One of the impacts of the disastrous Haiti earthquake will be a heightened focus on how ministries raise and use gifts given for Haiti-related programs. There will be stories about charities that operated outright scams. But the focus will also be on legitimate ministries and other charities. If you doubt this, simply think back to the events after 9/11 and the loss of credibility for charities that did not spend funds as promised.

The Haiti earthquake highlights the importance of truthfulness in fundraising—a key ECFA standard. There are a wide variety of programs being delivered: disaster relief, development, church planting, child sponsorship, volunteer medical teams and much more. While some ministries are well-equipped to conduct church planting and child sponsorship, it could be disingenuous to represent that they provide disaster relief or post-disaster development process of rebuilding infrastructure and livelihoods.

This is a time for organizations ministering in Haiti to perform a checkup:

1. Do fundraising appeals (printed, web, and other media) clearly and accurately communicate the ministry your organization is prepared to perform?

2. Will your ministry expend the gifts within a reasonable time period?

3. If there is a possibility of raising more gifts than needed to carry out the project communicated to givers, did the fundraising appeals clearly state how any excess funds will be used?

4. Does your organization raise funds for foreign charities providing services in Haiti? If so, you may be crossing the line into conduit transactions that may not result in a charitable gift for the giver.

5. Does your organization raise funds for Haiti projects and make gifts or grants to foreign charities providing services in Haiti? If so, are policies and procedures in place to ensure proper oversight of the use of the funds?

So if your ministry is accepting funds for projects in Haiti, perform your due diligence now on what is being promised to givers, how you will track the gifts, how you will spend the funds, and how you will monitor the outcomes of the programs. It will be time well-spent.

Business mileage. The IRS has provided a new maximum business mileage rate for 2010 of 50 cents per mile. The new rate is down from the 55 cents per mile maximum for 2009.

The new mileage rate has the following implications for congregations and clergy:

1. If the congregation has been reimbursing business miles at a rate less than 50 cents per mile, it may be an appropriate time to consider increasing the reimbursement to the new maximum rate.

   Reimbursing clergy (and other staff) at a rate less than the maximum rate is simply poor stewardship. The difference between the maximum IRS mileage rate and a lower rate of reimbursement has little tax value to the staff member. It is so much better to prospectively establish compensation at a level which allows for a reimbursement of business mileage at the maximum rate.

2. If the congregation has been reimbursing business miles at a rate more than 50 cents per mile, a reduction in the reimbursement rate to the new maximum is generally appropriate. If a congregation continues to use a reimbursement rate higher than 50 cents per mile in 2010, the amount reimbursed over 50 cents per mile is additional taxable compensation to the staff member.

Clergy housing allowance. The first of every year is a good time to review the amount of the housing allowance designation for each clergy employed by the congregation. Retroactive housing allowance designations are invalid, so if a housing allowance designation needs to be increased, the earlier the action is taken in a year, the better for the clergy. A housing allowance designation is appropriate for clergy who own or rent their own home or who live in a parsonage and pay some of their housing expenses.

Reimbursement of business expenses. The first of the year is also an excellent time to review the accountable expense reimbursement practices of the congregation. A congregation that only reimburses a portion of clergy business expenses is generally penalizing the clergy from a financial standpoint.

What is the value of business expenses not reimbursed by the congregation? They only have minimal value because:

1. The IRS is increasingly firm about disallowing the portion of unreimbursed expenses that relates to a housing allowance exemption. Example: A clergy receives $50,000 cash compensation, of which $25,000 is designated as a housing allowance. After applying the housing allowance limitations, the clergy excludes $25,000 for federal income tax purposes. The clergy has $5,000 of congregation-related expenses that were not reimbursed. The IRS takes the position that since 50% of the congregation-related compensation is tax-free under the housing allowance rules, only 50% of the unreimbursed expenses are deductible (50% x $5,000 =$2,500).
2. Clergy that do not itemize deductions on Schedule A (this includes nearly all clergy who live in congregation-provided housing) receive absolutely no income tax benefit from unreimbursed business expenses. Even clergy who itemize deductions, are limited to claiming unreimbursed expenses that exceed 2% of adjusted gross income. And, then the tax savings is limited to the marginal federal income tax rate.

Income tax withholding. The first of the year is also a good time to determine whether the congregation will withhold federal (and, perhaps state) income taxes for 2010 on a voluntary basis. (If this withholding was in placed for 2009, then, it may only be a matter of adjusting the voluntary withholding amount for 2010.)

Income tax withholding is not required by a congregation for clergy—it is a voluntary issue. But, congregations who offer this option are often doing clergy a good favor by providing this practical way to pay their taxes as they go. The amount of federal income taxes withheld may be set at an amount high enough to cover self-employment social security taxes. The withholding is FICA; it must be withheld as federal income taxes even though it funds the self-employment social security tax obligation.

Seeking immediate results is rarely more common than when our ministries are impacted by an economic recession. All of our measurement tools are in place to report short-term measurable “success.” We impatiently scan our ministry reports for positive data indicators.

Are concerns about short-term data important? Yes, par­ticularly if questions of sustainability of the organization are in play.

Yet sound guidance of a ministry is more like running a marathon than a sprint. It is focused on the Great Commission with an appropriate desire to attain short-term effectiveness.

Matthew 14:15 records the recommendation of the disciples to Jesus as they told Him, “This is a remote place, and it’s already getting late. Send the crowds away so they can go to the villages and buy food for themselves.” In his recent book, The Longview: Lasting Strategies for Rising Leaders, Roger Parrott, president of Bellhaven College, suggests “the committee’s decision seemed like a reasonable solution.”1

But Jesus took a long view perspective in mentoring these disciples, knowing the solution had sweeping ramifications beyond where to get dinner. Bolstered by the miracle on the hillside, Peter found the faith to step out of the boat and walk on water. That evening had long view implications.

God often builds his church using the long view principle. William Carey, the first missionary to India, worked for seven years before he had his first convert. Robert Morrison, the first Protestant missionary to China, labored for a quarter century and had fewer than a dozen converts.2

When taking the long view, the following principles are fundamental.

• Remembering. We are often so focused on the current challenges that we do not take time to remember. How has God helped us in the past? Has he ever failed us? What lessons did He teach us in past challenging times?
• Reflecting. Identify the season your organization is in by reflecting on your environment. Bill Hybels refers to the seasons of growth as consolidation, transition, malaise and reinvention. He traces the seasons idea back to Ecclesiastes 3:1, which says that “there is a time for everything, and a season for every activity under the heavens.”3 Simply naming the season we are in is the basis of determining the implications of the season.
• Vision-casting. “God’s vision for your ministry will not change quickly, nor will it be something you will accomplish rapidly. His vision will require years of active pursuit. The vision itself may even outlive you!

“Thus, the heart of the vision will remain unchanged over a prolonged period. Some of the details lying at the outer edge of your understanding of the vision may shift somewhat over the course of time. But the core of the vision—the people you have been called to reach, the task you have been called to do, the purpose for which you exist—will remain constant.

“Because He is not a God of confusion but of order, because He is a God who is in control, because He takes great pleasure in seeing us find success in our service, He will be faithful in His support of the vision.”4

Reflecting on these principles, have you made short-term decisions in the last 12 months impacting the budget, programming, personnel, and much more? You probably have and this was important to do in the short-run. But even the short-term decisions can and should be made with the long view foremost in mind.

1 The Longview: Lasting Strategies for Rising Leaders, Roger Parrott, David C. Cook, 2009.
2 Ibid.
3 Axiom, Bill Hybels, Zondervan, 2008.
4 The Power of Vision, George Barna, Regal, 2009.

When Daniel was diagnosed with autism at age four, it was especially traumatic for our daughter and her husband. Their dreams for Daniel—the dreams all parents have for their children—seemed to vanish. That was based on their perspective at the time.

Hundreds of hours in hyperbaric chambers, myriad therapy sessions, and a multitude of prayers later he was ready for his first tee-ball experience this summer—playing with other autistic boys and girls, some several years older than he. The first game was not enough fun and he nearly opted for early retirement after opening day.

But he tried another game and then another. And in a short time-span, he went from not sharing the ball to fielding balls and running over towards first base, handing the ball to Bob who plays first base (Bob’s disabilities prevent him from catching a thrown ball) and Bob completes the play. They are quite the teammates.

From our perspective today (and that of his parents), Daniel is a terrific boy—the delight of our lives!

God has the unfailing power to bring good from all circumstances that come our way. But what we see as “good” often depends on our perspective.

There are times when it is difficult to understand how “all things work together for good to them that love God” (Romans 8:28). Yet, with proper perspective we can “consider it pure joy…whenever you face trials of many kinds” (James 1:2).

What is your perspective of where you are right now? Feeling overwhelmed by the challenges of fewer resources and increasing expenses for the ministry in which you are involved? Having difficulty coping with the realities of cutting programs—perhaps even laying off staff? Or perhaps God has helped you gain a proper perspective—gaining a grasp of the cur­rent realities for your organization and realizing the future will not be like the past.

This may be a good time for you to take a blank sheet of paper and draw a horizontal line in the middle. Remember the good things that God has done for your church or ministry and note them above the line. Then, recall the dark, deep, troublesome times that threatened to engulf your organization across the years—perhaps including some current challenges. All of the items on the page can be committed to Him. He is the God of the top list and the God of the bottom list. He is just as much the God of our challenges as He is the God of our successes.

Listen to what God is saying to you and your organization through the experiences of this economic decline. He wants to help you with perspective!

But the financial upheavals were not restricted to individuals, big corporations, and governmental entities, they also took a toll on nonprofit organizations, both secular and religious, with one segment of the religious community especially hard hit by the alleged Madoff Ponzi scheme.

As the “talking heads” searched for terms to describe what would have saved us from the financial crisis, they dusted off old-fashioned words like “integrity,” “transparency,” and “accountability.” Interestingly, those are the watchwords of the evangelical community—particularly ECFA members. The secular media promoted our fundamental concepts!

Looking forward, the current financial crisis and economic downturn could have a very positive effect on Christian organizations. Yes, this is counterintuitive but very possible.

Prosperity can insulate nonprofits from reality. Innovative changes in nonprofit organizations come when the tension is greatest and resources are the most limited. That’s when nonprofits become more open to rethink the fundamental way they operate.

Innovative thinking may also cause ministries to collaborate in new and significant ways.

The economy should have at least three positive impacts on Christian nonprofit organizations. They are:

1. The focus on staff. While balancing the budget is fundamental, equally important is the proper care and respect of staff—yes, even in times of salary freezes and layoffs.The Bible implores us not to borrow concerns from tomorrow. “So don’t worry about tomorrow, because tomorrow will have its own worries. Each day has enough trouble of its own” (Matt. 6:34). Still, many employees are anxious about their future with your organization.

   Morale doesn’t have to plummet just because times are uncertain. Ensure open communications between ministry leaders and staff and be consistent in the day-to-day treatment of staff. Look for ways employees may contribute to the organization’s efficiency and effectiveness goals. Ask employees for help in developing possible solutions.

   Peter Drucker often said, “People are not a cost. They are a resource. Every organization must assume full responsibility for its impact on employees.”

2. The focus on donors. When money is tight, the historical tendency of charities, even many Christian ministries, has been to “turn up the heat” on donors—use “emergency” language, place a large “URGENT” stamp on the front of appeal envelopes, and increase the frequency of appeals.These techniques are diametrically opposite of the philosophy shared by Wes Willmer and his colleagues in Revolution in Generosity. If there was ever a need to focus on transforming givers’ hearts and lives towards God-focused stewardship, it is now!

   This is a time to minister to donors—many of them have been significantly impacted by the economy. It is a time to clearly communicate accomplishments—to focus on ministry outcomes, not just outputs.

   Donors want to hear how your ministry is doing—in fact, they are curious. But they don’t want to hear how many days you expect to keep your doors open. They want to hear what steps your ministry has taken to live within your budget—what innovative concepts you have adopted to better steward the resources God is providing.

   Like a functioning economy, the evangelical community is held together by a web of trust between donors and the ministries they support. This is a day to enhance that trust factor with your donors.

3. The focus on your mission. Revenue streams may be tightening, expenses may be rising, the clock is ticking, and your board and employees may be getting nervous.The IRS is increasing the pressure for more governance policies and disclosure. Your auditors want you to raise the emphasis on fraud prevention. And, to please the Internet raters, you try to keep your overhead low without threatening sustainability. What a balancing act!

   It is similar to being on the football field when the game is on the line. Executing under pressure equates to making decisions, calling plays, and managing the clock.

   In times like these, it is challenging to keep your focus on your mission—and yet, focus we must! These are days to be crystal clear about what your ministry intends to do, why it intends to do it, and how much progress is being made toward the mission.

Closing. My prayer is that, during this economic crisis, Christians and Christian organizations will powerfully demonstrate to a watching world the importance of seeking God’s goals and abiding in His peace.

The Senate Finance Committee has oversight of charitable laws for the Senate while the Ways and Means Committee has a similar role in the House. Measures must ultimately be reconciled and approved by both Houses of Congress and then signed by the President before any laws are changed. So it’s a long process which is why, in part, no sweeping changes have been made in charity law in nearly forty years. But the climate is clearly different now as lawmakers see what has long been considered a lightly regulated “industry” in need of an overhaul.

Nearly five years ago the Senate Finance Committee set off alarm bells throughout the charity world with a “discussion draft” that envisioned new regulations that would have seriously imposed intrusive and costly requirements on charities, including most ECFA members. Finance Committee hearings were held, and an advisory Panel was convened by Independent Sector at Committee Chairman Senator Charles Grassley’s (R-IA) encouragement. The Panel, which included ECFA representation, issued a series of reports on suggested changes to the law and a long list of best practices that many charities have adopted voluntarily as a way of preempting the need for new legislation. Only minor changes were made to the law as a result of the initiative.

But the issue has not gone away. Some nonprofits continue to make the news by pushing the law or ignoring best practices regarding raising and spending money that is subsidized by the government in the form of tax deductions for contributors and property and income tax exemption for nonprofits. This keeps lawmakers stirred which leads to new proposals to change the law.

The latest edition of proposals, this time from a member of the House Ways and Means Committee, is perhaps more striking than any in memory. With Federal deficits mounting and budget battles increasing, Congress is looking for more revenue—and that was before the $700 billion bail-out was conceived! The charitable deduction is being viewed by some as a source of income and this is a concept which could get traction. One of the steps for Congress to raise more revenue would be to redefine a charity or a church, providing less tax-exemption shelters for organizations that now enjoy this benefit.

Some have suggested a greater incentive for gifts to help the poor and a lower or no deduction for gifts to arts or education. The faith based initiative could be revised to require all ministry recipients of federal funds to fall under EEOC hiring guidelines in order to qualify.

None of this is imminent, in fact it is probably a long shot, but come Spring 2009 we could begin to see if any of these ideas have traction in a new Congress or Administration. Realistically, the more likely early targets could be nonprofit hospitals—which some believe look and operate too similar to for profit hospitals—or colleges and universities, which are often mentioned because many continue to grow enormous endowments even as tuitions go through the roof.

In any of this, ECFA will give voice to its membership. We will continue to provide the latest information in these pages, on its website and in its regional seminars and other conference venues.

Meanwhile, pursue your mission with passion and excellence. Implement best practices intentionally. Trust the Lord to supply all your need now and in the future—come what may!

As consumer confidence drops, how far behind can be donor withdrawal? I pray it will not be so. But now is the time to revisit mission strategies and prepare for operating in an environment we haven’t seen for quite awhile.

There is no scriptural promise that is conditioned on the economy. God’s Word never changes and it declares Christ is the same yesterday, today and forever. Christian leaders and donors who lived during the Great Depression probably understood that better than today’s generation.

All through history, whether in good times or bad, the Church of Jesus Christ has endured every hardship as God placed His hand on men and women who partnered together to meet the needs of their day and proclaim the “good news” of the Gospel.

Think of this: Today’s ministries have tools at their disposal that no previous generation has had. The ability to communicate quickly and efficiently, to analyze and plan and to put creative ideas into action has never been better. But they all must be carried out in the framework of time tested biblical principles.

A common tendency in addressing income shortfall is to simply increase fund-raising activity. It’s one thing to make donors aware of a need or situation—it is something else to engage in manipulative, guilt-trip or “gimmicky” tactics. God does not need that kind of help. The recent published book, Revolution in Generosity, edited by Dr. Wes Willmer (available from ECFA or your local Christian bookstore), underscores the promise that there is no shortage with God.

If you haven’t reviewed your operational costs lately, now is a good time. Strong income covers operating inefficiencies and mistakes while weak income exposes them.

For most churches and charities, many dollars spent have been donated. Be sure that certain costs such as travel and other visible spending don’t convey a poor image to your donors or the public. Revisit expansion plans; it is not unspiritual to delay or change direction when conditions indicate an unwise risk to the basic mission of the ministry.

Ask board members to join together in prayer with and support of the CEO and staff. Scripturally, there is protection in the wise counsel of many. Times of challenge are an opportunity for a team to pull together!

Today’s environment suggests a possible cycle that has occurred before—a tighter economy resulting in lower contributions at the very time that charitable needs increase. This is an election year with change in the air for 2009 and beyond regardless of who is elected to federal, state and local offices. New tax laws, tightened charity regulation and cultural changes could all impact your ministry. Plan now for various possibilities, including building partnerships, to reach your goals.

Most of all, acknowledge one more time that the ministry to which God has called you exists for His glory. Avoid turning your faith into presumption. At the same time, don’t be afraid to exercise your faith by stepping out of the box and taking prudent risks to accomplish some extraordinary things for God and His Kingdom. As has been said, “You cannot discover new oceans unless you have the courage to lose sight of the shore.”

Collections of policies grow up to be policy manuals. Policies come in human resource, accounting, facilities and other flavors. The greater the number of policies, the more likely one or more persons will be assigned the responsibilities of enforcing and interpreting the policies.

Policies notoriously collect dust. It is likely some of your organization’s policies are out-of-date and/or not being observed. This highlights the importance of an annual review of policies of all types (board and staff) to determine relevancy.

Organizational policies are fundamental for well-run organizations. ECFA’s best practices include many suggested policies. Our website includes many sample policies. We believe in policies.

For example, as part of a field review, ECFA often recommends a member adopt a conflict of interest policy to provide guidance in avoiding conflicts of interest. If a member has a significant investment portfolio, we will recommend the adoption of an investment policy.

ECFA has Standards which members are required to follow—and these seven Standards are simple, but not simplistic, as the nearly 100 pages of commentary on the Standards reveals. ECFA Standards and an organization’s policies are generally separate issues.

ECFA does not require member organizations to adopt certain policies—members have the flexibility to decide the policies which are appropriate for a particular organization. We are convinced that policies (board and organizational) do not come in a “one-size-fits-all” box!

In recent years, the IRS has shown an increasing interest in nonprofit polices. They have included policy-related questions on the Form 1023 Application for Recognition of Exemption and the Form 990 Return of Organization Exempt from Income Tax. Does the IRS require certain policies? Technically no, but practically—well, it’s a close call.

If an organization applying for tax-exempt status does not have certain key policies (as defined by the IRS), they will be pressed, at a minimum, to adopt the policies. And for organizations required to file Form 990 in 2009, there are a number of questions about specific policies (conflict of interest, whistleblower, document retention and destruction, compensation review and approval, evaluation of joint venture agreements, for example).

What is the importance of asking a few questions about policies? Well, it depends. It depends on how the answers will be used. In the instance of the responses to the new Form 990, the answers will be posted on the Internet for evaluation by the public and the media. It is likely we will see a “feeding frenzy” starting in 2009 based on the responses to some of these “policy” questions.

Many nonprofit policy experts will appear in the great Internet wonderland. They will offer their opinions on policy deficiencies of certain organizations and draw conclusions, going far beyond the presence or absence of policies. This will be our new world!

Even a group formed by the IRS, the Advisory Committee on Tax-Exempt and Government Entities (ACT), expressed concern about the IRS’s increasing interest in charities’ governance policies.

While agreeing that well-governed charities are more likely to comply with the tax laws and pursue charitable goals, ACT warned that if the IRS asks about specific governance practices, charities may feel pressured to adopt policies they otherwise would not consider. It also would place undue burdens on charities in terms of time, resources, forms, and the ability to recruit board members.

Good governance is more than policies. It is shared governance between a board and organizational leaders. It is about accountability. This new focus on policies provides an opportunity for leaders of churches and other nonprofit organizations to demonstrate the use of policies reflecting the culture of a particular organization—policies which will work within the confines of the entity.