We’re bringing up the topic of cash reserves again for one simple reason: It’s important. So important, in fact, that we created a free tool to help you discern if your reserves are adequate. Because inadequate reserves can translate into inability to pursue your ministry’s mission.
Case in point: We recently analyzed the financials from a representative sample of churches across the US, and 32% of ministries that experienced financial distress over the past two years maintained less than 51 days of cash reserves. On the flip side, 92% of ministries who maintained over 51 days of cash reserves didn’t experience any financial distress. (Distressed ministries are those that were past due on payments to vendors 60 days or more.)
That’s where the free tool comes in handy. We created an online recording of our recent webinar to help you understand:
- What makes up cash reserves
- Why reserves are important for your ministry
- How to establish a cash reserves target and begin building adequate reserves to reach it
You’ll also hear from a pastor whose church went through the process of building adequate reserves and how it benefited their ministry.
Not only is the webinar free, it’s easy. Simply visit www.eccu.org/cash-reserves-webinar. After providing some basic contact information, you’ll have an opportunity to view the webinar and to download the ECCU white paper, Cash Reserves: How Much is Enough?
Give it a listen and leave a comment letting us know what you found most helpful.
We have had the opportunity to analyze the financial statements of ministries across the U.S. in the past couple of years and we have found some helpful information worth mentioning.
Of those ministries, nearly 20% were deemed to be in financial distress. This meant that these ministry organizations were past due 60 days or more on payments to vendors in the past year.
The top correlation we found to becoming financially distressed was the amount of cash reserves maintained. 32% of the ministries who maintained less than 51 days of cash reserves became financially distressed. Conversely, 92% of those ministries who maintained over 51 days of cash reserves did not become financially distressed.
Now there isn’t any magic in 51 days of reserves specifically. That is just the number our statistical analysis showed to be a significant threshold. More importantly, each ministry should determine how much is enough for their unique ministry. For most ministries, adequate reserves would be something much higher than 51 days of cash reserves.
Financial distress can and will cause significant harm to your ministry. Active ministry is replaced by a survival mentality, cutting costs wherever you can. While it can be prudent to cut unneeded waste, cutting activities and programs which are critical to your mission takes away from you fulfilling your vision as a ministry.
We have written a white paper entitled, “Cash Reserves: How Much is Enough?” which you can read or send to another friend in ministry. In this, we provide a framework which you can use to determine how much is enough for your ministry. In addition, we offer a free consultation for our members with one of our staff to help them work through a process to discover this important information. Click to view our free webinar recording: Cash Reserves: Why you need them. How to build them.
It is common for ministries to focus on impacting communities outside our U.S. borders. Often, in order to accomplish this, funds need to be moved across our borders to fund these ministry activities.
One area ministries need to be aware of when funding ministry internationally is compliance with U.S trade regulations. It seems strange to think that U.S. ministries have to worry about regulations from a counterterrorism agency. Yet, the Office of Foreign Assets Control (OFAC), which is under the Office of Terrorism and Financial Intelligence in the Department of the Treasury, enforces sanctions on trade between U.S. organizations and foreign nationals and entities that could be viewed as unstable. All U.S. individuals and companies must comply with OFAC regulations. Non-compliance can result in penalties and fines as well as personal imprisonment.
So what does it take to comply with these regulations? Here are five steps to ensure your ministry follows these rules when sending funds internationally:
- Know the rules and regulations established by OFAC. You can learn about OFAC and its regulations from its website.
- Understand the risks identified by OFAC for charitable organizations in delivering aid and accomplishing ministry objectives internationally. A risk matrix has been developed by OFAC which describes higher risk factors that ministry organizations need to be aware of.
- Check individuals and entities that you are working with and sending funds to against OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list to ensure they are not prohibited from engagement.
- Refer to OFAC’s Country Sanctions which are red-flagged for having terrorism and drug trafficking ties. Know that it is okay to fund ministry activities in these countries when you receive an approved license to do so.
- Develop policies and procedures to comply with OFAC rules and regulations. Since the SDN list and Country Sanctions are being updated constantly, continual checking is required.
As co-laborers for Christ, we should do everything in our power to protect our brothers and sisters serving internationally. Many of them put their lives at risk daily while spreading the gospel.
Recently, the Internal Revenue Service (IRS) solicited the help of the Evangelical Council for Financial Accountability (ECFA) to gather comments to determine if reporting international activity on Form 990 is a concern for organizations. In response, ECFA will issue a letter to the IRS with signatures from organizations who are opposed to the reporting.
Follow this link for more information or to sign the letter.
I posted a blog on May 3 about a serious form of online fraud called account takeover fraud. An Iowa church appears to be one of the latest victims, to the tune of $660,000.
In a Your Church blog post titled Cyber Crime: Coming to a Church Near You, Matt Brannaugh tells the story, then offers six tips for avoiding a similar attack on your church. One that bears special mention is dual controls. From my earlier post, “This means that if one person authorizes creation of a payment file, a second person must authorize release of that file.”
At ECCU, we feel so strongly about the importance of dual controls that we require ministries to implement it when they set up their online banking.
For more information about how to protect your ministry’s information and funds, you can read our white paper Handling Cash: A Common-Sense Approach to Securing Your Ministry’s Most Liquid Asset.