Should you change audit firms? If so, when? Neither not-for-profit nor public companies are required to change firms at set intervals. Also, while there are times when it may be appropriate to switch, it is not a decision to be made lightly.

Studies have shown that changing audit firms can result in higher audit fees, because firms will not be able to recover all of the costs they typically treat as an investment in the business relationship and absorb over time.

Switching firms can also result in a lower quality audit. An auditor who works with your organization over consecutive years gains substantial understanding of your operations and is able to look more closely at areas of risk as well as processes over time.

One way to gain new perspective on your organization’s finances and accounting practices without the cost and difficulty of changing audit firms is to work with a firm that can rotate key partners and engagement team members. There are valid reasons for considering a complete switch, however.

It’s important to work with an audit firm that is well versed in church financial management, accounting and financial reporting issues. If you are not currently working with a firm with these qualifications, it may be beneficial to think about a change.

If you decide to select another firm, take these steps to make the process efficient and effective:

Begin by determining the criteria you will use to compare competing firms. This may include expertise, staffing, price, and timing. Each is important, but you will seldom make the decision on one criterion alone.

Send a request for proposal to firms you believe are qualified to provide excellent service to your church. You may choose to include your current firm in the proposal process.

Consider each proposal carefully against the criteria you set, and follow up on references provided. Even if vendors only provide a list of satisfied clients, you can still learn a lot from these references. For example, another church may mention that they really appreciate the service they receive from the audit team, but that the firm’s tax department is unfamiliar with nonprofits and churches in particular.

After narrowing the field to two or three prospective firms, schedule a time for each to present their proposal to you and the finance committee. This will give you the opportunity to clarify differences between the firms, meet the firm leadership, and get a better understanding of who each firm is and how they operate. When the interviews are complete, you should have enough information to make an informed decision.

If you select a new firm, you need to send a letter to your former firm informing them of the switch and giving them permission to share information with the new firm. While this formality is required, out of respect for the business relationship, you may choose to initially notify them with a personal phone call.

Start off on the right foot with the new firm. Prepare all the requested information, and ask questions whenever something is unclear. You should also feel free to ask if information can be provided in a different format. The new firm will probably need information that is similar to what your prior firm requested. If you already have items in a particular format, ask the new firm if they can use that, rather than taking the time to recreate it.

Vonna Laue is a partner in the California offices of the CPA firm of Capin Crouse LLP.   www.CapinCrouse.com

How technology and communications are changing church fundraising.

Church capital campaigns are hardly a new concept. For nearly half a century, pastors and their congregations have depended on opportunities for special giving to help them build buildings, pay off debt and fund their God-inspired vision. But the landscape is changing quickly — so fast that your father may soon not even recognize the process he perfected during his tenure.

Two things have dramatically influenced how churches approach capital campaigns: the economic crash of 2008 and the adoption of technology by the person in the pew. Both have provided opportunities to deviate from what have become hallmarks of the traditional campaign — one defined by a predetermined process, a large number of enlisted lay volunteers, and heavily dependent on paper-based communications.

The transition to digital communications and its impact on ministry initiatives such as capital fundraising projects was already in full swing prior to the economic collapse of 2008. The challenging circumstances, however, accelerated the rate at which churches adopted new ways of communicating and connecting with their members and even the community at large. The seismic changes altering the way churches conduct capital campaigns are revitalizing the function and effectiveness of this proven and very effective ministry venture.

A tale of two churches

Two churches that have significantly benefited from this shift are Eagle Brook Church (www.eaglebrookchurch.com) and Granger Community Church (www.gccwired.com). Eagle Brook is located in the Twin Cities area of Minnesota while Granger Community Church is in northern Indiana, just miles from the Michigan state line and close to the South Bend area.

Eagle Brook averages about 15,000 on any given weekend, and Granger averages 4,700 attendance.

Both tend to have demographics that find the median age to be in the 30s with a blend of professional and blue collar workers. Each church was already dependent upon technology and digital communications.

When it was time to embark on another capital funds project, both turned to RSI Church   Stewardship, Dallas, TX, knowing that they not only could get the help to raise the money but also to incorporate the technology in the campaign. “People are much more connected technologically than we think they are, and they expect churches to honor their preferences,” says Joel Mikell, president.

Scott Anderson, executive pastor at Eagle Brook, says “We needed help with a unique approach.

Our goal was really big, and the economy was really bad.” Anderson says that self-led campaigns had been their chosen path prior to their most recent campaign, but they didn’t want to go it alone this time.

When they set out in late 2009 to begin the Not Without You campaign (www.notwithoutyou.org) with a $30 million dollar need, Anderson knew it was time to partner with people who they believed understood their church and could get them to their goal.

Tim Stevens, executive pastor at Granger says, “The New Normal Project (www.thenewnormalproject.com) was descriptive of the time in which the initiative was birthed.

Everything we were certain of was being challenged.” In the midst of a community that reached 20 percent unemployment at the peak of the recession, Stevens wanted some perspective about how to approach capital campaigns in ways that were very different from how they had in the past.

Integrating technology
“Risky ventures often lead to innovative, breakthrough experiences,” says Bill McMillan, executive vice president at RSI Church Stewardship. Both Stevens and Anderson agreed that their respective campaigns were both innovative and breakthrough compared to past experiences, especially in the midst of challenging economic realities.

Stevens believes e-mail communication strategy was a catalyst for the success for his campaign. “I’d never heard of a ‘drip campaign’ before RSI introduced it to us. This is where we divided the information we wanted to send out and shared it in small, regular installments throughout the campaign rather than all at one time.” Stevens doesn’t remember a campaign when more average, regular attendees and marginal members were engaged and knowledgeable about what was taking place than during this most recent experience.

“Our people were really ‘leaning in,’” he says. “We felt like we had an empowered base of supporters who believed in what we were doing. Primarily sending communications digitally also made it easy for members to share details with others in their own spheres of influence.”

“Post-campaign, our investments in digital communication strategy continued to pay off through ​new online pledges,” says Anderson, “giving to the campaign that wasn’t pledged, and email communication as a way to follow up with pledges made.”

Stevens feels the same way. He believes the micro-site that housed all critical information for their campaign became an online gathering place where people could learn more, get involved, and spread the word both during and after the defined campaign season.

Neither Anderson nor Stevens believe that technology and digital communications are the only two keys to capital campaign success. They both recognize that clear vision, effective strategy, and personal relationships were critical to campaign success.

Ben Stroup is a freelance writer on church leadership and blogger, working from Greenbriar, TN. He posts regularly on The Content Matrix www.thecontentmatrix.com.

As a stewardship pastor I have often been asked why so few churches are investing in a comprehensive stewardship ministry. It’s a great question considering the emphasis the Bible places on stewardship, money and possessions.

It comes as a surprise to many that the Bible speaks about money and possessions more than any other topic except love. More than 2,400 verses address our relationship to wealth, the dangers of mishandling it and the barriers money can present to our relationship to God and others.

So why has stewardship not been emphasized more in our churches? The last 25 years of involvement in stewardship ministry have led me to several thoughts in response to that important question.

One, as a church body, we have misunderstood the fundamental meaning of stewardship.  I believe the great majority of our church leaders have defined stewardship incorrectly. Stewardship is not just another term for giving money to support church ministries. Stewardship is simply the act of being a steward.

A biblical steward is one who has been entrusted with the property of the owner and expected to manage it wisely as the owner himself would. Giving is the portion you manage that you give away, stewardship is the responsibility you have to wisely manage the total amount, most of which you keep.

Pastors need educating
Two, many church leaders have not been taught the true meaning of stewardship and therefore are not in a strong position to teach others. The formal education most of our pastors and senior leaders receive rarely includes a serious study of stewardship and the biblical perspective of money. When the topic is discussed, it is mostly in response to the significant pressure felt by senior leaders to raise funds to keep ministries supported.

Three, as churches, we frequently get the biblical message reversed. The vast majority of scriptural references to money and possessions address the responsibilities of the individual rather than the needs of the church. Stewardship is important because individuals cannot be fully aligned with God’s desire for them if they get the “money thing” wrong.  Funding church ministries is not the primary reason the Bible speaks so frequently about this topic.

Yet, it has been my observation that the majority of messages about money from senior church leaders primarily emphasize giving. What we should be doing is teaching individuals to recognize their calling to be faithful stewards of what God has entrusted to them. When we do that, the giving follows; not because we made it the goal but because that is the result as we grow mature stewards.

Four, church leaders often miss seeing money biblically as a discipleship issue rather than a financial issue. As Atlanta pastor Andy Stanley so eloquently stated it, “Biblical teaching about money should focus on what we can do for you rather than what we can get from you.”

Not just for hurting
Five, churches frequently associate a stewardship ministry with helping those who are hurting financially or have become overwhelmed with debt. We should be seeking to help those people, absolutely, but that should never be the main focus of a stewardship ministry. We are all called to be stewards, and building a ministry around people in financial trouble will actually hurt the stewardship effort, since those doing well financially will assume they are exempt from learning to live as stewards.

It is interesting to note that most of the time the Bible speaks about money it is directed toward those who had money but were using it or relating to it in a way that was spiritually damaging and contrary to God’s design. A healthy stewardship ministry addresses every person and seeks to provide opportunities for growth regardless of their financial condition.

Six, we have not presented the teaching and training of money in our churches comprehensively.

Money impacts us in three major ways, all of which are dealt with in great depth in the Bible. The first is the practical aspect of money – how specifically we are to wisely manage and account for what has been entrusted to us. The second area is the spiritual aspect. How our relationship to money and possessions impacts our relationship to God.

The third is the emotional aspect of money. It is here that we often find our greatest struggles since emotions drive us to make poor and often harmful decisions about wealth and possessions. An attempt to address the stewardship topic without diving into each of these areas will leave major holes in our understanding of what it means to live as a true biblical steward.

Money is never neutral
The foundational principle behind developing a solid theology of money and stewardship is that our relationship to money will always impact our relationship to God. Money is never neutral. It will either draw you closer to God or drive you farther away. As scripture tells us, we can’t serve two masters.

Jesus tells us clearly that there is a battle going on for our affection and loyalty between the God of the Universe and the god of money. Each one is trying to win our hearts and minds but only one will prevail.

Dave Briggs is the director of the Stewardship Ministry at Central Christian Church in greater Phoenix, AZ. He held a similar position for seven years at Willow Creek Community Church, South Barrington, IL. Previously, he spent 27 years as a finance manager with General Electric. www.CentralAZ.com

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Where stewardship leaders gather

Christian Stewardship Network is an organization of stewardship leaders serving in local churches throughout the country.

CSN has launched a two-day workshop designed for church leaders and decision makers who are interested in starting or strengthening a stewardship ministry in their local church. Dave Briggs co-teaches the seminar with Chris Goulard, the stewardship pastor from Saddleback Church in Southern California.

Workshop topics: Benefits of a Healthy Stewardship Ministry, Developing a Biblical Theology of Money, How to Structure the Ministry, Elements of Success in Stewardship, Recruiting and Empowering Volunteers, and Creating an Implementation Roadmap for Success.

Registration for the next event in Dallas, February 9-10, 2012, can be done by e-mailing Dave.Briggs@CentralAZ.com. For more information about CSN go to
www.ChristianStewardshipNetwork.com.

When Austin Ridge Bible Church, Austin, TX, decided to begin online contributions in the 1,600-adult congregation in July 2009, they decided not to install kiosks — but rather moved its church database to FellowshipOne and began to use its online giving (and event registration) functions when it moved to the F1 platform.

Kiosks just didn’t seem to fit the culture of the church, says David Bixby, executive pastor for Operations. “We looked into them in great detail, and it is possible we will revisit that in the next year,” he says.

“Our website has a ‘contributions’ link that redirects to the F1 giving portal,” Bixby explains. “The member can set up either one time, or regularly recurring gifts using credit/debit or EFT. A great feature about F1 is that the gift posts automatically to the donor’s church-giving record, thus eliminating a good bit of the manual data required of checks.”

FellowshipOne was acquired this year by Active Network, and Bixby says the transition was smooth and transparent, and offered no problems to the congregation. Congregants using the online feature have found it positive, he says. “There are occasional issues with the website interface; it acts up with different browsers, etc., but most people appreciate the convenience and the ability to review their giving online,” Bixby says.

The Austin Ridge budget last year (ending June 30) was $4 million, the current year it is $4.9 million. Bixby says the church had about $6.5 million in gifts, including the building fund, and 22 percent or $1.4 million came in online.

He notes too that June online gifts this year were 28 percent of overall giving, and “we continue to see that number increase,” he says.

While he can’t speak to whether there has been an increase in average per person contributions, he does say that “our giving and attendance has been increasing the past several years, so I suspect the online giving has risen in the same manner that our overall giving has, or even slightly more.”

East Lake Community Church in South Carolina runs about 1,000 adults on a given weekend, and Erik Ely, executive pastor, says they receive about 16 percent of their income through online giving. “For us online giving is defined as people who use their debit card or electronic check to contribute to the church,” he says. Currently the church does not accept credit cards for contributions.

East Lake does not use kiosks, nor is it planning on doing so. “We are taking small steps towards introducing this technology to our congregation,” says Ely. “Any time we talk about giving we make people aware of the online option.”

Interestingly, but probably not unusual, Ely finds that giving online tends to be generational.

“The younger someone is, the quicker they embrace technology and online giving.” The church has a budget of $1,116,000 and received 17 percent of that online or about $189,000, Ely says.

Some prefer ‘the plate’
“We are in the transitional period where traditionalists want to give in the plate as it goes by — and that is fine,” says Ely. “but we also have a group of people who demand online giving. I anticipate that giving electronically through kiosks or electronic means will be how we get a majority of our income in the coming years.”

“I try to be an early adopter of technology so I started online giving at a previous church in 2005. Prior to that it felt cost prohibitive to do online giving,” Ely says. He’s been at East Lake since 2007 and installed online giving late that year.

He’s been keeping statistics too. “People who give online do so very consistently; that is one of the reasons we push online giving.

We have found that some of our larger givers prefer to give online, so our average is slightly skewed to around $320 a gift,” he says.

Take out the larger gifts, and the average is about $208, compared, he says, to “an average of $25 per gift through ‘the plate’ on Sundays.”

The congregation averages 600 adults on a Sunday, and Ely has seen a positive response to online giving. “People like the convenience as well as the discipline that an automatic reoccurring gift creates. They feel good about supporting the church even when they are on vacation or miss a service for any other reason.

“It also allows people to give spontaneously, at any time throughout the week when they feel led,” he notes.

Ely has used Shelby for a database and ServiceU for online giving in the past, and at East Lake they use ACS for both. He notes that there are software issues at times, but work through them.

Online here to stay
Online giving isn’t going away, Ely says. “In order to teach a younger generation about stewardship, you need to do it in a relevant way using current technology. Our goal this year would be to receive 25 percent of our income through online giving, which translates into nearly $300,000.”

One advantage is that the regularity of online giving provides a chance to “count on” money coming in consistently. “It flattens out the rollercoaster effect of giving. The highs and lows become less noticeable and income becomes more consistent,” he says. “And another benefit is that fewer people touch the money so your internal controls are stronger, reducing the chance of fraud or theft.”

Tabernacle Baptist Church in Cartersville, GA, began using online giving in May of this year, and in a multi-generational congregation, they find that users trend toward young people, but they’ve seen a steady increase in its use. “It’s gaining momentum,” says business administrator Roy Edwards. He notes that use of kiosks would not be well received by the congregation.

This is a church of 1,100 adults and children that has seen a flat budget for four years — and staying the same for next year. The church’s software is Easy Tithe, so it is all in the name — making it easy to contribute through online matters. The church has a $3 million budget and online contributions are less than one percent.

Easy Tithe’s online giving website tries to direct people to use checking accounts so that the church will not incur the fees from credit card companies, Edwards reports.

Michael Gill is a member of the church and a staff member at a former church, where he used online giving. “Young people don’t carry checkbooks,” he says, “and everything is becoming more paperless.”

They have been looking into the use of QR technology. Gill says that QR technology would give people a way to scan the square from the church bulletin and give through their smart phones, allowing them to give as they sit in the pew.

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The cost of credit card processing

We are finding that our credit card processing is about 2.6 percent of our gross proceeds. ACH/EFT is less. While this number is high, we also know there is a cost to the personnel who have to collect, sort, scan, and record our 75 percent of paper checks that are written.

While I have not done a comprehensive study of what the staff and volunteer costs are to process our normal paper deposits, we definitely enjoy the reduced labor that online giving affords us.  — David Bixby

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Be intentional about online giving, focus your efforts

These days many churches offer some form of online giving; but few harness the power of it. Your church can do more than offer a donation on your website; you must intentionally emphasize it. You must teach people to set up online reoccuring donations. When you do this, here’s what happens.

• People will give to your church seven days a week instead of one.
• People will give to your church, even when they don’t have cash or checks.
• People will give to your church when they are sick and out of town.
• Bad weather days will have less effect on your budget.
• You will have more money for ministry.

Offering online giving (or digital kiosk giving) isn’t enough; you need to emphasize it. Think of this as a four-week campaign where you tell stories, show people how it works, and encourage them to give digital giving a try. Be intentional in your communication, and use all the tools at your disposal.

Churches that emphasize digital giving are finding success and actually increasing operational revenue. Since online giving often attracts a person who would not normally give in church, or gives people who do not carry cash or checks the opportunity to participate, it’s actually building the donor base.

Three Churches … Three Stories:

Revolution Church, in San Antonio, TX recently conducted a digital giving emphasis – adding a kiosk to their lobby and encouraging people to set up online giving profiles. The Sunday they introduced this program, offerings were up 30 percent, and they stayed there. Online and kiosk giving is a big part of their financial culture now.

Connexus Church in Ontario, Canada recently began emphasizing reoccuring giving. Now, more than 50 percent of its total offerings are given online. When Pastor Carey Neiuhof and his team explain what’s about to happen with the offering in the service, they take time to thank people who have already given online.

LifeChurch in Franklin, TN recently set a goal of moving 30 families from in-service giving to online giving. Through announcements on the weekend and email communication to their congregation, they just reached their goal.

— GivingRocket.com

A tree crashes through your church offices. A fire rips through your facility just before the Christmas season. A volunteer driving teens to a mission opportunity crashes into another car at a red light. None of these scenarios are easy to consider. The trouble is, they can and do impact churches of all sizes and in any part of the country.

“Churches need to make sure that if something happens they have adequate coverage to protect them” says Gaelen Cole, property and casualty program manager at GuideStone Financial Resources. Among the types of coverage churches should talk with their church insurance agents about: Property and casualty, including business interruption/extra expense (BI/EE), and abuse and molestation.

Other areas that can help mitigate claims for a church are things like placing hail cages around air conditioning units placed on a roof — especially important in areas where hail is common. As the price for copper has risen, many churches have experienced theft of air conditioning units.

Another area church leaders should inspect is downspout placement. “You want to make sure you have good drainage, that the waterspout doesn’t pool water near the building, especially if you have a sub-floor or basement situation,” Cole says. “One big thunderstorm could create a flooding issue that is not generally covered by insurance.”

Along with physical property claims, Cole says churches should talk with their church insurance agent to discuss whether their auto liability insurance coverage extends from the church van to volunteers’ vehicles.

Due diligence
“The church shouldn’t be ashamed, afraid or embarrassed to ask for a copy of the volunteer’s driver’s license, a copy of the driver’s personal insurance and to do a simple safety check of the vehicle to ensure it’s in good working order,” Cole says.

Business interruption/extra expenses (BI/EE) are also important to keep in mind. Consider this scenario: Your sanctuary becomes unavailable for services for one week during the month of December. Where do you meet? Further, if you have to cancel services, what happens to the church’s budget when it misses one week’s gifts?

“If you have an otherwise coverable loss – a tornado hits, a fire sweeps through your facility – most policies can provide some minimal amount of (BI/EE) coverage,” Cole says. “This is why you need to spend time with your agent and discuss your needs.”

Extra-expense coverage allows reimbursement for whatever reasonable extra expenses you incur during an otherwise coverable loss.

While property claims are common and churches should focus on mitigating those dangers, one area that cannot be overlooked in any conversations with your church insurance policy is casualty insurance. This type of insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or damage to property of others.

Part of the casualty coverage extends to an especially troubling area for churches: abuse and molestation. Churches that have experienced sexual abuse and misconduct all share one characteristic: They did not expect or intend for these acts to take place.

Existing procedures
Churches need to be aware of existing procedures regarding the reporting of instances of child abuse to appropriate authorities and take steps to comply with such requirements. As a preventative step, simple policies that prevent one-on-one interaction and physical controls that keep children in secured areas should be implemented to help protect youth and children.

Vigilant policies by church boards and committees can help mitigate the risk, but church insurance coverage can help protect the church as well.

Roy Hayhurst is editorial services manager, GuideStone Financial Resources, Dallas, TX www.GuideStone.org

This article is for informational purposes only and is not intended to be construed as legal, tax or other professional advice specific to you or your ministry.

By Dan Mikes

A strong organizational framework is created through transparency and detailed management structure.

Having financed more than $3 billion in mortgages and plant expansion projects for churches over the past 20 years, I can tell you there is no more unvarnished view of the financial affairs of churches than that which is gained by the church banker.

While strong stewardship programs, a good accounting system, internal controls, donor tracking and audit procedures are important, they must stand upon a sound organizational structure. The organizational framework should begin with commitments to transparency and accountability.

Articles of Incorporation
Effective financial management emanates from the articles of incorporation and the by-laws. Accountability within the organization begins here. Major financial decisions above a specified dollar threshold should be subject to board approval. The acquisition or sale of land and buildings, incurrence of significant debt, compensation levels for key personnel, removal of leadership for cause and the selection and replacement of board members should all be subject to board approval.

Business position
Staffing at the business administrator position is also critical. After a church reaches 400 to 500 in attendance the financial base is large enough to support a qualified individual.

“Qualified” doesn’t mean they must have a CPA or MBA after their name. At a minimum, qualifications should include some business and management background and an ability to generate a sufficiently delineated income statement and balance sheet.

Only small churches which cannot afford a qualified business administrator should use an outside bookkeeping service to generate monthly financial reports. Larger churches need more timely information to make effective managerial decisions. Without an in-house accounting capability, responsiveness and continuity will be compromised.

The business administrator should provide a monthly financial summary to the management team comparing actual performance to budget. This enables leadership to make timely adjustments throughout the year as needed. The board should be included in this review at least quarterly and financial priorities should be re-assessed accordingly.

Organizational chart
A megachurch recently completed a $50 million dollar construction project. Throughout the project they repeatedly signed contracts and then broke covenant by paying late and forcing sub-contractors to file liens and hire lawyers to renegotiate what the church had originally agreed to pay.

By the time the project was completed the church had severely damaged their reputation in the local business community. Behind the scenes the church was experiencing strong revenue trends. The problem was the board was allowing the foreign missions team to over-commit the organization with no apparent perspective on the contractual obligations which the building committee had already authorized. This proved a costly breakdown in communication and decision making.

While this is an extreme example it makes a point. People within the organization need to have clearly defined roles (job descriptions) and there must be an appropriately delineated chain of authority (organizational chart). Finally, the board must meet on a regular basis and must be provided with a comprehensive view of the business affairs of the ministry.

An appropriate leadership structure and a methodical decision making process set the ministry on a course to avoid financial inefficiency and assure that each dollar is spent to effect maximum eternal significance.

Dan Mikes is executive vice president /manager, Church Banking Division, Bank of the West, San Ramon, CA. www.bankofthewest.com

By David Fletcher

The Chapel of Akron deals with cutting 15 percent of its staffing budget.

The recession hit northeast Ohio pretty hard. It came early and has stayed longer. These conditions coupled with the transition of a long-time senior pastor at our church created a challenging scenario. The Chapel of Akron is a church of 4,500 adults in worship each Sunday, on three campuses in eight services.

The Chapel did well for several years by trimming non-staff costs. Eventually, there came a point when the church had to do some major restructuring. While downsizing is challenging in business, it is especially hard in the church.

A restructuring is hard because a staff becomes like a family. In a major restructuring, dearly loved people are often let go. The “pastor” side of the senior and executive pastor positions finds this one of the hardest things to do. It’s been nearly five months and I am still working through the grieving process — denial, anger, bargaining, depression and acceptance.

With this as a background, here are some steps that were done at The Chapel to deal well with the staff, the board, the congregation and the community. The original documents that are mentioned in this article are available on XPastor.org.

Making changes
My terrible task in February 2011 was to cut $750,000 in staffing costs from The Chapel. As one friend put it, “that is more than my entire church budget.”  It is a huge amount of money for a local church! With a staff of 140 full-time equivalents, the cut comes to about 15 percent of The Chapel’s staffing budget. The recession and a changing church caught up with our budget and we needed to make some changes.

We had to be gentle to the congregation, compassionate to the staff that was downsized, strong for everyone’s tears and wise with our governing board.

We began by talking with the staff about the economic issues — this happened about six weeks before any final decisions were made. We also talked to the congregation and let them know that there were serious issues being discussed. We had plenty of prayer in our staff times, board meetings and around the church.

The day after
After this six-week period, we made our decisions. We opted to be proactive in telling all who could be told. The day after the restructuring, we published on our Website an 11-page public letter to the congregation and community. The letter explains the process and the cuts that were made. Also, we gave interviews to the local newspaper and radio station.

On the communication side, one person wrote a comment on the radio station’s page:

If each of the area’s various governmental agencies made half the effort to do a top to bottom review to their mission, their staffing, and their financial resources such as The Chapel has done and made the appropriate adjustments, the world would be a much better place.

We accepted every positive comment. And, yes, there were negative comments too. Some people had disagreements with our decisions. It was extremely hard for people to lose their pastor. We shed plenty of tears and tried to explain the issues to the best of our ability.

We had developed a comprehensive communication plan. This outlined how we wanted to share information with the congregation, both before and after the restructuring.

Because our governing board members would be talking to the congregation, we also developed “FAQs” for them.

Were we perfect?  By no means. The issues were so large and so complex, that we had plenty of room to make mistakes.

Principles at stake
Let’s start with the obvious principles.

First, accept the numbers. Don’t sugar coat the numbers or give rosy predictions of the future. Be honest with the facts; if you have to trim, do so early. Most churches without debt will have 50 to 60 percent of expenses in staffing, and those with debt will have 40 percent or so. If you are going above those numbers, carefully examine your budget.

Second, accept that the economy is challenging. God can provide through more gracious giving by your congregation. However, that may not be God’s answer.

Third, accept that during a transition there will be challenges. People get attached to their key leader.

Fourth, take steps early on to ease your budget crisis. At The Chapel, we did work on staffing budgets for a year but in this case it wasn’t enough.

Fifth, get experts from your church to give their advice on the ongoing state of finances. Whether you call this a “finance committee” or whether it is done by the board, have high-level discussions about past, current and upcoming financial issues. Listen carefully to the advice and weigh it with biblical commands and principles.

Sixth, even with great advice and planning, your timing may be off. The recession is lasting longer than people predicted and is going deeper in various parts of the country.

Pastors need to gently and firmly make financial and staffing decisions. A major restructuring and downsizing may be one of the most difficult things that you will ever do.

David Fletcher is executive pastor, The Chapel, Akron, OH, and founder and host of Xpastor.org. www.xpastor.org

It’s a good challenge to face.

Your church finds itself with some kind of windfall. You want to be a wise steward but, with a myriad of investment options out there from your bank, brokerage firms and insurance companies, the choices can seem daunting.

While there are many options when making an investment decision, one doesn’t have to settle for lackluster rates of return just to rest easy about their investments. Nor do you need to sacrifice your values to achieve potentially superior returns.

“You really want to think in terms of anchoring your portfolio,” says Nathan Hutson, CFA, manager of client service and sales at Dallas-based GuideStone Capital Management. “There are three basic principles to anchoring your portfolio: risk premiums, that is to say, the amount you expect to earn above the return of a risk-free investment over a long time period; global diversification, and finally, strategic asset allocation.

“While no investment strategy can guarantee returns, anchoring your portfolio with these principles will improve your chances of growing your assets.”

Churches with money to invest generally fall into two categories, Hutson says. “One is an organization that has some extra money or an endowment, with a relative short-term time horizon, usually one to three years,” he notes. “Generally, they want to use at least a substantial portion of those funds during that time.” Funding for capital improvements often fall into this category. These churches are often looking for lower risk instruments with little or no fluctuation in value.

Other churches have benefited from oil and gas wells, large gifts to the church or other windfalls.

“This second group has no immediate purpose, and they want at least a portion of this money to have the opportunity for growth,” Hutson says.

What to invest in?
So, you find yourself with money to invest. Where do you put it?

“When you’ve got less than $5 million to invest, you probably need to stay in a registered mutual fund-type investment environment,” Hutson says. “It gives you diversification, you can monitor it easily, you have a very transparent investment, and it will generally perform along with the markets.”

Another important aspect is the trustworthiness of the institution with which you’re considering doing business. “There are a lot of people, sad to say, who take advantage of churches,” Hutson observes. “They charge them fees that are not easily understood. You have to ask yourself, ‘What fees am I paying?’ ‘Are they disclosing everything?’

“If, when you ask a question, their answer is unclear, and then you ask again and they still can’t explain it — that’s a red flag. While it could be a communication issue, it’s likely they don’t understand themselves or they don’t want you to understand what’s going on.”

How to invest
“Capital markets usually provide a risk premium for investors that can be captured by maintaining a strategic allocation over a long period of time,” says Rodric Cummins, CFA, chief investment officer for GuideStone Capital Management. “You must have patience, a defined risk tolerance, an understanding of your investment time horizon, and the discipline to stay with your investment strategy through good and bad times.”

Additionally, Cummins explains that investments for churches or individuals should be globally diversified and should include a strategic asset allocation that can spread risk and broadens the potential opportunity for growth.

“It’s important as CFO of an organization or executive pastor of a church to think about how long you’re going to put this money out there, put it in a risk-appropriate vehicle and let it ride until the time horizon is over,” Hutson said. “Not that you don’t tweak along the way, but you don’t pull out because the market is having a setback. Ad hoc changes to a long-term asset allocation strategy often result in lasting damage to financial plans.”

The market setback – especially the recent downturn in 2008 and 2009 – is fresh in the minds of many investors. Hutson said that has increased the sensitivity to risk, both for individual and institutional investors.

“How nervous are you going to get if you’re down 20 percent in a year,” Hutson asks. “If you can’t take that, then a more volatile investment – even with the potential upside – may not be right for you. This is why correctly identifying your risk tolerance and time horizon is critical to meeting investment objectives.”

Where to invest?
Finding someone who understands your church’s ministry and mission is paramount.

“One of the things that should be important to a Christian organization is matching their faith to their money,” Hutson says.

“GuideStone Capital, for one, has a structured process to ensure our values are embedded in the investment portfolios.”

Furthermore, Hutson recommends potential investors look at Lipper Rankings and Morningstar Ratings which provide general feedback about the mutual fund industry.

“Be sure to look at the suitability for various purposes,” Hutson says. “Money that is going to be used in the next three years shouldn’t be 75 percent in equity. Balance the need for capital preservation with the desire to have a better return over time.”

Finally, make sure your investments match your needs so that you can maximize your financial opportunities. “For long-term institutional investing, we’re big proponents of setting a strategic allocation based on your risk tolerance and investment objectives,” Hutson says.

Roy Hayhurst is editorial services manager, GuideStone Financial Resources, Dallas, TX www.GuideStone.com

Frequently ministers complain about rising health insurance costs. This cost is expected to continue rising. While I cannot do anything about these rising costs, there are several ways that the church can help reduce the financial burden its ministers incur to pay health care expenses. This article explores tax breaks for health care fringe benefits.

Pay expenses with nontaxable dollars. The tax code is frequently used by Congress to manage the US economy. Since health care costs have increased dramatically, Congress has enacted several tax breaks to help health care consumers. All these tax breaks work the same way:  If you pay health care costs with money that is not subject to tax, it costs less.

For example, to pay a $100 health care expense with wages after taxes were deducted, the individual would typically need to earn $140. On the other hand, if the taxpayer could pay this expense with untaxed wages, the individual would only need $100.

Since Congress wants employers to fund health care expenses, all these methods involve the employer working with the employee to minimize the employee’s tax burden. This is why the church must take the steps to create the health care benefits that allow the health care expenses to be paid with untaxed wages.

Health insurance. The church may provide health insurance to its employees with untaxed compensation. Further, federal law requires employers not to discriminate in how they provide health insurance. This means that if the church could pay the full premiums for the minister and his family, while agreeing to pay the premium that covers only the secretary, then the additional premiums represent a discriminatory fringe benefit.

While church plans are exempt from the penalties for operating a discriminatory plan, churches should be wary of unintended tax consequences. Note that some state laws and some insurance companies require all employees to be enrolled and prohibit discrimination. You should check with your tax advisor and insurance agent for the details in your situation.

Medical expense reimbursement plans. Sections 105 and 106 of the Internal Revenue Code allow employers to adopt a plan to reimburse employees their qualifying medical expenses. The reimbursement is tax free to the employee. The plan must be in writing and must not discriminate in favor of the highly compensated employees. The church is the sole funder of the benefits of this type of plan.

The church is free to select the health care expenses it will reimburse and set any limits that it desires. For example, the church could adopt a plan that reimbursed up to $3,000 of qualifying health care expenses per employee per year. Qualifying health care expenses could include doctor and dentist visits not covered by insurance.

This plan may include reimbursement for all medical expenses that would qualify for a tax deduction, including prescription medicines. For 2011, the IRS approved a plan that includes nonprescription medicines where the physician wrote a written prescription for the nonprescription medicine.

Health care savings accounts. Since 2004, qualifying individuals/employees may setup personal health care savings accounts. These accounts are patterned after the Individual Retirement Accounts. To participate in the health savings account, the individual must be covered by a high deductible health insurance policy. For 2011, a high deductible policy is defined as an insurance policy with a deductible in the amount of $5,950.00 (single), or up to $11,900.00 (family).

Employers/employees may contribute up to $3,050 in 2011 for single employees to the account while employers/employees covering families may contribute up to $6,150 in 2011. Further, if the employee is 55 years of age or older, the contribution may be increased by $1,000. These contributions are tax free. Employees may submit qualifying health care expenses to the account administrator for reimbursement. The reimbursement is tax free.

Further, any amounts left over may be carried forward into future years until reimbursements drain the account to zero. If one withdraws from the account without qualifying documentation, or if the account owners just wants access to the funds for nonmedical reasons before they turn 65 years of age, then a 20 percent penalty will apply to the withdrawal.

Cafeteria plans. A cafeteria plan provides a convenient way for employees to fund their own fringe benefits. The health insurance premiums and the Section 105/106 plans can be funded with employee salary reductions. In addition to these health care expenses, the cafeteria plan can reimburse other qualified expenses, such as child care expenses. The church saves money because the amounts paid into the cafeteria plan by lay employees are not subject to payroll taxes.

First the church must adopt a cafeteria plan that meets all the technical requirements. Second, the employees must sign a form authorizing the salary reduction. The amounts that go into the cafeteria plan are not taxed. This method achieves the same goal as providing the health expense benefits described in the prior paragraphs.

The Internal Revenue Service has made it even easier for churches to adopt a “premium only cafeteria plan.” The IRS removed all filing requirements for premium only cafeteria plans. This means that the church can adopt a qualifying plan that reduces taxes without requiring a third party administrator.

None of the tools can be implemented without expert advice. They all have technical requirements. For example, a premium only cafeteria plan will typically run 25 pages. Also, they have continuing requirements that must be met. A church cannot adopt any of these plans and simply forget it.

Frank Sommerville, JD, CPA is a shareholder with the law firm of Weycer, Kaplan, Pulaski & Zuber, P.C., Arlington, TX.  www.wkpz.com

Long Hollow Baptist Church has been in a continual season of capital campaign giving for the last 10 years. Twenty percent of total contributions each year could be directly attributed to campaign giving. So when we decided to “campaign the budget” under a unified approach for 2011 and not do a separate capital campaign, you can understand why our leaders were somewhat perplexed as to our decision.

This certainly wasn’t a decision we made lightly. The first three, three-year campaigns were pledge driven and specifically for much needed infrastructure and building projects. Every time we pushed for pledges for a new campaign, it seemed awkward and was always in the midst of fulfilling pledges for a previous campaign.

We didn’t plan for the overlap to occur, but we were growing so fast we were simply trying to keep pace. It seemed like an undue burden on our people who really responded in stride and gave consistently and sacrificially.

Worse were our attempts to keep the vision alive and the people energized after year one of each campaign. There were so many things going on, it was easy to lose sight of the vision and passion with which we began the three-year cycle.

Bottom line, our building campaigns were necessary but the campaigns themselves drained us. We sensed it was time to do something different. Only, we weren’t quite ready to commit to a unified budget.

We chose a different approach altogether with our Crazy Love Campaign, a multi-dimensional missional effort that included on-campus building improvements as well as mission work locally and around the world. We structured this campaign around five cash offerings over 18 months to raise $3.5 million which included a new youth building, four orphan villages in Haiti and Uganda, along with a variety of other ministry projects.

Sense of purpose
The excitement around this new approach was something we had never experienced. We never lost our focus, our sense of purpose, or our commitment to reach the finish line. The Crazy Love Campaign was a success.

As we studied the giving habits of our membership, we saw evidence that our faithful givers gave more, each offering day involved gifts from hundreds of new giving units, and we grew in giving in our younger demographics. Because of its success, the temptation was to continue this model in 2011.

Staff sanity involved
Our senior pastor, David Landrith, was convinced that for the long-term health of our church and the sanity of our staff that we needed to go to a unified budget that contained all the elements of what God was leading us to do. He believed that we shouldn’t separate our budget from the work that had created such a sacrificial lifestyle for so many of our people through the Crazy Love Campaign.

No one on staff, with the exception of David, was inspired to go this direction at first. The decision to go to a unified budget carried a tremendous amount of risk. In fact, until we meet or exceed budget in 2011, we will live with a sense of wonder if we made the right decision.

The 20 percent beyond the budget that had become part of our revenue stream was not guaranteed. While we have stressed that a combined budget means combined giving, whether or not our people will give at the same level is another question.

Our resolve to make this move didn’t become clear until we began measuring the impact of including into the budget an accelerated debt reduction plan to pay down the debt incurred by the previous capital campaigns along with carefully outlining how our monetary investments matched the core values of our church.

Sermon series kick-off
We had a powerful sermon series in the fall of 2010 called “Compelled,” so we decided to call the unified budget our “Compelled Ministry Plan for 2011.” We wanted everything about this effort to feel different and provide an opportunity for us to connect every dollar to life change.

Our church leadership and larger body were very supportive. The Compelled Ministry Plan for 2011 passed with only two or three objections.
Internally, we will increase the intentionality of our tracking of giving trends to better understand how our people give, provide better, more detailed information to connect the dollar given with its Kingdom impact, and expand the ways people can give on and off campus.

Because of our effort to put together the prospectus piece and treat it as a contract with the giver, we’ve also decided to use it as the basis of our messaging strategy, particularly our efforts to demonstrate a measurable impact to the person in the pew.

While we know a unified budget approach is risky, we believe the timing is right and will allow us to teach ministry as a holistic endeavor, whether it’s making payroll for ministry staff or gathering resources for our orphans in care.

Lance Taylor serves as the executive pastor at Long Hollow Baptist Church, Hendersonville, TN, and is responsible for staff coordination, church strategy development, and campus development. www.longhollow.com

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Ten advantages of a one fund budget

1.    Streamlined communication to church.
2.    Easier to concentrate on one theme.
3.    Demonstrates the value of the entire budget.
4.    Sets comprehensive ministry expectations for the congregation.
5.    Able to build in things like accelerated debt reduction.
6     Reinforces giving to the church rather than specific projects.
7.    Broader level of buy-in that results in a greater sense of ownership.
8.    Provides a total picture of ministry investments and impact.
9.    Less confusion for new members and visitors.
10.  More accurate tracking of corporate giving health and metrics.