Ask church pastors about what excites them, and they often enthusiastically share the plans their churches have to reach their cities, build life-sharing small groups, preach and teach the Bible, and develop thriving children’s and youth ministries. The list is seemingly endless.
But ask them about what keeps them up at night, and they often rattle off a list of issues unified by a common theme: church administration. The list usually includes the management of finances, the liabilities of staff or volunteer misconduct, the handling of paperwork, tax compliance, and the upkeep of a facility. This list, too, is seemingly endless—but there is no enthusiasm. The responsibilities are unavoidable, yet they aren’t even remotely close to the reasons pastors get into ministry.
Many pastors lament the lack of education they received on these management matters, further adding to the frustrations. Yet their churches expect them to know what to do. This is one reason we created a book on the topic for recent seminary graduates.
But whether you are a veteran pastor or a newcomer, there is no reason to despair about these management details. There is hope. Anyone can learn the basics of church management.
That’s not to say anyone can become an expert in church management, nor should today’s church pastor, who faces myriad responsibilities, become such an expert. But complete ignorance of these issues no longer is acceptable, given the societal, cultural, and legal changes taking place nationwide. Familiarity with key management matters is a must for sound church leadership. Handling these tasks with excellence helps ensure the ministries continue to thrive—and can protect the reasons these leaders got into ministry.
So let’s explore five of the most common, pressing management topics that every church pastor should know. This is not a comprehensive list, and further education and learning is highly encouraged on these fronts and more. But the list does offer an overview of some of the most important challenges confronting churches today. Learn the key angles, which can go a long way toward building a stronger church:
1. The protection of children and youth. Every year for many years, allegations of sexual abuse involving a minor has remained the top reason churches end up in court. Attorney and author Richard Hammar determines this list by categorizing the more than 12,000 federal and state appellate court rulings involving religious organizations that he reads annually.
Every pastor must take this threat seriously. It isn’t going away. And the stakes are significant. An act of molestation renders devastating effects on victims and their families, doing lasting harm to their physical, emotional, and spiritual well-being. It also makes a church vulnerable, starting with a loss of trust inside and outside the congregation, and extending to potential costly litigation and negative media coverage.
Churches cannot create impenetrable defenses, but they can take several important steps that demonstrate good-faith efforts to provide a safe environment—steps that can prevent many types of offenses. Success starts with visible, vocal support from the church’s pastor, who must champion the church’s commitment to foster a culture of safety, care, transparency, and action:
- A comprehensive, written child protection plan adopted and followed by the church’s leadership (a sample is included in Reducing the Risk, a church child protection program published by Christianity Today).
- A thorough application, screening, and selection process for anyone in the church—clergy, staff, and volunteers—who will work with children and youth. The process should involve a written application, an interview, institutional references from individuals who can speak directly to the applicant’s overall fitness to work with minors, and background screening. Screening should include local, state, and federal criminal records databases, but churches also should run applicant names through the free sex offender database available at nsopw.gov. All screening should be periodically repeated.
- A response plan should an allegation arise. This plan should address how to respond to the victim and the accused individual. It also must include information regarding the child-abuse reporting law requirements for the church’s state (many states consider clergy and other adults in positions of responsibility to be mandatory reporters of suspected abuse, and all states require mandatory reporters of abuse to report a suspected case in a short amount of time).
- Mandatory annual training of all staff and volunteers to cover best practices, including the church child protection plan and the abuse response plan.
2. The dollars and sense of ministry. Budgets. Taxes. Fraud prevention. Compensation. This is the stuff of CPAs, not pastors, right?
Not exactly.
Churches today require wisdom and discernment from their pastors when it comes to their finances. Expertise isn’t expected, but a working knowledge is. Here are some initial steps for building that financial sense:
- Know what type of budget calendar the church uses and note when budgets must be planned, reviewed, and approved. Pastors should help reinforce the process so that staff and volunteers know what they need to do and when they need to do it by—and pastors should set the right example by following that process, too.
- Make certain the church’s vision and mission—what God calls a church to do and how to do it—is clear. As Michael Batts says in Church Finance, budgeting starts with this. Pastors set their churches up for financial success first by having vision and mission set, and then by making certain budget priorities reflect that vision and mission.
- Ask for simple, visually driven financial reports, including ones showing giving and expense trends—and read them. Pastors should use these gauges with leaders to see the state of the church’s finances and what direction they’re going.
- Understand the dual tax status of ministers—they are self-employed when paying into Social Security and Medicare, but treated as employees in most other instances. Be mindful of the housing allowance, the most valuable clergy tax benefit, which should be set in writing by the church before each new calendar year. Track business expenses and turn in timely receipts and reports. Understand the laws and regulations that dictate tax exemption, charitable contributions, and benevolence (the annual Church & Clergy Tax Guide fully covers all of this and more).
- Encourage sound internal controls so that no individual has unsupervised control over the handling of contributions or spending. When a church becomes a victim of fraud, it is usually perpetrated by someone on the inside who exploits a weakness. Require regular reviews of processes and procedures.
- Know that personnel often represents the largest expense for churches, and also recognize that most in ministry are not overpaid. Fair compensation is a real challenge that churches must be willing to address so that budgets are handled well and pastors and staff aren’t struggling to make ends meet.
3. Common legal issues. Churches are free to choose their pastors, clergy, or ministers. However, the government may or may not consider those individuals to be pastors, clergy, or ministers for legal and tax purposes. As Richard Hammar notes in Pastor, Church & Law, Volume 1: Legal Issues for Pastors, “attempts by the civil courts to define ecclesiastical terms often are awkward and inadequate.”
Nevertheless, it is critical for churches to understand how their pastor, clergy, or minister is viewed when it comes to specific situations. For a statute or judicial ruling, carefully read the law or the case decision to see how the term is defined. For a tax benefit, such as a housing allowance, the Internal Revenue Service requires the individual to meet specific criteria. Chapter 3 of the annual Church & Clergy Tax Guide explains an individual must be ordained, commissioned, or licensed, and then the IRS considers a combination of four other factors, including the individual’s involvement with administering sacraments and leading worship services.
Pastors face numerous other legal matters. They should be familiar with their state’s clergy-penitent privilege law. They should exercise extreme caution before signing any contracts on the church’s behalf. They also must understand that the work they put into sermons on church time and using church equipment means their church owns the sermons.
Records also matter to pastors. They must understand how their church was formed, meaning they have read the church’s charter, constitution, bylaws, and any resolutions. These documents dictate how the church operates—who leads it, how it meets, how decisions get made, and what kinds of reporting requirements the church must meet. A failure to follow these documents can nullify important church business. Pastors also should know the whereabouts of other key documents, including the church’s property records and financial records.
4. Religious freedom issues. The First Amendment of the Constitution guarantees religious freedom protections to churches. The US Supreme Court has reinforced these protections in recent years, including a unanimous decision barring civil courts from intervening in employment disputes between churches and clergy, and a majority decision protecting the free-speech rights of churches.
Churches also receive special treatment with respect to a variety of federal statutes. For instance, Title VII of the 1964 Civil Rights Act prohibits employment discrimination, but churches may discriminate on the basis of religion. Churches also are exempt from the so-called “contraceptive mandate” required of employers by the Affordable Care Act.
For pastors, they enjoy freedom-of-speech protections regarding their preaching on spiritual and moral topics. Even the Matthew Shepard and James Byrd Hate Crimes Act, passed in 2009, contained a specific religious exclusion for speech, so long as that speech “is not intended to plan or prepare for an act of physical violence or incite an imminent act of physical violence against another,” according to Hammar.
But religious liberty challenges also loom.
Zoning laws often lead to disputes between churches and municipalities due to activities that churches wish to do on their properties. Specific laws have been passed to help preserve the rights of churches, but zoning lawsuits still are common.
And political activities by churches proves to be a murky subject. The Internal Revenue Code prevents churches (and any other organization that receives tax-deductible contributions) from explicitly endorsing political candidates for office, but permits churches to conduct an “insubstantial” amount of lobbying on political issues (with “insubstantial” ambiguously left undefined). Some believe the prohibition of candidate endorsements by churches is unconstitutional; in the history of the Tax Code, only one church has ever lost its tax-exempt status over the matter, leading some to believe the IRS is reluctant to penalize violators. But the risk of losing tax-exempt status does, in theory, exist.
Marriage is another challenge. In June 2015 the Supreme Court ruled, 5-4, that same-sex couples have a constitutionally protected right to marry. The Constitution continues to protect the rights of clergy to decide whom they wish to marry, so that remains unchanged. Less clear is whether churches that already offer their space for a fee for wedding ceremonies will be required to host same-sex marriage ceremonies. Some believe those churches will have entered the “stream of commerce,” requiring them to extend availability of their property to same-sex couples. Future lawsuits likely will sort this out.
5. Property matters. While personnel almost always represents the largest budget expenditure for churches, building and property expenses aren’t far behind. As a result, pastors should be familiar with the following:
- Lending. If a church needs a loan, the pastor should understand the process. And if a church already has a loan, it is important to understand the terms and covenants that the church must meet.
- Insurance coverage. Disputes with insurers are another top reason churches go to court each year. Pastors should understand the coverage their church possesses, and what special coverages may be necessary to cover specific risks, such as water damage, abuse allegations, or employment matters. Form an insurance committee to regularly review coverages and pricing.
- Facility use. If a church allows outside groups to use its building, it should make certain it has a clear policy and process for how that works. Require the group to demonstrate it possesses adequate insurance coverage. Churches also must be mindful of whether they charge outsiders for building use, and the potential implications of entering the stream of commerce.
- Unrelated business income. Many churches host festivals sponsored by businesses or operate an onsite bookstore or coffee shop. These types of activities may generate income for the church that is taxable. Pastors should be familiar with all activities on church property that generate income so that the church can determine if it owes unrelated business income tax.
- Slips, trips, and falls. Personal injuries are another common reason why churches end up in court. Proper maintenance of the church building and grounds is important—and an act of ministry that protects the well-being of the youngest and oldest of the church.
- Safety teams. A pastor should consider forming a team consisting of staff and volunteers who are passionate about the safety of every person who attends the church. These teams can regularly review the property, policies, and procedures to identify vulnerabilities and address them.
Pastors set the tone for their ministries. The right education and planning go a long way toward strengthening any church. While management issues may not be the reason pastors get into ministry, giving them proper attention is an opportunity to support—even enhance—ministry and allow it to thrive.
Matthew Branaugh is editor of the Church Law & Tax Team at Christianity Today.
