ECCU Blog

To help you know what to expect if you attend the upcoming 2011 Financial Forum for Ministries, I’ve asked each of the presenters what they’ll be covering. Next up is George Martin, CLU with HUB International Insurance Services. His session is titled, “Slaying the Cost Dragon.” 

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

George: My presentation will give information and ideas to those responsible for their ministries’ benefits programs so that their benefits costs might be more predictable, reasonable, and easier to budget for. 

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

George: First will be to think differently about the design of medical plans. Second, we will talk about selling the “We’re all in this together” mindset and teaching employees how to be better consumers of healthcare. Finally, people will learn how to use the new benefit plans to project future costs to their ministries.                                                                                                      

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

George: Come with an open mind. The plan designs are different, but they have worked very well for many organizations. 

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

George: Ministries, like all non-profit organizations, typically pay lower wages than other businesses with which they compete for employees. Therefore, most of the secular and non-secular non-profit organizations we work with want to be sure that their benefits packages are as strong as possible. The struggle is how to keep the benefits strong but still affordable to both the ministry and the employees in any economic situation, especially the current one. 

What is the biggest challenge you face regarding benefits packages for your ministry staff?

Yes, this is a blog post about the IRS. So, understandably, I’m afraid I might lose you before we even begin. Please don’t check out too soon, though, because here’s the bottom line: The IRS actually has a new program designed to save you hassle and money. 

Good, you’re still reading. Now let’s talk about why this program might be important to your ministry. 

In the nonprofit world, especially in churches, it isn’t uncommon to find misclassification of workers—usually meaning an employee is mistakenly classified as an independent contractor. Why is it a problem? According to the IRS, “Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.” 

The new IRS program allows employers to resolve past worker classification mix-ups. By making a minimal payment to cover past payroll tax obligations, employers can come back into compliance rather than waiting for a dreaded and painful IRS audit. 

If your ministry is eligible for this new program, you can obtain substantial relief from past-due federal payroll taxes. Once accepted into the program, you will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties are due, and you will not be audited on payroll taxes related to these workers for prior years. 

(Need help determining if you have classification mix-ups? In a blog post I wrote addressing the issue last year, I included a resource from the IRS to help distinguish employees from independent contractors.) 

There you have it. If you discover your ministry has employees who are classified as independent contractors, take advantage of this program to avoid hassle and expense and get into compliance. After all, how often does the IRS try to make things easier for you?

What is the one area that we see derail more ministries than any other? I’m sure you’ve already guessed that it has little to do with macro economic conditions or the weather.

In good times and bad, the area that poses the greatest threat to ongoing success in ministry is a loss (or perceived loss) of integrity.

Here are three steps you can take to ensure that your ministry keeps—and strengthens—its financial integrity.

1. Create an involved finance committee. When I meet with churches, the norm is a conversation with the senior pastor and a bookkeeper—the best have a competent and involved team of people who work together to ensure checks and balances.
2. Hire an outside CPA. If your ministry has more than $500,000 in annual income, we recommend that you minimally have a CPA compilation every year, and I’d suggest a CPA review as well.
3. Communicate with your congregation or donors. Stay in regular contact with updates about the financial condition of the ministry. This not only ensures that they understand and can hold leadership accountable, but also makes it easier to ask for additional giving when it’s needed.

Of course, it helps to find a financial institution that is aligned with your values and works to preserve your financial integrity (Hey, I can’t resist…this is important!). Look for product offerings that reinforce your commitment to integrity (like ECCU’s Positive Pay, which ensures that every check your ministry writes is verified for the same amount when it hits your account), or services like our ministry banking assessments to keep your financial strategies on track.

Bottom line: Accountability is king. The more safety nets you have in place, the less likely you are to fall.

What does your ministry do to protect financial integrity? Please leave a comment and share your practices with our readers.

I’ve sat in the executive pastor seat. I know how challenging (even seemingly impossible) it can be to get the rest of the staff, especially your lead pastor, to value the same priorities that you do when it comes to church revenues and expenses.

That’s one of the reasons we developed the four financial priorities model at ECCU.

We talk with hundreds of ministries every year, from church plants with a few hundred people to some of the largest and most sophisticated ministries in the country. Some are growing rapidly, others are fighting to survive. What we’ve found as we look at the common denominators is that ultimately, all ministries really should have four financial priorities:

1. Ensure Financial Integrity. Without this one, the other three are useless, even dangerous.
2. Maintain Adequate Liquidity. Churches that had this in place over the past two years have continued to thrive while those that didn’t are often struggling or even out of existence.
3. Maximize Cash Flow. All about maximizing giving while also controlling expenses.
4. Leverage Assets. Ensuring you are being the best possible steward of the resources God has blessed you with—people, property, and cash.

As with any priorities, the order of these four can change based on the current church situation, but frequent review and discussion can ensure that your church is putting the proper emphasis on good stewardship of the resources God has entrusted to you through your givers.

Over the coming weeks, I’ll unpack each priority in more detail and also share about an exciting tool that we’ve developed to help your church with the process of managing your financial priorities.

I’ve been thinking about what’s new and interesting in the world of ministry financial services, wanting to wow you with fun facts and useful information. Which is why I’m devoting this post to…(drumroll please)…a new ministry report card. Okay, technically it’s called the Borrower Health Assessment, but that doesn’t make your stomach drop the way “report card” does. And it really works like a report card for ministries asking questions like: Are we making wise financial decisions? Are we financially healthy? Will we qualify to refinance when our loan matures? (This last one is most important to many ministries these days.)   

Helping to explain the Borrower Health Assessment is David Lee, ministry development officer for ECCU, and two representatives from ministries that have already benefited from this tool: Dave Beatty from West Bowles Community Church in Littleton, Colorado, and Ross Harrop from Springs Community Church in Colorado Springs, Colorado.

Ministry Banking Guy: What inspired this new tool for ministries?

Lee: Our research has shown that a major concern for ministries today is that they simply don’t know if they are financially sound enough to qualify for a refinance once their 5-year term is up. The tool was designed to help ministries understand—objectively and in laymen’s terms—their own financial health.

MBG: When is the best time for a ministry to take advantage of this tool?

Lee: The Borrower Health Assessment is preventative rather than a treatment tool. Like understanding the symptoms before you have the heart attack. Engaging ministries even two to three years before their loan matures lets them know what they need to work on long before they need to renew. It even gives them time to launch a capital campaign, if necessary, to compensate for things like declining property values.

Beatty: We used this tool three years before our renewal, and it prompted us to pare back our budget and look hard at personnel costs. We now look carefully at our numbers on a monthly basis, preparing us to pass with flying colors when it comes time to renew our loan.

Harrop: For us, we got the information too late. Our lender at the time was saying, “We like you….but there are some yellow caution flags with renewing your loan.” Then we were referred to ECCU, and David (Lee) offered us the Borrower Health Assessment. While the results aligned with our other lender’s feedback, the difference was that ECCU was objective, not trying to persuade us to do anything, but just saying, “Here is what we see.” It really helped us understand our strengths and weaknesses.

MBG: So, why doesn’t every ministry borrower just ask their lender for this pre-underwriting evaluation?

Lee: You can’t just talk to any lender to get the best pulse on your financial health. They don’t all understand the financial realities of a church or ministry.

Harrop: ECCU not only understands our belief system, but they also get the business side of ministry. So, when David came along with a tool that took an unbiased look at our budget and financials and could objectively explain why we did not have a sustainable financial model…I realized I have a partner in ministry. ECCU helped us bring a business sense to our decision making. We finally understood that a budget is simply ministry expressed in dollars.

Beatty: We used to go to our lender and ask these questions. Our former lender would say, “Here’s what you should have done.” ECCU was much more proactive. They said, “Here’s what we need to do together; here’s what we’re forecasting….” Going through the pre-approval process was hugely helpful. They walked through it with us.

MBG: What advice do you have for ministries approaching a loan renewal?

Beatty: Get a good picture of what you need to qualify for your renewal and maintain your lending relationship. There should not be any surprises. The Borrower Health Assessment—combined with a working relationship with someone who can walk you though it—is extremely valuable. One without the other may not be as effective. Anyone can generate numbers and say, “Look at this and take an inventory of how you’re doing.” But actually sitting down and talking with someone about it? That’s excellent.

Harrop: Get objective information on the health of your ministry. ECCU did not tell us what to do, but gave us information they had compiled from national percentages, allowing us to compare to some of the most successful churches. This put things in the spotlight for us, giving us financial clarification that we had never experienced before.

Lee: It sounds cheesy, but ask yourself, “Have we had our fiscal?” Your ministry should assess its financial health annually—even monthly—just like you should assess your own personal health long before problems arise. Talk to ECCU about using the Borrower Health Assessment and treat any ailments now, before it’s time to renew your loan. Whether you’re an ECCU member or not, if we can help your ministry become better aware and more in tune with what is healthy financially, then we have fulfilled our mission.