Monday, August 20, 2018

What Should I Look for in Online Giving?

Question: Hey Fletch...Our church is considering starting online giving. What are the kinds of things that we should be looking for?

Answer: From a user’s perspective, the number one thing for me in an online giving platform is ease of use. If I’m a new online donor, I want a system that works easily for me. Along with that is security. I want to know that the donation processing is secure and that my donation data is secure. Brad Leeper, President of Generis, and I were talking about online giving recently. Let me ask him to share his thoughts.

Brad—

Your question highlights four important values an XP should consider and execute for their church. 

First—Digital giving is an option that many people prefer. As wise leaders, we should make giving as easy as possible. Dealing with the issue of giving and the heart is demanding enough, so eliminating barriers to giving is something we have to incorporate into our generosity culture. A target we suggest for our clients and frequently see is at least 60% of giving coming from channels other than the actual worship experience. Financial leaders tend to balk at the fees built into digital giving. An XP will need to concede these fees as a market reality. There is good news: the market seems to be forcing fees to lower levels. 

Second—There is consolidation going on in the space. Be alert as to who stands behind a platform, such as if the owner is providing service and if the tool is constantly undergoing improvements. Even with consolidation in the space, new tools are frequently emerging into the market. 

Third—Integration with your church data base and accounting are important to understand, making sure is workable in your current configuration. Do consider that the primary goal here is to increase giving by making the process easier and more seamless to how people financially do life. If a better giving app increases your giving, then needing a few additional steps internally is well worth those steps. I’d rather have $5,000 a month in giving with an extra few steps than $800 a month in giving with the value being what is easiest internally. 

Fourth—An app is not a magic solution to instantly increase giving. Each  platform will provide you with a process to announce and to integrate the tool into your setting. Successful installations, however, take far more time and emphasis to normalize and increase giving through the tool. The additional work is well worth it because an app will elevate giving over time with much of that giving chosen on a recurring basis by the giver.

Saturday, August 11, 2018

Pastor Buying a House in an Expensive Location

Question: Hey Fletch...Can you share insight into how churches in affluent areas are handling housing costs, especially for new staff members who move into the area? Here in our region, the median home price is $1,000,000. This has made it especially difficult to hire folks who are new to this crazy real estate market. I imagine you may have dealt with this and wondered if you know how other churches are handling it. Loans? Signing bonuses? Equity share? Lottery? Thanks for any insight you might be able to provide.

Answer: There are several parts of the country where your question literally “hits close to home.”

Some churches in California have a joint ownership program. The pastor puts up a percentage of the down payment and the church puts up the same. This can make it possible to buy a house. As co-owners, questions arise. What about repairs and renovations? If the pastor and church are 50% owners, does a committee represent the church if the pastor wants to add a new roof or another bedroom? You can see how co-ownership can get dicey.

Loans are interesting. There are some states that have laws about any incorporated entity loaning money—and California has some rules about this, but I don’t know about your state. Bottom line, before doing a loan, check with an attorney. Issues need to be ironed out in advance. What happens when the pastor retires, resigns or is fired? Do they have to sell their house immediately? If the pastor becomes a “pastor emeritus,” can he live in the house until he dies? Will the church then force the new widow or widower to pay back the loan or sell the home? Does the church have a second mortgage and will the primary lender allow this? Many lenders want a church loan to be a personal loan and not tied to the mortgage.

Common housing issues in high profile areas:

  • Few churches do a signing bonus of a significant amount to help buy a house.
  • Some churches increase salaries to help with local cost of living issues. They use national scales to understand how much housing costs are for their area.
  • Some pastors live in apartments.
  • Some families save for years before buying a house.
  • Some churches loan money or are becoming co-owners but this is dwindling due to the complexities involved.
  • Many churches overlook this area. “It’s the pastor’s problem.” In this scenario, only senior staff, or young staff with spouses in lucrative professional positions, can afford a house.
  • Many families are dual income. One spouse’s income pays the mortgage and the other pays for everything else.

Without working through the issues in advance, these scenarios can be spelled u-g-l-y.



Thursday, June 21, 2018

Does a Church Pay Social Security on a Pastor's Salary?

Question: Hey Fletch...For a pastor that has been licensed by the Board of Elders, my assumption is that the church should not withhold any Social Security or Medicare tax, right?

Answer: This question is one of the reasons that I wrote Smart Money for Church Salaries. This book and the 12 regional workshops in the fall of 2018 get to the heart of this and other similar questions. Issues of pastoral compensation can be murky. The book looks at every salary in WheatFields Good News Church, a complied case study.

Pastors pay into the Self Employed Contributions Act (SECA). IRS Publication 517 outlines Social Security for religious workers (see  U.S. Department of Treasury, Internal Revenue Service, Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, December 29, 2017, available from https://www.irs.gov/pub/irs-pdf/p517.pdf). SECA is 15.3% of wages and go to Social Security or Medicare. Only pastors who have opted out of Social Security are exempt from paying SECA.

The church cannot pay Social Security or Medicare for the pastor! The pastor can ask the church to voluntarily withhold funds and remit them to the government for SECA. Or, the pastor can pay their own quarterly estimated taxes, which takes financial discipline.

-DRF

Saturday, June 16, 2018

Insurance for Sexual Abuse, Part 2

Question: Hey Fletch... Our church has $2 million in umbrella insurance. Does that cover sexual abuse as well?

Answer: When I get a question on insurance issues, I always turn to the professionals. Insurance can be a highly technical area—and I always need a refresher course. Yesterday we heard from noted attorney, Gregory Love. Today, let’s hear from Charlie Cutler, a respected a insurance agent in southern California. Charlie is the prototype of a great agent—knowledgeable, helpful, honest, gives it to you straight, gets more information as needed.

Charlie Cutler—

Glad to be brought into the conversation! If this particular church hasn’t jumped through quite a few hoops to include abuse in the umbrella, then it likely doesn’t have that coverage. The term “umbrella” is a bit misleading. It sounds like there is a broad policy that covers anything that happens at a church. Policies used to be written this way, but virtually all “umbrellas” nowadays require that there are limits on the base policy and that wording on the umbrella policy says that particular coverage is included in the higher limits. A more appropriate term is actually “excess.” This means that you have limits “in excess” of the base policy.

Key items in the insurance policy should include Directors & Officers, Counseling, Sexual Misconduct, Coverage for your Security Team (especially if you have a formal team and/or if anyone is armed), Cyber Liability, Foreign Liability, and Non-owned Autos. The key to determining the limit is that it shouldn’t ever be one person’s decision. The board should annually be informed what the current limit is and be sure that they are all comfortable with it.

For an active church like the one you describe, most boards would be comfortable with $1million plus a $2 million umbrella (total protection of $3 million). A key point on the limit is that $1 million for Directors & Officers isn’t $1 million each board member … that is the total amount of protection for the entire board. If you have board members with high assets, those boards want to be sure that the umbrella/excess extends over the Directors & Officers Insurance to cover their personal exposure.

The majority of claim dollars are spent in the property area. With construction growing and unemployment low, replacement costs are growing faster than most insurance policy limits. Most churches should increase their property limit by about 10% from 2017 to 2018.

Additionally, we see that most churches don’t think about the other costs during a claim … what it takes to rent an alternative location, lost tuition income, decreased giving, and much more. A major property claim (especially where the cities are difficult to work with) can last two years … think of what it would cost to rent a space for two years to keep your ministry going.

Lastly, I’d like to emphasize the importance of Ordinance & Law Coverage. If your church was built more than a couple of years ago, it doesn’t meet current codes…fire sprinklers, “green” upgrades, energy efficient requirements, ADA access, etc. Talk about this with your agent (and hopefully a contractor in your congregation) to get a feel for what would be appropriate.

Insurance is more than an annoying line item in your budget … it’s a tool for ministry protection and continuity. A good agent should have a ministry-focused discussion with how this applies at your church!

Friday, June 15, 2018

Insurance for Sexual Abuse, Part 1

Question: Hey Fletch… Our church has $2 million in umbrella insurance. Does that cover sexual abuse as well?

Answer: When I get a question on insurance issues, I always turn to the professionals. Insurance can be a highly technical area—and I always need a refresher course. Today let’s hear from noted attorney, Gregory Love. Tomorrow we will hear from an insurance agent.

Gregory Love—

As a sexual abuse attorney, I prefer doing prevention work—preparation to prevent an allegation and preparation to respond well if an allegation arises. Insurance is a very important piece of a sexual abuse preparation plan; it is not a substitute for safety measures, but plays a very important role in the event a situation arises. After years of crisis response work, I have created an exercise … a Sexual Abuse Fire Drill. This is a comprehensive study regarding potential sexual abuse risk—and insurance coverage is one of the most significant revealed weaknesses. In short, I have my organization assume it is facing a multi-victim sexual abuse allegation involving a trusted staff member. One of the first categories of inquiry is the available insurance coverage to handle a multi-victim allegation. Most organizations learn that they have insufficient coverages/limits or that they misunderstood which section of the policy involved sexual misconduct/sexual abuse.

This exercise arose from a number of “in the ditch” experiences. One Texas church, for example, contacted my office on the very front end of a sexual abuse matter involving a children’s ministry staff member and up to four children ages seven and eight. When I reached the insurance part of my inquiry, I was told the church had a $1,000,000/$3,000,000 policy; in essence the church had an aggregate of $3,000,000 available to cover a multi-claimant lawsuit. This seemed reasonable given the size of the church. When I asked for the policy, however, I realized that the church’s executive pastor was misreading the policy. There was $1,000,000/$3,000,000 available for general liability and injury; on Page 3 of the policy, there was a Sexual Misconduct Endorsement limiting coverage to $100,000 for each claim with a maximum possible aggregate of $300,000. Prior to the allegation, the church leadership believed “all is well.”

When the church was sued, the insurance company simply tendered its total obligation of $300,000 and bowed out of the matter. The church had to come out-of-pocket for its legal defense and settlement funds; the church had to sell most of its real estate to resolve the matter.

Morals to the story: (1) read your policy closely; (2) have an insurance agent that is skilled beyond your ‘property and casualty’ needs; (3) do a Sexual Abuse Fire Drill—ask these questions before you are in crisis … while you still have the chance to address potential weaknesses in your system or your coverages.

Wednesday, June 6, 2018

Legal Issues with Songs on a Church Website

Question: Hey Fletch... We livestream our worship services and also have some recorded worship songs on our website. Someone asked me if that is legal. Thoughts?

Answer: That is a huge can of worms. Actually it is two cans worth. The first issue is livestreaming your worship and the second is recorded songs on your website.

You will want to get this one right, otherwise the penalties can be stiff. There is an organization that you need to check out: Christian Copyright Licensing International (CCLI). Here is why you need CCLI. A 2017 ChurchLeaders article stated that:

“Yesh Music (Richard Cupolo and John Emanuele) filed a complaint on October 28, 2011, claiming that First Baptist Church Smyrna (TN) used two of Yesh’s compositions in videos streamed from their website. The complaint also details Yesh’s assertion that no license was granted for this use. Yesh is seeking $150,000 for each infringement in addition to attorneys’ fees.”

When I said the penalties could be stiff, that was an understatement. There is the fine to consider. There is also the public relations nightmare of having your church in the news and in a lawsuit. Your church’s integrity will be tarnished.

The CCLI Copyright License covers projecting lyrics in worship, song sheets and songbooks. You can record your worship services, provided it is live music (no accompaniment tracks). The CCLI Streaming License enables you to live stream or podcast live-recorded services. This does not cover secular songs. The CCLI Rehearsal License goes even further. See the CCLI website for details.

The prices for annual licenses are based on the size of your church. The base license ranges from $290 for a church of 200, and goes up to $602 for a church of 2000. The streaming is an additional $89 and $223 respectively.

These are fair prices and help support the original artists. If you don’t get a license, you are stealing from the artists. Get the license that fits your need and be legal!

-DRF

Friday, June 1, 2018

Weekly Financial Reporting Spreadsheet

Question: Hey Fletch... Would you mind sharing an example of a Weekly Financial Reporting spreadsheet?  I’d love to see it and incorporate it.

Answer: A weekly financial reporting spreadsheet should contain a church’s actual income and the budget forecast. The following numbers are from WheatFields Good News Church. This church is the basis of my book, Smart Money for Church Salaries and the upcoming 12 regional workshops on the topic.This is a compiled case study church, as no church wants to share their confidential donation numbers.

WheatFields has 2,000 people in worship each week and a thriving 600-child preschool.

View and Download the Weekly Financial Reporting Spreadsheet Here.

-DRF