Lending to ministries gives those of us privileged to work in the Ministry Development Group a unique perspective. Having one foot firmly planted in ministry and the other foot firmly planted in business allows us to identify many of the challenges ministries face and gives us an opportunity to be an advocate for our members by sharing what we’ve learned. In this series on mitigating risk, we’ll share key areas in which your ministry may be exposed to unnecessary risk and we’ll provide some thoughts on how to help mitigate that risk.
Admittedly, management is a large topic to cover in even a few articles much less one. There are volumes that have been written on the subject of management; therefore, the focus of this publication is on those aspects of management that can expose your ministry to unnecessary risk: Corporate Documents and Management Structure
I. Corporate Documents
Corporate documents generally encompass:
- Bylaws and Constitution
- Articles of Incorporation
- Minutes and Corporate Resolution
There may be other documents, but these are the backbone of most organizations. Since some are also filed with the State, they present unique risks.
1. Bylaws and Constitution
A ministry’s Bylaws and Constitution define the structure of the ministry, the governing model, and conduct. Some also include the primary objective for which the ministry exists, the results the ministry expects and the staff controls in place to meet its objective. This collection of rules can be referred to as an organization’s policy and are a very important framework.
The primary risk here is making decisions that are inconsistent with your stated policy which can result in significant unexpected or negative consequences such as having board decisions contested by congregants. Often, this risk exists because the policy is out of date making it difficult or impractical to follow.
Mitigate this risk by consulting your policy regularly to ensure controls are met and meetings are conducted in accordance with stated quorum and voting requirements. Review and amend your policy as necessary to further protect your ministry.
2. Articles of Incorporation
While rare, some articles of incorporation include certain aspects of policy such as quorum and voting requirements. If your Articles of Incorporation include policy, reconcile it with your bylaws and constitution to ensure a contradiction does not exist. If a contradiction does exist, consult your attorney to determine the best course of action.
As a general rule, keep a record of not only the original filing of the ministry’s articles, but all amendments subsequent to the original filing.
3. Minutes and Corporate Resolution
Minutes of meetings and corporate resolutions are crucial in chronicling your ministry’s decisions and provide proof that your board or governing body adhered to the stated policy. Keep minutes of all meetings and corporate resolutions filed in a safe place. You may also consider keeping a duplicate copy of key decisions in a separate location in the event originals are destroyed accidentally (e.g., decisions such as amending bylaws and articles, hiring and dismissing key staff, property acquisition and borrowing).
II. Management Structure
Management structure refers to the way a ministry’s management team operates. Whether by board of directors, elders, deacons or other means, management structure is (or should) generally be defined in a ministry’s written policy. Because ministries sometimes operate independent of their written policy, management structure can be more abstract. In those cases, it is reflected more in the ministry’s culture and in the precedent set by its leaders. And therein lies the risk. An ignored or poorly crafted management structure risks the appearance of impropriety, operational inefficiency and, in a worst case scenario, litigation.
1. Appearance of Impropriety
Probably the most important commodities for a board or executive team are credibility and influence. Without them leaders cannot lead. Poor management structure ignores these important commodities or, at best, takes them for granted. While there are many individual factors that can lead to the appearance of impropriety, having adequate controls in place goes a long way to minimize this risk.
If you don’t have them in place already, consider implementing financial controls that promote accountability and transparency. Clearly defined policies that share the responsibility of finances among more than one person is a good place to start. For example, churches should avoid having family members related by blood or marriage oversee the administration of tithes and offerings. Finally, if at all possible, the ministry’s board should have at least five people on it of which at least three are unrelated by blood or marriage.
2. Operational Inefficiency
Headlines depicting a bleak economy continue and are further affirmed by headlines reporting job reductions and layoffs among businesses of all sizes. While their pre—layoff strategy may be to save money or prevent filing bankruptcy, their post layoff strategy is to be more efficient. To do more with less income, fewer expenses, reduced workforce, limited resources and so on. Operational efficiency is just as important to most ministries and sometimes even more so.
Because a ministry’s income comes primarily from donations, it owes its givers a duty to use those donations productively. When ministries don’t, givers’ wallets and purses close up and dollars are donated elsewhere or worse. Givers decide to stop giving.
A ministry can minimize the risk of operational inefficiency by having a well crafted management structure that:
- Outlines its mission, objectives and expected results
- Clearly defines ministry roles and controls
- Promotes volunteerism and limits hiring staff to strategic and well defined ministry needs
- Facilitates communication among leaders and staff
- Handles ministry and personnel matters consistently
In an ever increasing litigious society, ministries and other non-profits are no longer immune to lawsuits. While litigation is typically not a direct threat to ministries, board members and executive staff are in highly visible positions of influence. The importance of that cannot be understated. Here are a few things your ministry can do to minimize this risk.
First, your ministry must carefully consider the structure of its board, executive staff and pastoral staff. As already noted, a policy that promotes accountability and transparency is a powerful tool. It is widely considered prudent to include accountability at all levels.
Second, ensure whenever possible there are no conflicts of interest between board and staff. For example, avoid having someone serve on the board of directors or other governing board if the prospective board member is related to someone on staff. If that can’t be avoided, then the board member should recuse himself from voting on matters that may impact staff, especially on matters of pay or promotion.
Third, remember to keep ministry funds separate from personal funds. This includes commingling of funds (depositing ministry funds into a personal account and visa versa) and using ministry funds for personal use (whether by cash, debit cards, or credit cards). While it’s true that it all belongs to God anyway, there is wisdom in staying above reproach.
Unfortunately, it’s difficult to discuss mitigating risk without sometimes painting a bleak picture. The important thing to remember is that ignoring these management risks can:
- Negatively affect a ministry’s reputation
- Cause inefficient use of both staff and resources
- Impact staff morale and effectiveness
- Expose the ministry and its board to legal risk
However, the picture doesn’t have to be so bleak. With proper planning, written policies, accountability, transparency and adequate controls your ministry can minimize these risks substantially.
Seek wisdom from others that are where you want your ministry to be and consult professionals when possible. Some of these professionals may even exist in your own organization or in your circle of influence. Whatever your management structure is or will be, let it be by intent and not by default.
Disclaimer: Christian Community Credit Union is a state charted financial institution. While we offer a full line of banking products and services, legal advice is not one of them. The information presented in this white paper is intended to bring awareness to areas where your ministry may be taking unnecessary risk. Our recommendation is that you or your executive team consult with professionals; only then can you be fully informed of your ministry’s options and how best to protect yourself and your ministry from loss.