cases when problems do arise, having policies in place makes navigating the choppy waters manageable. For instance, suppose your church is offered a gift of land of a sizeable dollar value. (According to the donor…) The church accepts the land, transfers the title, and later learns the land has significant environmental issues. (For example, the land was the site of a former gas station, dairy, or dry cleaners, etc.) Unfortunately, accepting the land also results in accepting the liability for cleaning up the mess. A good contribution policy could help prevent this from happening by requiring all gifts of property be approved by the appropriate committee prior to acceptance. Contribution acceptance is just one of the topics to be included in a policy manual. Here are a few more.
Organizational structure
Budget development
Cash management
Offering counting, recording and reporting
Bill approval and payment
Vendor approval
Investments
Financial statement presentation
Personnel and employee benefits
Insurance
Conflicts of interest
Fundraising
Building and property use
Restricted funds
Intellectual properties
Short-term mission trips
KEY: A church accounting and management policies and procedures document is another brick in the wall of risk management. The goal of establishing clear policies is to anticipate problems before they arise and having a suitable response should they occur.
Operating without an annual budget
In fairness, there are very few churches that do not have some form of budget. The key words in this caption are “operating without”. The main point here is that even though most churches do have some type of budget written on paper, far too many operate as if they did not have one or misuse the one they do have.
Historically, church budgets have had a two-fold purpose.
First, they fill a financial role helping to make sure the church stays within acceptable and approved spending parameters.
KEY: The pendulum swings pretty wide in regard to church mismanagement of budgets. Some churches completely ignore the budget once it is approved begging the question, “Why have one to begin with?”
Other churches let their budget become a straight jacket, leading to some unfortunate results:
“Stingy” finance committee/team members may refuse to allow their church to begin new ministries because “This is not in the budget!” I have seen situations where churches have missed out on great ministry opportunities because they “postponed” them until the end of the year when the new venture could “be budgeted”. This in spite of the fact that the church had ample cash in reserve to fund the new project.
Occasionally a church staff may be intimidated by finance team members and are fearful of overspending a budget line item. But, due to their belief that a project is essential, go ahead and authorize expenditures. To cover their tracks, the expenditures are not included in the budget but are classified to other less visible areas, such as designated funds or the church’s net asset account (retained earnings). The budget report is unaffected making it appear that the church “made budget”. Too much of this type of activity results in meaningless financial statements.
The church budget also has a spiritual role in that a church budget is simply the congregation’s vision for the coming year, stated in dollars.
KEY: This is particularly important in the establishment of your chart of accounts. A church’s chart of accounts should reflect its ministry. What your church management software representative suggests is just that; a suggestion. The same goes for your CPA
Avoidance means to succeed in keeping away from something dangerous or undesirable. Conversely, the opposite of avoid is to confront. In church administration, the only way to avoid dangerous situations is to proactively confront, or face down, certain ideas, attitudes and practices within the church. In doing so, an administrator’s life as a church leader can be a positive experience due to the fact that more time will be spent focusing solely on administration, not being a fireman.
In this next series of blog posts we are going to spend our time discussing ten traps church business administrators should avoid. Or, stated positively, ten areas in which the administrator must be proactive in order to face down danger. The first of the ten is planning.
Trap #1 Operating without a plan
When my son and daughter were young we often went to Chuck E Cheese, a restaurant catering to kids, which specialized in pizza, clowns and games. One of their favorite games was Whac-a-Mole, the object of which was to score points by clubbing moles (mechanical not real!) over the head as they popped their heads out of holes. Many churches follow the Whac-a-Mole management theory. When “the tyranny of the urgent” kicks in, issues tend to be addressed as they pop-up. This method, such as it is, leads to many unpleasant results:
- The inability to make good decisions
- The inability to report reliable results of ministry activities
- The loss of credibility of leadership
- The loss of faith by the congregation in leadership’s ability to guide the church.
KEY: In the worst case scenarios the result can be fraud. Fraudsters do not like baselines. (More importantly, they do not like to be caught!) Baselines help establish what is normal within an organization. With no processes or plans in place, baselines cannot exist and a church will never know what normal is. A thief can swoop in, help himself to what he wants, and no one will be the wiser.
In our discussion of this particular “must to avoid”, we will break the planning process into two parts.
- Short-term planning
- Long-range planning
In our next post we will begin with a discussion of short-term planning
In our litigious society, it seems like people file lawsuits for just about anything, but since when did copyrights and licenses become so sensitive? The old days are gone; the truth is, operating a Church becomes more and more complex every day. So what are a few things an administrator can do to protect their organization?
Worship Music, for example, is majority owned by record labels. The Christian artists usually make licensing deals with organizations like Christian Copyright Licensing International (CCLI.com), which in turn charges a yearly subscription fee based on the size of your congregation (starting for about $50 for a small congregation). Some worship pastor's prefer to write their own music, which is great because you don't have to buy a license for their works. However, then the question arises – who owns those songs he/she writes on the clock? An intellectual properties policy can help clear up any confusion between you are your creative team.
Does your Church show videos in youth group or as an illustration in a sermon? There are other groups for videos such as Christian Video Licensing International (CVLI.com) that sell affordable licenses to view certain protected materials within your organization.
Even looking at your copy machine, it's a best practice to have a notice posted by each machine warning against the duplication of protected materials. And finally, let's not forget about software. Make sure that when you are buying software that you are respecting the software licensing agreement and abide by the notice as to how many computers and users that each license allows.
Is your organization at risk? Need help navigating any of these areas? PSK can help!
–Daniel Lienemann, CPA is a Senior Auditor specializing in church accounting at PSK LLP.
I have a friend who has reminded me to be thankful for annoying things such as the red light I am stopped at, because I am privileged enough to live in a country that has roads, and orderly ones at that. This same attitude can be applied to taxes—thankfulness for them and for the ability to pay them.
I wanted to start with this thought, because none of us like taxes. But we can be thankful for them, and also take care to report them properly. As additional incentive for excellence in this area, did you know that if payroll taxes are not withheld and paid to the IRS, the Church’s Board of Directors and employees may be personally liable? Some thoughts on ensuring your Church is addressing taxes appropriately:
Who performs the Church’s payroll? Even If the Church is fortunate enough to use an outside payroll service provider, it is still important that the Business Administrator ensure that the following are occurring:
- For all non-minister employees, the Church correctly withheld and paid the employees’ share of FICA taxes.
- IRS form 941 was filed for each quarter of the calendar year.
- The totals from the four quarterly 941 forms agreed with the totals on IRS form W-3, which is prepared at year end and filed with the IRS along with employee W-2s by February 28 each year.
- Timely deposits of payroll taxes are made to the IRS. Required deposits vary. Generally, deposits may be made quarterly if total quarterly payroll taxes are $2,500 or less. Otherwise, deposits must be made monthly, or even more frequently for very large organizations.
- W-2 forms are provided to all employees (including ministers) by January 31.
How about your Church? Do you know for certain that payroll taxes are calculated, withheld, and remitted to the IRS correctly and in a timely manner?
–Justin Baldwin, CPA is a Senior Auditor specializing in church accounting with PSK LLP.
You need more than faith in God to keep you and your people safe from attacks in your facilities!!
Recently, several high-profile incidents have raised awareness of the threat posed by individuals against churches, schools, and similar organizations. Dr. George Tiller, a controversial physician in Kansas, was shot to death in the lobby of Reformation Lutheran Church in Wichita. James von Brunn attacked the Holocaust Museum in Washington DC; he had a list of other potential targets in his vehicle, including the National Cathedral. The man who attacked a military recruiting center in Little Rock also conducted ongoing surceillance on a Baptist church in Atlanta. And although it's been ten years since the horrific catastrophe, our own client, Wedgwood Baptist Church in Fort Worth, lost seven members when a lone gunman opened fire in the church sanctuary.
For help in security issues, I immediately think of our friends at Gatekeepers Security Services, www.gatekeeperssecurity.com. Chuck Chadwick and Matt Gilstrap stress that it's much more than alarms and locks. Many churches utilize off-duty police officers or other hired security personnel. Even more, though, there needs to be an overall awareness by the entire congregation that's proactive. Effective security takes ongoing training, and so much more.
Contact Gatekeepers for help and insight in this area. And contact PSK with questions about the business of running your church.
Related to the last post on IRS & Cell Phones, I read the actual IRS Notice 2009-46. The IRS is considering three possible approaches, and they will allow public comment through September 4, 2009. Go here to see the details. What approach would you suggest?
Churches and schools often have annual meetings or retreats that employees must attend. A source of irritation for employees can be the issue of pay — or no pay — for time spent attending meetings and training sessions.
Tell employees they have to attend a meeting or training program, and the employees may raise questions like these:
- Is attendance mandatory, or can we skip it?
- If we show up, do we get paid?
- If we don’t get paid for the time at the meeting or training, why do we have to attend?
Church leadership can lessen, and even end, the irritation employees experience, and avoid having to deal with questions like those above by adopting a clear policy on the topic.
Address the following in this policy:
- How often do you have employee meetings? For example: once a year…once a month…every other month.
- Is employee attendance requested or mandatory? This is especially important if meetings are held when all employees aren’t on-duty but are required to come into work to attend the meeting.
Warning: Keep in mind that if you require off-duty employees to attend meetings… you must pay them for that time, if they are non-exempt employees. Under the Fair Labor Standards Act, employers must pay employees for attending meetings: (1) if their attendance is mandatory and (2) the meeting serves to benefit the employer. If meetings are strictly voluntary and outside of working hours, you may not be required to pay employees. Get information on the Fair Labor Standards Act from the U.S. Department of Labor’s “ELAWS” website –
http://www.dol.gov/elaws/flsa.htm
- Be sure and mention where the meetings are usually held, what time they are held and what type of topics will be discussed.
Here’s some wording to consider in a meetings policy: “The Company holds monthly employee meetings. These meetings are usually held at 4 p.m. in the staff lounge. All employees are required to attend. Off-duty personnel are required to punch-in at the start of the meeting and punch-out at the end of the meeting. You will be paid your regular rate of pay for your attendance at these meetings.”
NOTE: We’re not lawyers or spokespersons for the government! We do try to provide accurate and helpful information. But this is not intended to provide a legal service for your individual needs. For legal guidance in your specific situations, always consult with an attorney who is familiar with employment law and labor issues. Our friends at the Church Law Group would be happy to assist with legal guidance – www.churchlawgroup.com. That having been said, we can offer you a sample policy on the meetings and training topic – www.pskcpa.com.
At our most recent monthly breakfast for church business administrators, Lawrence Swicegood offered great info on Crisis Management. He runs Clarion Call Marketing. Very insightful! Everything from how to be prepared even before a crisis erupts, how to handle and how to do a "post mortem." Topics, in outline form:
- Everyone is Affected by a Crisis
- Characteristics of a Crisis
- Planning for a Crisis
- Potential Crises for a Church
- Developing a Response Plan
- Internal & External Communications
- Post Crisis Analysis
For more info, contact Lawrence (lswicegood@msn.com) or give us a call at PSK.
