The second trap, or thing to avoid, deals with payroll. Churches face risk in a variety of areas. Facilities, congregational unity, financial, security, and our next topic, personnel are just a few areas of danger.
In business terms, churches are in the “service industry” and as a result, typically, 50% of church budgets are dedicated to salaries and benefits. Personnel risk is significant. Operating in the personnel arena without a formal plan makes it even riskier.
Unfortunately, some churches do exactly that. Here is what has happened to some of those who chose not to manage personnel risk:
- Churches have been sued (and lost) after automobile accidents in which it was discovered the church assigned driver had a prior DWI.
- Churches have been sued after discovery of prior child abuse convictions of some of their employees.
- Churches have been victimized by embezzlers with prior convictions.
- Churches have been sued for unlawful terminations.
- Churches have been sued for sexual harassment.
In the next few posts, we will discuss things that should be done in order to avoid situations like these unfortunate churches. It’s important to point out that they were unfortunate primarily because they were careless.
Today we continue our discussion of the importance of long-range planning by looking at two other areas where churches need to be taking soundings, to see if storm clouds are on the horizon.
Ignoring long-range giving opportunities
At the present time, our society is going through the greatest asset transfer in world history. Many of the baby-boomers, who have lived through the most prosperous eras of our nation’s history, are reaching retirement age. With ever increasing amounts of disposable income many are also looking for worthy charities to share their abundance with.
Many pastors are surprised when they read in the newspaper or online that one of their members has given a substantial endowment gift to the local university or hospital. Some pastors screw up the courage to ask why the church was not the beneficiary only to hear the following comment. “You never asked.”
Whether churches like it or not, they live in a competitive arena. Various organizations within the nonprofit sector are vying for a limited amount of donor dollars. Churches also need to realize that secular charities are asking their members for significant gifts. Maybe the churches should too…
When it comes to fund-raising, few churches look past current budget needs or an occasional building campaign. Very few venture into the planned giving arena. Perhaps it is time to begin.
Failure to address demographic change in the church’s mission field
In the last few decades, immigration has drastically changed the demographic makeup of our nation. In the course this major shift, neighborhoods have taken on a new look and culture. Unfortunately, many churches failed to adapt to their surroundings, and as a result, have seen a dramatic decline in membership. In fact, many have ceased to exist.
Because most of these churches are in older parts of most cities and towns many church leaders in the growing areas feel somewhat immune to this situation. I think this is a false sense of security. I am getting old enough now to have seen quite a bit in my career providing services to churches. One thing I have noticed is that churches do indeed have a cycle they follow. Eventually, the new becomes old and almost all churches must re-evaluate their situations. It is essential, to be an effective ministry present, each church must evaluate its calling. One way to do that is to have a firm understanding of its surrounding neighborhoods. By paying timely attention to these matters, churches can adapt their efforts and provide ministry to their new neighbors.
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
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.
