We asked church leaders about the following situation:
At the start of a new year, many churches revitalize their governing boards with new members. Often these individuals have never served on a non-profit organizations board before and are more familiar with a for-profit environment.
The apostle Pauls first letter to Timothy gives an excellent list of what qualifications a church overseer or elder should possess (1 Timothy 3:1-7). But he only includes two duties on his list, teach and preach, and direct the affairs of the church. Two additional duties are mentioned in Acts, shepherd the flock and guard the church from error (Acts 20:28-31).
While the short list of duties noted in the Bible is important, most churches have been organized as non-profit corporations within their state, so the list of duties for board members doesnt end there. State non-profit corporation laws also include legal responsibilities for governing boards. Right about now the conscientious new church board member must be saying that they didnt expect such a steep learning curve accompanying their new responsibilities.
So what do many Christians do when facing a challenge such as this? They pray. We expect that at the top of the list of many new board members petitions to God are requests for wisdom and good judgment. Fortunately the eighth chapter of Proverbs gives some insight into finding the good judgment and wisdom that one seeks. In verse 12 (NIV) we read,
I, wisdom, dwell together with prudence; I possess knowledge and discretion.
Since prudence isnt a word that one hears very often these days, lets turn to Websters 11th Collegiate Dictionary. One of the ways that it defines prudence is "skill and good judgment in the use of resources."
And the prudent thing for a new church board member to do is to attack that learning curve head on. In an attempt to lend an assist, weve put together this primer on what a newbie needs to know.
One thing that may surprise most church leaders is that non-profits are allowed to make a profit!
Lets start by taking a step back and look at what makes a non-profit corporation different from a for-profit one. For starters, a non-profit corporation doesnt have owners or stockholders that it must make a profit for. Instead non-profit corporations exist to fulfill a public purpose or benefit. They are required to engage in activities that accomplish one or more of their public purposes. One thing that may surprise most church leaders is that non-profits are allowed to make a profit! But instead of their profits going to owners or stockholders, they are reinvested in furthering the organizations mission.
Nevertheless someone within a non-profit corporation must act take legal and missional responsibility for the organization, much like an owner does for a for-profit company. Thats where a churchs governing board comes in. From a legal perspective, the board functions as the churchs owner. It carries the responsibility for the well being and effectiveness of the churchs ministry.
Often church board members can be found working alongside the church staff, performing management duties within the church. But board members should understand that they have no special power or authority when the board is not in session. Working as individuals they become just another ministry volunteer. Board members also wear a third hat so to speak, that of participant. When they are a beneficiary of the service provided by the church, they are a participant. It is only when a churchs governing board is in session and board related activities are being performed that a board member has standing as such.
There are three fiduciary duties of governing boards outlined in state laws. They are the Duty of Care, the Duty of Loyalty and the Duty of Obedience. Much of what is included in these fiduciary duties one would probably consider just good old common sense.
For example, the Duty of Care means that a board member attends most, if not all, duly called board meetings, arrives at those meetings well prepared and participates in the discussions of all issues presented. The Duty of Loyalty requires that board members act in good faith and in the best interest of the church, and avoid or disclose any conflicts of interests. The Duty of Obedience entails board members to be faithful to the churchs purpose and the laws of the land.
It is the Duty of Obedience that most likely contributes the most to the slope and height of a new board members learning curve. Because of the tax exemption that accompanies non-profit status, there are laws that must be followed by churches that for-profit companies arent even aware of. If a church engages in (or allows its facilities to be used by organizations that engage in) activities that conflict with its non-profit purposes, its tax exemption can be revoked. We suggest that you pause and give that dangerous scenario some thought. For example, allowing a for-profit company to utilize your churchs facilities could result in revocation of the property tax exemption that your church benefits from.
Another way a churchs governing board can endanger its tax exemption is by allowing the churchs assets to be used for excessive personal benefits. Even worse is when those personal benefits flow to a mover, shaker or decision maker in the church (or their family members). This is called inurement by the IRS, a term that many people have never even heard of. It comes from the phrase required in church bylaws that reads,
No assets of this church shall inure to the benefit of any private individual.
While the bar for private benefits is set at a reasonable level before they present a problem for the church or its leaders, federal tax courts have set the bar for inurement at one dollar. So if the senior pastors wife wishes to borrow the churchs 50-cup coffee maker for a non-church private party at her home, doing so would be considered a case of inurement. At the least every board member would be personally obligated to pay fines to the IRS as intermediate sanctions. Ouch!
Perhaps the setting of goals prior to, or at least during a pastor search, would allow church leaders to better locate someone who shares their vision for the future.A churchs tax exemption is its most valuable financial asset. Other things church boards should pay attention to in order to protect its exemption include avoiding prohibited political activity, adopting a mission statement, adopting and enforcing a code of ethics, adopting whistleblower protections, requiring board members to adhere to their three fiduciary duties, adopting and following a fundraising policy, adopting a document retention policy and probably most important of all, functioning as a truly independent board. Please understand that this list is not all-inclusive, just a starting point for an effective board.
Protecting the church from problems such as a revocation of its tax exemption is just one of the things that church boards should concentrate their efforts on. They also should formulate corporate strategic short-term and long-term goals. They should seek out long-term challenges and opportunities for the church. They should formulate corporate policies. The stewardship of the churchs resources is also one of their key tasks. They should evaluate the performance of church staff and volunteers in meeting the churchs strategic goals. They should also evaluate and help manage risks facing the church. All of these should be done while seeking the advice and counsel of the senior pastor.
Lastly as the churchs
owners, the governing board authorizes major financial transactions.
Before we wrap this discussion up, lets circle back to talk about the church boards job of formulating strategic goals and how it relates to churches in the middle of a pastor search. Often, we hear that church boards in that position opt to delay setting overall goals for the church, choosing instead to wait until a new senior pastor arrives. Perhaps the setting of goals prior to, or at least during a pastor search, would allow church leaders to better locate someone who shares their vision for the future.
Our primary reason for this article is that it serve as a starting point for the learning process that new church board members should go through. It is not intended to be all inclusive nor the final word. Law and regulation writing entities at all levels seem to like moving the goal posts. As a result, members of church governing boards should plan on continuing education being a part of their lives as long as they serve.
We at Church Administrative Professionals are here to help in this task. The articles that we offer on our website cover a wide range of issues facing churches and are updated as we become aware of changes in laws and regulations. If your church is interested, we also offer training in church governance that we believe would be a blessing to all of your board members regardless of their years of experience.
Remember these words that are spoken by Wisdom in Proverbs 8:33-35 (NIV):
Please Note: This information is provided with the understanding that Church Administrative Professionals is not rendering professional advice or service.