Why you shouldn’t shun good financial accounting in your church
I once worked for a corporation that was growing tremendously. At an annual meeting, the CEO gave a speech lamenting the fact that the accounting staff had become larger than the sales staff. But the reality was that the rapid growth of the company demanded a higher level of internal financial management than ever before.
Many churches view their need for accounting and business administration in much the same way—as a necessary evil. But I contend that appropriate financial accounting, administration and accountability is not evil. In fact, it is not only essential but also beneficial because it helps maximize the efforts of your ministry.
You need to know what you don’t have to pay!
It seems crazy to think that a church, which is a tax-exempt entity, could be paying taxes needlessly. Because your federal exemption exempts your church only from paying federal income tax many state and local authorities may try to charge you tax as well. Knowing what taxes your church doesn’t have to pay is very important!
1. Sales tax. Do you know for sure that the individual in your accounting department is diligently monitoring every invoice to make sure you are not paying sales and use tax? Even recurring bills can include sales tax without your realizing it. Sales tax can be rolled into other items or even miscoded on utility bills.
Depending on the state you are in, it could be years before your church realizes it. Follow up with your staff members and ask them to call every vendor to make sure they know your organization is a church, and verify that you have been classified correctly in their billing software. One church received a refund check for three years’ worth of overpayment on taxes from an electric bill!
2. Property taxes. Always review how much your state’s property taxes are for your church building, any auxiliary property the church owns, land owned by the church and church-owned parsonages. Some states have exemptions for ministers who live in church-owned property, for religious property, or for those with a duly held license, so be sure to thoroughly research the exemptions in your state.
If you have an additional church- or ministry-owned property, the local assessor’s office may try to assess it if particular criteria for the property are not specified, such as for use as a “worship auditorium” or other purpose. Be sure that the assessment has been thoroughly analyzed to confirm that you are not overpaying.
If the fair market value of your church or church property has decreased, be sure to thoroughly check the assessment to make sure items are calculated correctly—if by chance you live in a county where certain property taxes may be applicable. You might want to consider hiring a local property-tax professional who specializes in reducing tax bills to assist your church.
3. Payroll taxes. Are you absolutely certain your church payroll is being run correctly? In our experience, numerous administrators believe so, but upon closer review discover numerous errors. Do you use a large company to process your payroll automatically? If so, be sure the company hasn’t set you up as a for-profit corporation instead of a church. If you are incorrectly set up as a for-profit, they might be charging you Federal Unemployment Tax Act (FUTA) or State Unemployment Tax Act (SUTA) taxes.
Ensure that your payroll processor is running the ministerial payroll correctly and not inadvertently charging the church FUTA or SUTA (if applicable, and subject to state laws). Verify that all payroll benefits are being properly processed, and all deductions are being processed as pre- or post-tax. These errors could be needlessly costing the church additional employer FICA taxes on certain benefits. Make sure you are not overpaying, because every dollar counts.
4. Hotel use and occupancy tax. Numerous states allow exemptions from certain hotel and occupancy taxes for 501(c)(3) organizations. When your staff plans to travel, diligently fulfill your hotel’s requirements for applying the tax exemption before they travel. Check with the hotel to see if you can fax in advance copies of your church’s IRS 501(c)(3) letter.
Never let a church staff member check out from a hotel without carefully examining the bill to see if any of those taxes were inadvertently charged. Take the time to visit the front desk to have the erroneous charges deleted. It is surprising the amount of money these taxes can add up to over time!
Pamela M. Schavey, J.D., is a CPA and tax attorney with ChurchShield LLC (churchshield.com), which assists churches and ministries in IRS compliance with legal, accounting, tax and payroll matters.
How a divine disappointment led us to save money and triple our growth
I will never forget the day the town said “no.” I thought it was the end, but it was actually just the beginning. We had experienced a season of growth at Seacoast and felt it was time to build. We were conducting five services on the weekend and had purchased additional acreage for a 4,000-seat expansion. We had been in discussions with the city for about a year, and things seemed to be progressing well. At the last minute we were caught in a “not in my backyard” backlash which resulted in a no vote from the town council, making it impossible to build.
To say I was disappointed by this turn of events was an understatement. The prospect of continuing five services or adding more seemed overwhelming. We were already beginning to plant churches, but that didn’t address our current capacity issues.
So I did what I always do when discouragement sets in. I shut the blinds to my office and turned on some country music. In that genre, singers are always losing something—a horse, a dog, a girlfriend or a truck. I wanted to listen to someone who understood my loss. I wasn’t ready to move on yet. Later, a church member helped me with my flawed theology.
“Pastor, it’s OK to sit on the pity potty,” she said. “As long as you don’t sit there long enough to get ring-around-the-hiney.”
That sounded about right. So I sat in my pity for a while. Then I remembered: There are no surprises to God. He has never had a day when He said, “Wow, I never saw that one coming.” So if He didn’t share my surprise by the turn of events that day, it’s probably because He had been working on a solution—before I even knew there was a problem. So we bandaged our wounds, rolled up our sleeves and went to work finding out where He was leading us next.
We settled on multisite services as the best possible solution to our situation. We knew that adding more services at off-peak hours had inherent problems. The further we moved the service from the “golden hour” of 11 a.m. to noon on Sunday, the less likely people were to attend. What if we were able to add extra services at the optimum time? The only way to do that was to meet offsite. Ultimately, we added 30 more services in 13 additional locations.
How much did it cost? A lot less that a 4,000-seat auditorium. We used the phrase “high impact, low regret” to guide us in the process. We wanted the highest impact for the kingdom with the lowest potential for financial regret.
We also tried to define what was necessary and what was merely helpful. If you confuse these two categories you can focus on the wrong things and find yourself regretting your decision in the long run. In life, for instance, food, water and air are essential, while Guitar Hero and iPads are just helpful. If you mix up the categories, you’ll wind up in a world of hurt.
In launching multisite services, a good location, the right leader and the leading of the Holy Spirit are necessary, while high-definition video, a live stream and lots of low end in the sound system are only helpful.
We still haven’t added most of the helpful stuff, and we never built the 4,000-seat auditorium. But we have more than tripled the number of people we minister to weekly, and we’re able to do it with very few regrets.
Greg Surratt is the founding pastor of Seacoast Church in Mount Pleasant, S.C., one of the early adopters of the multisite model. Greg is a founding board member of the Association of Related Churches and is married, with four children and seven grandchildren.
Pastor Chip Sweney tells the inspiring story of one church that looked beyond its own growth limitations to create “a new kind of big”—a citywide network of almost 150 churches that today work together to meet the needs of their community and change their city.
We should use technology to help glorify God, not put on a show
Technology in a church setting can be a difficult issue. When referring to the sound, video and lighting aspects of a church sanctuary, we all have our own varying experiences.
On the positive side, a well-lit room may inspire us to forget what is going on around us and create an environment that draws us closer to God. But isn’t it strange how the same tools can be
distracting by demanding our attention and causing us to take our eyes off God?
The fact is that many churches commonly use equipment that was initially developed for use in concert tours and theater productions. In theater settings, technical equipment is used to bring scenes alive. It directs our focus and makes us believe we are somewhere else. In concert tours, it builds excitement and stimulates our senses.