ECCU Blog

Have you heard about the legal decision that was recently handed down in a case involving World Vision? Three former employees who identified themselves as Christians when hired were dismissed from their jobs after professing atheism. They sued World Vision claiming discrimination based on religious preference.

While the court ruled in favor of World Vision, the case has profound implications for all ministries. To address these implications, ECCU is partnering with Rothgerber Johnson & Lyons (a law firm specializing in labor and employment law as it relates to non-profits and religious organizations) and the Christian Leadership Alliance (CLA) to co-sponsor a half-day event in Colorado Springs. Staffing Ministries with Fellow Believers: Lessons and Mischief from the Recent World Vision Decision will be presented on October 18, 2010, and address these topics:

• The World Vision Decision: a “Victory” Breeding Mischief
• The Human Resources Freedom Architecture
• Benefits and Beliefs
• Critical Issues for Ministries Active Internationally

One of the experts presenting will be L. Martin Nussbaum, Esq., an attorney who focuses on labor and employment, litigation, non profit organizations, and religious institutions. 

You can find details and registration information at www.rothgerber.com/events.aspx.

I read last week that the Great Recession officially ended more than a year ago. This probably came as a surprise to ministry leaders who are still working through recession-related issues like declines in giving and real estate values.  The latter, in fact, could have significant impact on your ministry’s ability to renew existing debt.

Over the past decade, many churches took out conventional, commercial loans to acquire or build new facilities. Monthly payments were typically calculated on a 25- or 30-year amortization schedule to keep payments manageable. But those loans had maturity dates set at 5, 7, or 10 years. That means that when the loan matures, it must be paid off, refinanced by another lender, or renewed by the existing lender.

Before the Great Recession, the incumbent lender was usually happy to renew a loan after resetting the terms to prevailing market rates. New appraisals were seldom required. Today however, lenders are looking with more scrutiny at maturing loans.

Two areas that lenders are paying more attention to at maturity are:

Debt Coverage – Lenders want to know that a ministry can make loan payments out of its operating budget without dipping into reserves. If your ministry cannot demonstrate a 1:1.25 debt coverage ratio (or even higher in some cases), the lender might set restrictive covenants, increase the interest rate, or even chose not to renew the loan.

Loan to Value (LTV) – Appraisals are revealing that the LTV ratios on many church loans are higher than when first originated. In some cases, real estate values have declined to the point that churches actually owe more than their properties are worth. If your ministry falls in this category, your lender may require additional collateral. If none is available, or if it is insufficient, you may have to pay down the principal balance to bring the loan in line with the LTV requirements.

At ECCU, we’ve developed an informative tool called the Borrower Health Assessment to help ministries understand the risk exposure they may face when their loans mature. Among other things, this tool helps ministries understand their debt coverage and LTV ratios. This information can be immensely valuable in helping a ministry know how to prepare for a loan renewal.

The risks to ministries with maturing loans are significant. Among those risks—more stringent loan terms, a major reduction in cash reserves, or even default. However, with some forecasting and preparation, a ministry can be better equipped to address these risks.

Has your ministry experienced challenges from a pending loan renewal?

Dennis Park is a ministry development officer, financing specialist, and occasional blogger with ECCU.

The difference between banks and financial cooperatives like ECCU isn’t a topic that usually attracts a lot of attention. Well, I couldn’t ignore an article in the most recent issue of The Christian Century titled “Where’s your church’s money?”  

It starts by introducing the Move Your Money project, which urges “people to move their money from scandal-ridden megabanks to local institutions” like community banks and credit unions.

As if that wasn’t compelling enough, it introduced the Appleseed Fund, “which declared that it would no longer invest in…the five ‘too big to fail’ banks,” making it “the first socially responsible investing firm to exclude banks from its investments—in effect adding banking practices to other issues of moral concern, such as alcohol, tobacco, pornography, working conditions, environmental impact and weapons production.”

The more I read, the more tempted I was to holler “Amen!” Here are a couple more excerpts:

The new focus on banking practices forces us to consider banking as a moral issue. For many of us, choosing a bank is a matter of finding convenient branch locations, low fees and high interest rates on savings, CDs and mutual funds….I suspect this is how most churches choose their banks as well. We look for the best deal and then pat ourselves on the back for our good stewardship.

The challenge is that banking has a high level of invisibility. We deposit money and we withdraw money, but what the money does once it disappears into the bank is, or has been, largely invisible (and uninteresting) to us.

Before launching into a lengthy (but still compelling) discussion about the biblical view of usury, the article raises an important question: “Can churches become more discerning about where they keep their money?”

The question raises another that we’ve been asking more often these days: Do you know how your deposits are being used? Because ECCU is a financial cooperative comprised entirely of evangelical Christian ministries and individuals, we can respond by saying that our deposits are always used to resource ministries and never for causes contrary to Scripture.

It’s encouraging to hear a conversation like this in a national venue. What do you think? How concerned should ministries be about what happens with their deposits?

Transitions are important, aren’t they? Some of you can remember making the transition from typewriters to personal computers. For me, this post constitutes an equally eventful shift. Yesterday I wasn’t a blogger. Today I am. Amazing. And to think that when I gave up my typewriter, “blog” wasn’t even a word.

The transition from summer to fall is always eventful too, especially for ministries. I trust your ministry team is increasingly energized as you pursue your mission in this new season. And just like the ministries we serve, we’ve been busy here at ECCU. With so much happening, now is a good time for an update on what we’re up to.

This blog is a good place to start. We launched it in July, and it’s already well on its way to achieving our goal of delivering financial management insights and information while giving readers the opportunity to join an online conversation about ministry, money, and more. Please take time to comment on posts that catch your attention and invite your friends to join the conversation.

We also rolled out a new e-newsletter, Managing Ministry Money, which delivers the “best of” blog posts and updates on financial services, events, and other resources. I hope you choose to subscribe.

ECCU members have been receiving preliminary information about another initiative that’s been getting a lot of our staff’s attention—enhanced online banking. This significant investment of credit union resources is focused on making ministry banking quicker, easier, and more secure for our members. We’ll be communicating more details in the coming months about the launch of this new system.

Those ECCU member ministries that utilize our remote deposit services are now enjoying quicker access to their funds and reduced risk of fraud thanks to a recent upgrade. They’re also experiencing increased speed and accuracy through automatic email confirmations and duplicate deposit identification.

You’ve read several recent posts about cash reserves because we’ve been talking with so many ministries about the importance of building reserves. These conversations have prompted us to develop financial tools and resources to help ministries better understand liquidity and cash reserves. We’ve even created a new account to help ministries build their reserves—the Cash Reserves Savings Account.

See what I mean about this being an active season for all of us? I can tell you that we’re enjoying all the opportunities to better understand ministries’ needs and equip them with the financial services and resources to meet them.

What’s even more fulfilling, though, is the way these interactions and conversations are building relationships. I think that’s the aspect of being involved in a financial cooperative that keeps all of us working so hard. We are definitely better together.

Earlier this month, we looked at two recent cases of church embezzlement, and the “zero tolerance” stance judges are starting to take against these crimes.

Unfortunately, yet another big headline has since emerged—this time, the leaders of a 150-member Greek Orthodox Church in Connecticut discovered someone potentially embezzled more than $1 million. Federal authorities investigated the claims, and in an arrest made Tuesday, authorities say the suspect, who oversaw the church’s investments (including managing the building fund and endowment) allegedly used the money for his businesses, according to the New Haven Register. The church’s attorney, and federal documents released with the arrest, allege the 50-year-old man stole more than $2 million from three parishoners, and potentially millions more from the church, the paper reported.

As incidents such as these continue to spring up, we’ve compiled the Top 7 resources church leaders should use to prevent embezzlement opportunities and combat individuals who might attempt to steal:

7. The National Association of Church Business Administration. Phill Martin, NACBA’s deputy chief executive officer, is a Contributing Editor to Your Church. NACBA offers ongoing certification that covers a variety of subjects, including church financial management. The organization also recently released “Weeds in the Garden,” a book about preventing fraud in churches.

6. The Evangelical Council for Financial Accountability. Dan Busby, the ECFA’s president, is an Editorial Advisor for Church Law & Tax Report, Church Finance Today, and Your Church. The ECFA publishes best practices on its website, as well as a quarterly publication, Focus on Accountability. The organization also plans to host numerous regional workshops throughout the country in 2010 focused on establishing higher standards in church finance and governance, among other things.

5. Secure Your Church Finances, an electronic training resource from ChurchSafety.com. This free online assessment will help you determine whether your church’s money is at risk.

4. Safe Ways to Handle Your Church’s Money, an electronic training resource from ChurchSafety.com. The free article from this resource outlines several initial steps to take.

3. Church Finance Today, a monthly newsletter written by senior editor Richard Hammar, one of today’s leading thinkers on church law and finance matters, covers key financial and tax developments that church leaders should know.

2. Chapter 7 in Richard Hammar’s four-volume series, Pastor, Church & Law (4th ed. 2008) (also available by calling 1-800-222-1840). Chapter 7 addresses the following topics:

• Definition of embezzlement
• Why churches are vulnerable
• How embezzlement occurs
• Reducing the risk of embezzlement
• Responding to allegations of embezzlement
• The consequences of embezzlement
• Confidentiality and privileged communications
• Informing the congregation
• Avoiding false accusations
• The Employee Polygraph Protection Act

1. Essential Guide to Church Finances (Christianity Today International, 2009). This new book, co-written by university accounting professor Richard Vargo and Vonna Laue, a CPA and partner at nonprofit accounting firm Capin Crouse, maps out how to plan and budget, how to set performance measurements, how to create church financial reports, how to conduct church audits, and how to minimize the risk for embezzlement.

Matt Branaugh is director of editorial for Christianity Today International’s church management publications and resources. His current duties include editing Your Church magazine and TheYourChurchBlog.com. Used by permission.