ECCU Blog

In September 2011, many nonprofits experienced a drop in their ratings on Charity Navigator, the nation’s largest and most-utilized evaluator of charities. Charity Navigator’s significant shift in their rating system of nonprofits was the cause of this drop. Their new system, Charity Navigator 2.0, incorporates two new dimensions. In addition to examining financial health, they now examine accountability and transparency.

The new accountability and transparency component includes additional information from the IRS Form 990 as well a review of an organization’s website. The scope of the new rating includes analysis of the following areas:

• Independent board
• Material diversion of assets
• Audited financials prepared by independent accountant with an audit oversight committee
• Loan(s) to or from related parties
• Board meeting minutes
• Copy of IRS Form 990 provided to organization’s governing body in advance of filing
• Conflict of interest policy
• Whistleblower policy
• Records retention policy
• CEO listed with salary
• Process for determining CEO compensation
• Board compensation

Additionally, information reviewed on your organization’s website includes:

• Board members listed
• Key staff listed
• Audited financials
• IRS Form 990
• Privacy policy

Churches are excluded because they are not required to file IRS Form 990, the fundamental source for these ratings. However, those evangelical nonprofits that are required to file Form 990 are included. Even if you ministry is not required to file Form 990, this is a good list of areas for your ministry to consider addressing.

What do you think about making this information available? How has your ministry’s rating changed?

To help you know what to expect if you attend the upcoming 2011 Financial Forum for Ministries, I’ve interviewed each of the presenters to find out what they’ll be covering. First up is David Lee, ministry development officer with ECCU. His session is titled, “How to Measure and Communicate the Financial Health of Your Ministry.” 

MBG: How will your presentation help attendees better serve their ministries?

David: My main objective is to be a catalyst. I’ll encourage those who attend to begin identifying key ministry and financial metrics that should be measured and who they should communicated to.   

MBG: What are three important takeaways attendees will learn during your presentation?

David: First would be a clear understanding of why it’s important for every ministry to measure and communicate their financial condition. Second would be some sample metrics (ministry and financial) that ministries tend to measure. Finally, people will walk away with a better understanding of the kinds of dashboards ministries use to communicate financial information to different stakeholders.                                                                                                      

MBG: What is one suggestion you’d offer to help attendees gain the most from this learning experience?

David: Take advantage of the opportunity to talk with the experts who are there, both presenters and people from other ministries. At ECCU, for example, we have expertise identifying and evaluating financial metrics. John Butler with CapinCrouse has expertise in non-profit tax issues. And ministry peers have experience with many of the same issues you deal with every day. 

MBG: What do you think are the biggest challenges facing ministries today?

David: For many it’s limited financial and human resources to pursue their missions. For others it’s ongoing economic uncertainty. They’re wondering how long the recession will continue to impact their ministries, which is making it difficult to budget and plan for the future. 

What is the biggest challenge you face regarding the financial health of your ministry?

How do you decide if an event is worth your time? I usually start by asking people who’ve attended before. Since ECCU’s 2011 Financial Forum for Ministries is happening soon, I thought I’d save you some time by interviewing an alumnus.                                                                               

Jim Clark is the associate pastor of business and stewardship at the First Evangelical Free Church in Fullerton, California. Here’s our conversation about the upcoming Forum.

MBG: Have you attended the Financial Forum for Ministries in the past?

Jim: Yes, in fact it is a priority event for my team.

MBG: You’ve signed up again this year. Why?

Jim: We love the partnership of ECCU, CapinCrouse, and ECFA to serve ministries and particularly the local church. We can drive literally a few miles and receive valuable training and legislative updates while networking and being encouraged in our kingdom work. This is the best value of its kind while allowing us to quickly get back to work and apply what we have learned.

MBG: Please talk about the format of the forums. How does it add value to this particular learning opportunity?

Jim: The presenters are always top notch. These are the experts in their fields who are at the forefront of changes that could affect our ministries. The material presented goes deep, but is always done in a format that we can easily apply. The setting is wonderful and the time we have to network with those who we don’t normally get to be with, and share our challenges, is fantastic.

MBG: What’s one reason you’d recommend that others attend the Financial Forum for Ministries?

Jim: We are all looking for ways to stretch our budget dollars while staying current on issues facing our ministries. The ability to stay local, glean expert knowledge, and network is an excellent value and an opportunity to be good stewards for our ministries.

MBG: How can someone who attends make the most of the experience?

Jim: Come ready to learn. Think of who in your organization might benefit from this day. It’s a great opportunity for board members to gain a better understanding of the challenges your ministry faces. There is normally plenty of time for Q & A, so don’t be afraid to ask questions.

Have you attended past financial forums? What was your experience?

Follow this link to learn more and sign up for the financial forum in your area.

I’ve blogged in the past about the tension that can develop between people who hold differing views about how to manage ministry finances. The topic can spark passionate discussion. It can also spark thoughtful guidance from ministry leaders like Henry Morris III, chief executive officer with the Institute for Creation Research.

I stopped by the ICR website the other day and ran across a piece Morris wrote titled “Ministry Money.” He says that “the principles of money management routinely place ministry leaders in certain tensions regarding wise stewardship. Some insist on debt-free ministry operations. Others see prudent financing for capital projects as wise financial leveraging.” He goes on to offer some “biblical admonitions to help us all make wise financial decisions.”

If you’d like to learn more about ICR’s ministry, check out the video we did last year titled Contending for Creation.

Understanding tax guidelines for nonprofits and faith-based organizations can sometimes be complicated. That’s why we feel it is necessary to provide as many resources as possible.

The California State Board of Equalization and Cal State Fullerton are partnering to host a free tax seminar for nonprofit and faith-based organizations on July 12, 2011.

For more information and to register, click here.