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05 Apr 2018

4 Steps to Maintain Compliance for Your Ministry

Raul Rivera

The number one question pastors and ministry leaders ask once they receive the 501(c)(3) approval for their church or ministry is, “What do we need to do now?”

Obtaining tax-exempt status for your church or ministry cost both time and resources. Maybe there were times when you thought that the day your ministry would receive official 501(c)(3) recognition would never come.

But that day did come, and if you are still in the process of applying for 501(c)(3) status, I want to encourage you that that day will come for you and your ministry.

Since obtaining tax-exempt status for your church or ministry is something your worked hard for, I want to spend some time letting you know what you should do next.

In reality, there are various steps to maintaining compliance for your church or ministry. But today I want to cover the most essential steps that will help you to get started.

So, are you ready to go on this journey?

Where maintaining nonprofit compliance begins

Once you’ve received 501(c)(3) approval for your church or ministry, the path to maintaining compliance begins with the Annual Board Meeting.

This is the most important board meeting you will hold all year. It is this board meeting that will help set the tone for your church or ministry each year.

Many boards choose to hold this meeting at either the very end of their fiscal year, or within the first month of their fiscal year.

In the following paragraphs I will share with you what should be considered and reviewed during this meeting, and along the way I will suggest some resources to help you get the job done.

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4 steps to maintain compliance for your ministry

1. Review what happened last year

When it’s time to hold your annual board meeting, your secretary and treasurer should have completed an internal audit of all records.

Most boards remember to reconcile their financial records, but not everyone reviews and reconciles their board meeting minutes, contracts, and other written agreements.

If your board made a decision last year to establish a lease, hire someone, or to make a purchase outside of last year’s budget, you need to make sure you recorded it in your board meeting minutes.

Have your secretary look through last year's board meeting minutes to ensure all important measures were recorded and filed. If any discrepancies are found, cover and ratify those decisions during your Annual Board Meeting.

2. Create a budget for your ministry

Projecting the budget for your church or ministry is very similar to projecting your family’s home budget.

First determine what you need to pay for (such as facilities costs, liability insurance, administrative costs), and then you can consider and plan for the things you want to purchase (such as children's church check-in system, mission trip to Kenya, new sound board, etc.).

Having a budget will save you time. It will not only create peace of mind, but your budget will help you plan your fundraising campaigns. Once you know what you expect to spend, you will then know how much you need to bring in.

3. Create, renew, or review all compensation agreements

This is the perfect time to create, renew, or review your church's or ministry’s compensation agreements and benefits packages.

I want you to latch on to two words here: Renew and Review.

If your board approved a compensation agreement and/or benefits package for an employee last year, you need to reevaluate and renew the agreement.

This is to ensure that the compensation agreement remains “reasonable.”

Reasonability is a term the IRS uses when speaking about compensation within the charitable sphere. Though it encompasses many things, the easiest way to think about reasonability is for you and your board members to ask:

“Can our church or charity still afford to pay this person, meet our obligations, and continue to further our charitable purposes?”

If yes, renew the package. If you can give them a raise, do it! If you can add more staff, do that too!

You can read more about how to establish reasonable compensation here.

4. Establish this year’s corporate calendar and assign responsibilities

Each board member should have access to your organization’s corporate calendar.

In addition, each board member should be aware of your organization’s yearly responsibilities.

After identifying your organization’s obligations be sure to assign someone to their completion.

As you will see, failing to accomplish some of the below tasks could put your church or ministry in dire straits.

a. Filing your annual report

Most states require all corporations to file an Annual or Periodic report with the Secretary of State. Failing to file this report may lead to your corporation’s involuntary dissolution. This applies to both churches and charities. This applies to every state with the exception of the following: AL, MS, NY, NC, OK, PA, SC, and WY.

b. Filing your annual IRS Form 990

The IRS requires all charitable corporations, with the exception of churches, to file an annual Form 990. If your ministry were to fail to file this form for three consecutive years, your charitable status would be automatically revoked. There are also fines for filing this form late! This applies only to non-church charities.

c. Renewing your charity registration

Some states require your corporation to not only register as a charity but to renew that registration annually. Please keep in mind that registering as a charity is different from incorporating (which you will have taken care of by now).

This applies to both churches and charities. This applies to every state with the exception of the following: AL, AZ, DE, ID, IN, IA, MT, NE, NV, SD, TX, and WY.

d. Renewing your sales tax exemption

Some states also require your corporation to renew your sales tax exemption annually or periodically. Make sure to find out if this applies to your organization as it would be awful to lose out on this amazing benefit. This applies to both churches and charities.

This applies to the following states: FL, IL, KS, PA, and VA.

If you have questions about any of the filing requirements just mentioned, give us a call at 877-494-4655.

Don’t wait to make your next move

We want you to maintain the joy of knowing you are operating your church or ministry in a compliant manner. 

I realize you may have additional questions and that’s fine. We can help answer those questions. Just give us a call at 877-494-4655, or register to attend one of our conferences.

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera

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About the Author

Church Planter. Speaker. Author. CEO. Raul Rivera has had ample experience in the church planting world. His current venture, StartCHURCH, has helped 1000's of churches to start right. Raul has compiled an array of manuals and software tools that help churches stay compliant with the IRS. He also hosts over 35 national conferences per year, training pastors on how to launch their churches. Raul is married to his wife Genel, and they and their five children live in Atlanta, GA.