3 Compliance Pitfalls for Your Ministry to Avoid

Written by Raul Rivera on Jan 08, 2017 in Church Management

“How did we get here?” was a question that Pastor Tom, the senior pastor of a growing church, found himself struggling to answer. 

Pastor Tom was unprepared for a terrible turn of events in his church. To the shock of the church leaders and board of directors, they learned that a longtime church member had been stealing money from the offering for over two years! 

The church leaders thought nothing of it when this church member occasionally counted the offering alone because not enough volunteers were available to help. The possibility that this church member would steal from the offering had never even crossed the minds of the leaders.

In response to him stealing, the church member was ousted from the church. To make matters worse, the member then began to defame the pastor because he was offended from being forced out of the church. Some church members believed the false claims and called for the pastor’s removal.

In reviewing the church’s bylaws, the pastor and other church leaders realized that there was nothing to prevent this from happening.

Shaky foundations

Unfortunately, this is a common story. A church begins with great spiritual fervor, and while membership grows and lives are changed, important responsibilities such as managing administrative tasks, updating bylaws, maintaining board meeting minutes, and setting up protective policies for the ministry fall by the wayside ... until things go wrong.

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There are several “traps” that churches should be aware of because it takes only one trap to cause substantial trouble for a church.

I have good news for you though. You can arm yourself with the knowledge to recognize these traps, and the dangers associated with them, before they can have a disastrous impact on your ministry.

Fight the "as we grow" mentality

For many leaders, the "as we grow" mentality is a detriment. Many ministers say to me, "I know that we do not have it completely together, but as we grow, the Lord will provide to us people who can fill in the gaps." 

The problem with that mentality is that one believes growth will cause things to fall into place. However, the exact opposite is true. Growth will not come unless things are already in place. Intentional and focused leadership creates a sustainable environment of growth. Let me explain.

Twofold compliance

Intentional leadership recognizes two main areas of compliance that foster growth.

Intentional and focused leadership creates a sustainable environment of growth.

1. Compliance with God's government:

Compliance in this area means that you spend blocks of time each week knowing the Word and how God governs His kingdom. You cannot have a kingdom without government, and in order to operate in His government, you will have to be compliant with His laws and statutes. 

In Jeremiah 31:31 (also referenced in Hebrews 8), the Lord promised to give us His laws and to write them on our hearts. Many ministers today spend less time reading the Word, and as a result, lose the deep sense of conviction for truth required to lead a congregation.

2. Compliance with man's government: 

Compliance in this area requires that you become knowledgeable of the laws that govern your ministry in order to make wise decisions as to when to do something in-house and when to seek professional help. 

While ministers emphasize compliance with God's Word, they tend to disregard compliance with man's laws because they disagree with some of the laws. The deception here is in thinking that God accepts this position. In fact, the extent that you are compliant with man's laws, is the degree that God will entrust you to lead His sheep and for others to view you as being legitimate. It is difficult for people to follow a pastor with financial or tax troubles. 

3 compliance pitfalls to avoid

Next, let us review a few of the most common compliance issues that ministries face and how you can address them. This list is not exhaustive, but it is a good starting point to strengthen your church’s legal foundation. 

1. No plan of succession

Some pastors assume that they will always be the leaders of the churches that they founded. However, that may not be the case. 

A church founder, and any successor, only has the authority to perform the duties assigned to him in the organization’s governing documents.

Documents such as the articles of incorporation, bylaws, or employment contracts are legally binding documents that establish the legal structure of the corporation. Any succession plan language is most commonly found in the bylaws. It is important to have a plan of succession and to establish an accountability board to help protect the pastor from being unjustly removed from office. 

2. Lack of financial accountability

As in the story of Pastor Tom’s church, financial accountability can help prevent issues before they have a chance to start. Stealing money is not always the situation. The issues can also be small things, such as not having receipts to validate purchases or providing reimbursements without proper documentation.

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Implementing good bookkeeping practices and establishing policies (i.e. a purchase authorization policy, benevolence policy, reimbursement policy, etc.) can help your church ensure that all funds are being properly handled. Furthermore, implementing such financial practices and policies will help you to maintain compliance with IRS regulations in certain financial situations.

Not establishing these best financial practices and policies will unlikely hurt your church in the immediate future. However, if a church employee or member is audited, you would not want any improper reimbursements or donor receipts to bring unwanted IRS attention to your church.

Financial accountability can help prevent issues before they have a chance to start.

3. Mishandled donated property

A lesser known and very important area of compliance is the management of donated property. Most churches have a basic understanding of managing cash donations. On the other hand, knowing how to properly handle noncash donations becomes a little murky for many churches.

Donated property is treated differently than cash donations. Some churches make the mistake of assigning a value to the items donated to their ministries. Such practice is not permitted by the IRS.

A letter (known as a contemporaneous written agreement) should be issued stating the purpose of the noncash donation, and how it can be used for ministry purposes. A value cannot be assigned by the church to the donation. That responsibility is placed on the donor.

(Recommended reading: “How to Handle Year-End Donations, Part 1”)

Do not wait until things go wrong

In the end, Pastor Tom and his church were able to weather the storm. Through prayer and sound counsel, they were able to show the church Pastor Tom’s integrity. Their financial policies and practices were in order, their bylaws fortified, and they continued the journey of strengthening the spiritual and legal foundations of their ministry.

You do not have to stay in the dark about whether or not your ministry is protected and has a solid foundation. Rather than wait to see what happens, be proactive. Take steps now to review your legal foundation and to set in place the right documents and procedures to keep your ministry running healthy. 

Consider attending one of our Ultimate Church Structure Conferences to bring a new level of vision and strength to your ministry. Call us today at 877-494-4655, and register for a conference location near you in 2017! We look forward to meeting you! 

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Raul Rivera

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