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Let Financial Ratios Strengthen Your Church Budget

Learn about—and use—the various ratios that financial experts use to strengthen and improve your church budget process.

Vonna Laue, CPA
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Follow this guidance tracking budgets through various financial ratios, and learn why these measurements are important for building financial health.

For many of these ratios, the top number should be divided by the bottom number. This will produce a usable measurement for tracking trends and making comparisons.

Income and giving ratios

There are four ratios that can help you better understand your congregation’s giving patterns.

1. Net income ratio

change in unrestricted net assets
____________________________
unrestricted revenues

This ratio reveals the change in unrestricted net assets to unrestricted revenues. It shows whether your church’s general operations are positive or negative, and by how much. It answers the question of whether the church is making or losing money in its day-to-day ministry.

Obviously a church is not a business that’s trying to generate a profit to stockpile cash. However, if a church continually loses money in its basic operations, it will eventually have to close.

The benchmark for this ratio is a positive result for the year. A more important benchmark, however, is for the ratio to show an improving trend over the years, factoring in both years of surpluses and years of deficits.

2. Unrestricted contributions per average adult attendee and giving unit

unrestricted contributions
________________________________
average adult attendees and giving units

This measurement introduces the concept of a giving unit. A giving unit is a group of family members, or any recurring supporter, who contributes jointly to the church. This excludes individuals who make a smaller one-time gift supporting a specific event. To identify only the regular recurring giving units, set a minimum dollar threshold, such as giving units that contribute more than $250 annually.

This calculation can be compared to other years to see trends and determine the effects on the church and budget. It is also useful to calculate what contributions would be if every giving unit made a certain amount (e.g., $40,000 a year) and tithed on that amount. Your church could use this measurement to make the congregation aware of the current giving per adult attendee and giving unit, and what the projected giving level would be if everyone participated.

3. Total contributions per average adult attendee and giving unit

total contributions – the combination
of accrual pledges and large one-time gifts
______________________________
average adult attendees and giving units

The key difference between this result and the measurement of unrestricted contributions to average adult attendees and giving units is that this one uses total (unrestricted and restricted) contributions and removes the effect of pledges (which are essentially a noncash accrual) and large one-time gifts.

The power of this measurement comes through analyzing trends in congregational giving habits from year to year. During the period of a capital campaign this figure may be inflated due to an increase in smaller gifts, which are not removed from the calculation.

4. Median household income given to the church

total contributions per average
adult attendee and giving unit
(Measurement 3)
____________________________
local median household income

This ratio determines total contributions per average adult attendee and giving unit to local median household income (from the US Census Bureau, American Community Survey). It shows what percentage of the local median county household income adult attendees and giving units are contributing. In essence, it reveals the additional giving capacity of your congregation.

The trends in this data from year to year are important because there are two indicators that affect the outcome of this ratio: congregational giving and local median household income. For example, if local median county income decreased from one year to the next, the measurement could appear to increase while overall giving actually remained the same.

This measurement will enable church leaders to see changes in giving habits from year to year in response to stewardship teaching and focus.

Cash flow ratios

A church without necessary reserves will be scrambling to operate in the short term, no matter what the other balances are. Positive net income and net asset balances won’t make up for inadequate cash reserves or help in months when giving is down. Fortunately, there are five cash-flow measurements you can use to monitor reserves and identify any needed adjustments.

Numbers 1 through 3 offer different cash flow ratios you can use to calculate how many days of cash reserves your church has, using different perspectives from the financial statements. The result of each calculation is multiplied by 365 to determine a total number of days.

1. Days of expendable net asset reserves

unrestricted, undesignated net
assets + board-designated net
assets for operations
__________________________ X 365
cash expenses (total expenses – depreciation)

The first “days of cash” ratio tells how many days of operating expenses are available in net asset reserves. It takes into account the accrual of current assets and current liabilities. Expendable net assets represent the total resources available to spend on operations, excluding future gifts made or revenues generated by the church. It’s similar to a savings account.

Expendable net assets consist of unrestricted, undesignated net assets, which are net assets that result from achieving positive net income from all sources of revenues (excluding restricted revenues). It also includes amounts designated by the board for operating purposes other than capital expenditures. You divide this total by the amount of cash expenses to find your net asset reserves. Since all of these ratios measure cash flow, I use the term “cash expenses.” These are total expenses less deprecation, the most significant noncash expense recorded.

2. Days of operating cash and investments on hand to fund annual cash expenses

operating cash and investments
___________________________ X 365
cash expenses + capitalized interest

This second “days of cash” ratio calculates the days of operating cash and investments on hand to fund annual cash expenses specifically related to liquid assets. That means it only considers operating cash and investments, not other current assets and liabilities. Again, you divide operating cash and investment by the sum of cash expenses plus capitalized interest (interest paid in cash but not expensed by the church) to find on-hand funds.

This measurement will calculate a result that is slightly different (typically higher) than the first ratio (net asset reserves) because it does not include the impact of other current assets and liabilities.

An appropriate benchmark for this ratio is to have 40 to 80 days of cash expenses on hand. Furthermore, a result of less than 20 days could indicate that your church should take action quickly to improve this measurement.

3. Available days of cash flow coverage

operating cash and investments
___________________________ X 365
cash expenses (including debt principal payments)

This final “days of cash” ratio represents the number of days of operations (including making scheduled debt payments) available when calculated from the sum of operating cash flow. This number comes from the statement of cash flows, operating cash and investments on hand at the beginning of the year, and the amount available from the operating line of credit.

Again, divide beginning cash, cash flows from operations, and available line of credit by the amount of total cash expenses and debt principal payments.

Here’s another way to state this: If your church used all of the cash generated from operations, all available cash and investments on hand at the beginning of the year, and your available line of credit, how many days would you be able to operate on these sources of cash? This number represents your maximum level of reserves, and should always be the highest of the three “days of cash” numbers.

4. Liquidity ratio

operating cash and investments
_______________________________
current liabilities – building fund current
liabilities, deferred revenue, and short-term
construction line of credit

The liquidity ratio measures how operating cash and investments are able to cover current operating liabilities, which exclude current building fund liabilities. (These typically have a separate source of cash from restricted revenues or budgets.) This ratio reveals how many times actual operating liabilities can be funded from operating reserves.

Divide operating cash and investments by current liabilities (excluding those items noted in the ratio).

A low result may indicate that the church is keeping fewer liquid reserves and is less likely to be able to handle unexpected operating expenses, events, or new opportunities that may come along.

5. Net cash availability measurement

total cash and investments – adjusted current liabilities (current liabilities excluding amounts borrowed on a construction line of credit) and temporarily restricted net assets

The fifth and final cash flow item is not a ratio but a measurement of the sum of total cash and investments less certain amounts the church may owe or be required to spend for specific purposes due to donor restrictions. This measurement calculates the amount of cash available for other uses after the church has satisfied its adjusted current liabilities and set aside appropriate funds for temporarily restricted projects. Amounts borrowed on a construction line of credit are also excluded, as they will ultimately be refinanced with the debt and paid over time.

Your statement of financial position answers the question, “How much cash do we have?” but it doesn’t answer the question, “Whose cash is it and how much of it can we spend?” The answers to those questions are typically very different. Therefore, this is one of the most important measurements you can provide church leadership.

The minimum for this number is at least one month’s worth of cash expenses. Any positive amount less than this is in the warning range. Any negative amount indicates the church is borrowing from temporarily restricted funds—a warning that corrective action is needed.

Expense ratios

Expense ratios can help identify trends in the outflow of resources over the years. They also allow you to compare your church with other churches and check the reasonableness of your expenses.

1. Personnel and mandatory debt service payments to total expenses (excluding depreciation expenses)

personnel (salaries including benefits)
+ mandatory debt service payments
(principal + interest expense)
________________________________
total expenses – depreciation expense

The largest expense of most churches is salaries and benefits. Debt service payments—which are a reduction of a liability and not an expense—represent the second largest outlay. Together, these items represent a majority of resource outflows from the local church.

Continually monitor these levels as a percentage of cash expenses. Cash expenses are total expenses minus depreciation, the most significant noncash expense recorded. It is also important to promptly follow up on changes in trends or unusual variances from peers to ensure that your resources are continually maximized.

This ratio, which can be split into two separate pieces, allows you to look at two of your largest outflows and determine the portion of the operating budget that will be used. Often, a growth cycle results in an amount of debt the church anticipates being able to pay off as more people start attending. However, the church needs to be able to pay the bills and provide the services that will attract new people with the current budget. Reviewing this ratio in advance of any major debt decisions will help you analyze the feasibility of facility expansion goals.

Reasonable benchmarks for these ratios are:
  • Personnel costs (salaries and benefits) should fall between 40 percent and 55 percent of expenses.
  • Mandatory debt service payments, including interest, should be no more than 15 percent of total expenses.
  • Total personnel and debt service costs should be no more than 40 percent to 70 percent of total church expenditures.

2. Expenses (excluding depreciation) per average adult attendee and giving unit

total expenses (excluding depreciation expense)
________________________________
average adult attendees and giving units

This measurement tells you the cost to the church for each adult attendee or giving unit. It takes total cash expenses and divides that total by the average adult attendees or giving units.

The power of this measurement is in the peer group comparison. This allows your church to see if your cash expenses are high or low compared to your peers. Analyzing trends over the years is also important. Another benefit of this measurement is that it can be subtracted from total contributions per attendee and giving unit to show if contributions are high enough to cover the monetary cost per individual. In other words, are you taking in enough contributions to cover the costs of having people attend your church?

3. Total missions categories to total expenses

total outreach expenses (local and global)
_________________________________
total expenses

This ratio looks at the combined total of local and global outreach (missions and benevolence) expenses as a percentage of total expenditures. It can be separated into two pieces and calculated by local and global activities. Global activities include actual expenditures for cross-cultural missions activities in the United States and other countries. This includes direct support to missionaries; outside agencies, including national partners; and cross-cultural missions trips. It excludes internally allocated costs and salaries of employees included within missions for some church budgets. This is because internal allocations vary significantly among churches.

Local outreach includes expenditures for local missions activities not classified as “global.” This includes direct support of community-based church ministries, local missionaries and agencies, and benevolence given to local individuals. It excludes internally allocated costs and salaries of church employees included within missions for the same reason as stated above.

This ratio can be useful in benchmarking your total outreach expenditures with other churches. More importantly, when a church experiences economic difficulties, the ministry and mission expenses are usually the first to be decreased as debt service payments are not discretionary and personnel costs are difficult to reduce. Declines in this ratio can allude to other issues. Monitoring these ratios over time will allow the church to identify any significant changes.

4. Facility cost per square foot (excluding interest expense)

total facility costs (excluding interest
expense on the debt and depreciation)
_______________________________
total facility square footage

This measurement answers the question, “How much does it cost to operate the church building?” Total facility costs include building and grounds maintenance, personnel salaries and benefits, outside contract labor, utilities (excluding telephone), security, liability insurance, and rent or mortgage payments. It should also include the cost of general repairs to the facility and other facility-use expenses, but not equipment purchases or the cost of major renovations. This overall expense excludes both vehicle-related expenses and interest expense on debt and depreciation.

Facility expenses measurements can vary, depending on whether the church has new or older facilities and is in one or multiple locations. Facility expenses measurements can also vary by geographic area. The most accurate comparison would be against churches with buildings of a similar age as yours (e.g., built within a decade of your own).

The ratios detailed above can provide valuable insights for leaders. They are tools that can be used proactively to minimize the need to respond to financial crises later.

Related articles:
Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.
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Paying Nonexempt Staff for After-Hours Communication

Employers must pay nonexempt employees their regular hourly rate plus overtime for all on-call time.

Frank Sommerville, Attorney, CPA
Bio

Last Reviewed: June 17, 2025

Q: Many churches have policies stating that nonexempt workers are prohibited from off-the-clock work, such as answering calls, texts, and emails from home. But I’m looking for guidance in the circumstance where it is expected, and even required, for employees to answer such communications after hours.

Nonexempt employees can always be on call

Employers may require nonexempt employees to be on call at all times. However, they must pay nonexempt employees their regular hourly rate plus overtime for all on-call time. For this reason, many employers explicitly prohibit employees from responding to texts, emails, and calls after scheduled work time.

State guidelines for on-call pay vary

Some states require employers to pay a minimum amount of time whenever nonexempt employees respond to after-hours communications.

If these employees are not on call and the church does not require an employee to respond to after-hours communications, federal law still requires the employer to pay them. Payment must be at least one-tenth of an hour of pay each time the employee responds to a call, email, or text. Some states require employers to pay a minimum amount of time (usually two to three hours’ worth of time) whenever nonexempt employees respond.

In other words, your church needs to manage its expectations and costs. If it doesn’t want this kind of activity going on, it needs a policy prohibiting after-hours communications. It also needs to communicate that policy regularly and directly.

It also needs leadership, including pastoral staff, to reinforce the policy. This is especially true when it comes to any expectations made of church support staff.

One church started docking a pastor $100 every time he sent an after hours email or text to support staff. It didn’t take long for the pastor to stop contacting his support person after work.

We’ve used a combination of AI and human review to make this content easier to read and understand.
Frank Sommerville is both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Image: Alejandro Garrido Navarro / Unsplash

Finding a Church Insurance Broker

What churches should know and ask when seeking a broker.

Elizabeth Jackson

Why Insurance Matters for Churches

Insurance coverage helps churches prepare for unexpected risks. But with so many providers and coverage types, the process can feel overwhelming.

“When you say the word ‘insurance,’ it’s a huge subject. Not all coverage is equal.” —Phill Martin, CEO, The Church Network

Why Work with a Broker?

Churches don’t have to navigate insurance alone. A qualified broker can guide you toward the coverage your church truly needs.

“Consider an insurance broker as a consultant, your advisor… a trusted advisor… with that comes expertise.” —Peter Persuitti, Global Managing Director, Gallagher

What a Broker Can Do:
  • Match your church with the right insurance provider
  • Explain policy options and exclusions
  • Handle claims and provider communication
  • Offer ongoing customer service and support

Ask Brokers Upfront:
  • What services do you offer?
  • How do you support churches during claims?
  • Do you have experience working with churches?

“I would request the broker provide information that clarifies their services.” —Rodney Flanders, AVP, Church Mutual Insurance Company

Know Your Coverage Options

Understanding coverage types is essential before selecting a broker.

“Claims-made coverage is temporary; occurrence coverage is permanent. If it’s occurrence, you have permanent coverage.” —Charlie Cutler, President, ChurchWest Insurance Services

Liability Coverage to Consider:
  • Church-sponsored activities
  • Employment practices
  • Allegations of sexual misconduct

“[M]ake sure [you] have permanent coverage.” —Cutler

A good broker should explain coverage terms clearly and help you select what’s appropriate for your church.

How to Choose the Right Broker

Not every broker understands the unique risks churches face. That’s why experience matters.

“I can’t emphasize enough the church’s need to go with a broker who is experienced in church insurance.” —Frank Sommerville, Attorney and Senior Editorial Advisor, Church Law & Tax

Look for Brokers Who:
  • Specialize in church insurance
  • Know about ministry-specific risks
  • Have proven experience with similar organizations

Smart Selection Steps:
  1. Ask other churches for broker referrals.
  2. Contact and evaluate broker references.
  3. Ask about the broker’s experience with church-specific policies.

Planning for Insurance Disputes

Even if your church hasn’t faced a claim yet, don’t skip insurance coverage. In 2016, one of the top reasons churches ended up in court was insurance-related disputes.

Ask Brokers:
  • How have you handled disputes in the past?
  • Can you share stories from previous clients?

“Nothing is better than storytelling… What you are especially looking for is experience working with the faith-based community.” —Persuitti

If a major claim arises, churches should consult legal counsel.

“Any time [churches] have a major potential claim, they should have an attorney involved.” —Sommerville

Some policies may appear to cover a claim but fall short. Attorneys can help clarify what is or isn’t covered.

“There are attorneys who specialize in nothing but coverage disputes.” —Sommerville

Reviewing and Reassessing Policies

Churches should periodically review their insurance policies. Don’t assume last year’s renewal still meets your needs.

“Just like our personal insurance coverage, [don’t] be comfortable renewing the policy over and over again.” —Martin

Review Tips:
  • Conduct annual check-ins with your broker
  • Schedule periodic reviews with legal counsel

“Periodically [churches] should have their policies reviewed by an attorney—especially the larger churches.” —Sommerville

Final Thought

Churches that proactively ask questions, understand their risks, and work with trusted brokers can secure insurance that truly protects. These partnerships not only reduce risk but also empower ministry leaders with peace of mind.
Elizabeth Jackson is a freelance writer living in Wheaton, Illinois.
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5 Key Differences in Church Compensation Every Leader Should Know

Discover five key differences in church compensation that church leaders must understand for financial compliance and fair staff pay.

Lee A. Dean
Bio

Last Reviewed: May 20, 2025

Setting compensation for pastors and church staff isn’t just a financial task—it’s a legal and organizational responsibility with distinct challenges. Unlike the for-profit world, churches face unique tax laws, benefit structures, and stewardship expectations.

“Clergy compensation is an animal in and of itself,” said Ben Rhodes, a CPA and past chief financial officer of Faith Assembly of God in Orlando, Florida. “When we have new board members come on, many of them have never even heard of a housing allowance exclusion.”

To help church leaders and financial managers understand these differences, Church Law & Tax spoke with Rhodes and three other experts. Together, they identified five key differences between church and for-profit compensation practices.

1. Tax-Exempt Status Changes the Stakes

Churches are classified as 501(c)(3) organizations, which means they must follow IRS rules regarding reasonable compensation. Paying more than what is considered reasonable can have serious consequences.

What’s Different?

In the for-profit sector:
  • If compensation is too high, the IRS disallows a tax deduction.
  • The business pays more tax but continues operations.

In the church world:
  • The church could lose its tax-exempt status.
  • The person receiving excessive pay may:
    • Owe 25 percent of the excess amount to the IRS.
    • Face an additional 200-percent penalty if not corrected.
  • Board members who approved the payment may personally owe 10 percent of the excessive amount.

“Reasonable compensation is defined as what other similar organizations pay similarly qualified people to perform similar work,” explained Mike Batts, CPA, managing partner of Batts Morrison Wales & Lee, and a senior editorial advisor for Church Law & Tax.

2. Housing Allowances Are a Unique Tax Benefit

Ministers are eligible for parsonage or housing allowances—a benefit rarely found in other sectors.

Two Common Approaches:

1. Parsonage (church-owned housing):
  • The church provides housing as part of compensation.
  • Ministers do not report the rental value or utility costs as income, as long as they stay within fair rental value.

2. Housing Allowance (minister-owned or rented home):
  • Part of a minister’s salary is designated for housing expenses.
  • That portion is exempt from federal income tax, if:
    • It is used for actual housing costs.
    • It does not exceed the home’s fair rental value plus utilities.

Caution:
  • Long-term parsonage living can prevent pastors from building equity.
  • Some churches offer equity allowances by contributing to a retirement fund the minister can use later to buy a home.

“Funding the retirement plan does not create current taxable income,” said Elaine Sommerville, a CPA and senior editorial advisor for Church Law & Tax. “And certain retirement plans may designate a portion of the payment as a housing allowance during retirement.”

✅ Best Practice: The housing allowance should be approved in writing, and set before the payment is made.

➡️ See Chapter 6 of the Church & Clergy Tax Guide for more.

3. 403(b) Retirement Plans Offer Flexibility

Churches can offer 403(b) and 403(b)(9) retirement plans, which come with advantages not found in for-profit retirement programs.

Benefits of 403(b)(9) Plans:
  • Allow faith-based investments aligned with church values.
  • Can pay annuity-style benefits directly from the plan.

More Flexibility:
  • Churches may continue contributing up to five years after employment ends, said Danny Miller, an attorney and Church Law & Tax contributor.
  • Ministers may receive retirement benefits that qualify for housing allowance exclusions.
  • Churches may discriminate contributions, meaning they can contribute:
    • Only for certain employees (e.g., pastors),
    • In varying amounts.

“For-profit plans generally have strict nondiscrimination requirements,” Sommerville noted.

➡️ See Chapter 10 of the Church & Clergy Tax Guide for more.

4. Social Security: Ministers Are Self-Employed

Unlike typical employees, ministers are considered self-employed for Social Security purposes.

What That Means:
  • This rule is based on IRS Code Section 1402(c).
  • Ministers pay both the employer (7.65 percent) and employee (7.65 percent) portions of Social Security as self-employed (SECA taxes).
  • They are not subject to FICA withholding by the church.
  • Most ministers still are employees for federal income tax reporting purposes.
  • Ministers report their income taxes as employees and receive a Form W-2 from their church.

“The compensation paid to a minister—for ministerial duties—is a trade or business subject to self-employment tax,” Sommerville said.

Opting Out:

Ministers may permanently opt out of Social Security if:
  • They object to the program based on conscience.
  • They file the required paperwork within their first two years of ministry.

⚠️ Opting out should be considered carefully and only after consulting with a financial expert.

➡️ See Chapter 9 of the Church & Clergy Tax Guide for more.

5. Healthcare Options Are Limited—but Evolving

Health insurance remains a challenge for smaller churches. One emerging solution is the QSEHRA (Qualified Small Employer Health Reimbursement Arrangement). Another is the ICHRA (Individual Coverage Health Reimbursement Arrangement).

What are QSEHRA and ICHRA?

A QSEHRA is available to employers with fewer than 50 full-time employees. Therefore, it:
  • Must be offered equally to all eligible employees.
  • Is fully funded by the employer (no salary reductions).
  • Reimburses employees for medical expenses (after proof of minimum coverage).
  • Has annual dollar limits on reimbursements.

An ICHRA allows many employers to reimburse employees for some or all of the premium expenses incurred for an individual health insurance policy. They will also allow employers to pay the employees’ individual health insurance premiums.

Important Warnings:
  • Churches cannot limit QSEHRAs to ministers only.
  • Many churches mistakenly reimburse insurance premiums without establishing a proper QSEHRA.

“A QSEHRA will not work for every church,” said Miller. “And it must follow strict requirements.”

Also, “you cannot offer an ICHRA to any employee to whom you offer a traditional group health plan,” notes Richard Hammar, attorney and senior editor of Church Law & Tax. “However, you can decide to offer an ICHRA to certain classes of employees and a traditional group health plan (or no coverage) to other classes of employees.”

Other Healthcare Options:
  • Denominational plans (may be required or optional).
  • Health care sharing ministries like MediShare.

“Some smaller churches are choosing co-op plans like MediShare,” added Rhodes.

Final Thoughts

Understanding these five key differences helps church leaders:
  • Stay compliant with IRS rules
  • Create fair and competitive compensation packages
  • Understand the benefits and limitations of parsonage and housing allowances
  • Research ways to help your minister prepare and save for retirement
  • Consider ways to provide for health care coverage

Are you a financial manager or board member navigating clergy compensation? Lean on expert advice and reference trusted resources like the Church & Clergy Tax Guide.

We’ve used a combination of AI and human review to make this content easier to read and understand.
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What Counts as a Tax-Deductible Donation?

Discover what counts as a tax-deductible donation and how to navigate IRS rules for fundraisers and gifts.

Michael E. Batts, CPA
Bio

Last Reviewed: January 23, 2025

Q: Our youth group hosted a spaghetti dinner to raise money for hurricane disaster relief. How do we determine what is a donation and what is payment for the spaghetti dinner? Can a donor’s entire check for the dinner work as a tax-deductible donation?

Understanding What Counts as a Tax-Deductible Donation

When hosting events like spaghetti dinners or fundraisers, understanding what counts as a tax-deductible donation is crucial for both the organization and its donors. The key factor in determining tax deductibility is whether a quid pro quo arrangement exists. A quid pro quo contribution occurs when a donor receives something of value in return for their contribution. In such cases, only the amount exceeding the value of the benefit received is deductible.

What Is a Quid Pro Quo Arrangement?

If the understanding with participants is that the “price” of the dinner is a donation of any amount, the IRS considers this a quid pro quo arrangement. Under such arrangements, the value of the dinner (not its actual cost) is used to determine the nondeductible portion of the donation. Organizations must provide a “good faith estimate” of the value. For example, if the dinner is similar to one at a restaurant like Fazoli’s, its value should reflect that comparable cost.

When Is the Full Donation Tax-Deductible?

If the dinner was offered for free and attendees were asked for voluntary contributions, this is not considered a quid pro quo arrangement. In this case, the entire amount donated by participants is tax-deductible, as no goods or services were provided in exchange for their contributions.

IRS Receipt Requirements for Quid Pro Quo Donations

For quid pro quo donations exceeding $75, the IRS requires the organization to issue a proper receipt. The receipt must include:
  • A statement indicating that the donor received goods or services in return for the contribution;
  • A description and good faith estimate of the value of those goods or services;
  • A statement clarifying that only the amount exceeding the value of the goods or services is tax-deductible.

For example, if a donor contributes $100 for a spaghetti dinner valued at $20, only $80 is tax-deductible. Receipts for non-quid pro quo donations over $250 must also meet specific IRS guidelines.

Exceptions to Quid Pro Quo Rules

The IRS allows organizations to ignore the quid pro quo arrangement under certain conditions:
  • If the value of the goods or services received is 2 percent or less of the gift amount (up to $107, inflation-adjusted annually);
  • If the goods or services provided are considered “token items,” such as promotional materials.

Resources for Further Guidance

For detailed IRS guidelines, visit the IRS quid pro quo contributions page. Additional information, including receipt guidelines for both quid pro quo and non-quid pro quo donations, is available in chapter 8 of the Church & Clergy Tax Guide.

Frequently Asked Questions

What is a quid pro quo donation?

A quid pro quo donation occurs when a donor receives goods or services in exchange for their contribution. The tax-deductible amount is limited to the contribution amount minus the value of the goods or services received.

Do I need to issue receipts for all donations?

Receipts are required for quid pro quo donations over $75 and for non-quid pro quo donations over $250. Receipts must include specific details to meet IRS requirements.

What if the goods or services are of minimal value?

If the value of goods or services is 2 percent or less of the donation amount (up to $107), the IRS allows organizations to ignore the quid pro quo rules.

How should I estimate the value of goods or services?

A good faith estimate should reflect the fair market value of comparable items or services. For instance, use the price of a similar meal at a local restaurant as a benchmark.
Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.
Image: AdobeStock/MQ-Illustrations

Maximizing Retirement Savings with the Rule of 72

Discover how church leaders can use the Rule of 72 to estimate investment growth and build a solid retirement plan. Start saving smarter today!

Richard R. Hammar, Attorney, CPA
Bio

Last Reviewed: January 31, 2025

What is the Rule of 72?

The Rule of 72 is a simple financial formula that helps estimate how long an investment will take to double based on a fixed annual rate of return. Church leaders and pastors can use this tool to plan their retirement savings efficiently.

Key Takeaways:
  • The Rule of 72 helps estimate how quickly savings can double with a fixed interest rate.
  • Compounding interest plays a crucial role in long-term financial growth.
  • Starting early and leveraging investment accounts like a 403(b) can maximize retirement savings.

How Does the Rule of 72 Work?

The formula is simple: divide 72 by the expected annual rate of return to determine the number of years it will take for your money to double.
Annual Rate of Return (%)Years to Double
6%12 years
8%9 years
9%8 years
12%6 years

Why Church Leaders Should Use the Rule of 72

Many pastors and church staff delay saving for retirement due to financial constraints. However, understanding the power of compounding interest through the Rule of 72 can help them take proactive steps toward financial security.

Example Calculation

Imagine a pastor invests $1,000 at age 30 with a 9% return rate:
  • At age 38: $2,000
  • At age 46: $4,000
  • At age 54: $8,000
  • At age 62: $16,000
  • At age 70: $32,000

This exponential growth underscores the importance of starting early.

Applying the Rule of 72 to a 403(b) Retirement Plan

Church employees can take advantage of a 403(b) plan, which allows tax-deferred growth. This means savings grow without immediate taxation, allowing more significant compounding over time.

Overcoming Investment Fears

Some church leaders hesitate to invest aggressively, fearing market fluctuations. However, historical data from SEC.gov shows that long-term stock market investments yield positive returns over time.

Common Questions About the Rule of 72

Is the Rule of 72 accurate?

Yes, for estimating investment doubling times, but actual returns may vary due to market fluctuations.

Can the Rule of 72 be used for inflation calculations?

Yes! By dividing 72 by the inflation rate, you can estimate how long it takes for money’s purchasing power to halve.

What is the best investment vehicle for church leaders?

A 403(b) plan is ideal due to tax-deferred growth, but diversified portfolios can also be beneficial.

How often should I review my retirement plan?

Church leaders should review their plan annually and adjust contributions based on financial goals and market trends.

By applying the Rule of 72, church leaders can strategically plan their financial futures, ensuring a secure and well-funded retirement.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: AdobeStock/ Liera

Best Practices for Installing Security Cameras at Your Church

How to make the most of surveillance technology.

Bobby Ross Jr.
Bio

In this interview with Nathan Parr he shares his insights on security cameras. Nathan spent 12 years as the operations manager for the 4,000-member First Baptist Church of Belton, Texas.

How many security cameras do you have at First Baptist Church, and where are they located?
We have 54 active cameras throughout the entire complex. You can’t come inside our main campus without being on camera. You enter any door, and I can track you throughout the entire building until you leave. I can do that with only 54 cameras on our main campus that takes up about two city blocks. It’s about 115,000 square feet.

Why does a church like yours need 54 cameras? Why do you need to track me from the time I walk in until the time I leave?

Cameras, they’re passive. They record data; that’s all they do. They interpret and don’t act upon it. We have them as a way to determine what has happened if we have a concern, but also as a way to determine who might be doing something. At every entrance, we have a small sign that says, “Be advised, all activities are monitored by camera.” So someone walking in is alerted that they’re under observation.

Are these cameras monitored live or do they mainly record for future reference?

Typically, we do not actively monitor our camera system. We have the capability of doing that if we need, but if you’ve ever tried to monitor multiple cameras at once with a lot of people, it’s never practical or easy. But we also—after major events like Vacation Bible School—have the capability of downloading and saving all of what the cameras saw from when the kiddos got here to when they left. We can burn it onto a DVD and store it in an external hard drive, so if there’s anything that comes up later, we have a way to go back and look.

What would prompt that? Something like child sexual misconduct allegations?

That, or if a child got injured. In a large church that’s very active, kids and even adults get injured every now and again. Sometimes you have people who are looking at large organizations and thinking, They’ve got money. They’ve got insurance. Let me claim that I had a slip-and-fall. Well, we have cameras everywhere, so we can tell. If we had a wet floor sign and you ignored it, or if we had tape up and you ignored it and hurt yourself, or if you just magically fell for no reason, we’ll probably have the video of it. It’s mainly a passive security insurance to protect us.

How costly is it for a church to install a security camera system and maintain it?

If [a church is] willing to do the work themselves, the components are like any electronics: The price keeps coming down further and further, and some of the old technology is even cheaper now because it’s already been replaced by new, digital technology.

Do all churches, regardless of size and circumstance, need cameras?

I think it is a sound investment for every church, absolutely—just for the safety aspect of having a record if something were to happen. Obviously, you don’t want bad things to happen, but you have to be realistic. We live in a broken world; that’s why we exist and why we’re here and have churches. If we’re doing our job, we’re going to be under attack: physical, spiritual, etc. A camera system, once you install and maintain it, [is] watching over you and recording without you having to worry about it. If something were to happen, you have a way to look and see what happened. I think that’s well worth it.

Let’s say I work for a church that doesn’t have cameras and would like to add them. What process would you recommend to begin installing them?

It starts with making the decision as a church to say, “You know what? We want to have the cameras.” There are people in churches who think this level of security is too much. But make a decision that you want to do it, and from there, look at how much you need to do the basics. Protect what has to be protected first. So if you can only do a couple of cameras, and you’re not super busy during the week but have staff inside, put enough cameras up to watch the doors that people come in and the office area where people work. Then your children’s areas are your next critical areas.
Then expand it as you can. I would advocate, again, spending extra money on memory so you’re not having to buy bigger and better DVRs. Think ahead. The way I did it, we added encoders so I’d have everything I needed without swapping equipment. If you have a small budget, get the best analog camera system you can buy. Then upgrade the IP (Internet protocol) when you can afford it.

Anything else you haven’t covered that would be important on this issue?

People think, Now I’ve installed a camera system and can relax. My advice always is that safety and security is a continual process. You should always be looking on how to improve and do better and more of what you’re doing. Consider your first camera you install [as] just the first step in a safety and security culture, not the end state.

For more on the benefits of installing security cameras at your church, see this article.
Image: AdobeStock/jovannig

Parental Permission and Medical Consent Forms for Churches

Release forms cannot free your church from liability, but some forms are still worth considering.

The Editors
Bio

Last Reviewed: February 6, 2025

While release forms cannot avoid liability for injuries to minors, there are other forms that churches should consider. For example, churches should not allow a minor to participate in any church activity (such as camping, boating, swimming, hiking, or sporting events) unless the child’s parents or legal guardians sign a form that

1. consents to their child participating in the specified activity;

2. certifies that the child is able to participate in the event (e.g., if the activity involves boating or swimming, the parents or guardians should certify that the child is able to swim);

3. lists any allergies or medical conditions that may be relevant to a physician in the event of an emergency;

4. lists any activities that the parents or guardians do not want the child to engage in; and

5. authorizes a designated individual to make emergency medical decisions for their child in the event that they cannot be reached.

Ideally, the form should be signed by both parents or guardians (if there are two), and the signatures should be notarized. If only one parent or guardian signs, or the signatures are not notarized, the legal effectiveness of the form is diminished. Having persons sign as witnesses to a parent’s signature is not as good as a notary’s acknowledgment, but it is better than a signature without a witness.

The form should require the parent or guardian to inform the church immediately of any change in the information presented, and it should state that it is valid until revoked by the person who signed it. The parent or guardian should sign both in his or her own capacity as parent or guardian, and in a representative capacity on behalf of the minor child.
The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.
Image: getty/Yoshiyoshi Hirokawa

Retirement Planning for Pastors

Early planning can avoid IRS trouble—and provide well when retirement comes.

Lisa A. Runquist, Attorney
Bio

Last Reviewed: June 23, 2025

As a lawyer, I’ve had many difficult conversations with church leaders.
One of the hardest is telling a church and its pastor that it’s too late to fund the pastor’s retirement.

The Problem: Too Many Pastors Don’t Save

Far too many pastors reach retirement age without enough savings.
As a result:
  • Some pastors can’t retire, even if they want to.
  • Some church boards face resistance from pastors who fear financial uncertainty.
  • Some pastors die without leaving financial support for their surviving spouses.

When problems arise, many proposed quick-fixes are often questionable—or even illegal.

Six Real-Life Examples

These real-world cases show the complex challenges churches and pastors face regarding retirement planning (resolutions for each are shared toward the end of this article).

1. Church Forced to Sell Property to Fund Pastor’s Retirement
  • A pastor served 50 years, earning less than $30,000 annually.
  • He opted out of Social Security, mainly due to lack of cash.
  • The church dissolved and planned to use property sale proceeds to buy an annuity for the pastor.
  • The state attorney general challenged the use of funds for this purpose.

2. Pastor’s Widow Left Without Support
  • Over 15 years, the church discussed—but never finalized—a retirement plan.
  • After the pastor’s death, the church paid small sums to his widow.
  • The Internal Revenue Service (IRS) questioned the legality of payments during a tax-exempt status review.

3. Two Churches Merge; One Pastor Expects Retirement Pay
  • Two churches merged; one pastor initially intended to retire.
  • Later, he expected the merged church to continue paying him a retirement salary.

4. Pastor/CEO Pushes for Separate Retirement Fund
  • A pastor/CEO requested a new, church-funded retirement account managed by himself.
  • Upon retirement, he planned to transfer the entire fund directly to his control.

5. Monk’s Vow of Poverty Leaves Widow with Nothing
  • A monk who took a vow of poverty wanted the church to support his wife after his death.
  • She had never been a church employee and had no legal claim to benefits.

6. “Pastor Emeritus” Role Raises Tax Questions
  • A church created a “Pastor Emeritus” position for a retiring pastor.
  • The arrangement raised legal questions about compensation limits and retirement legality.

Why These Cases Matter

These examples highlight why careful, early planning is essential—to protect pastors, families, and churches from legal and financial risks.

Next: the key questions churches must ask.

Key Questions for Churches

1. Are You Paying Your Pastor Enough?

Fair compensation includes:
  • Covering current living expenses.
  • Allowing for meaningful retirement savings.

Best Practices:
  • Aim for salaries in the median income range of the congregation.
  • Small churches may need bivocational arrangements.
  • No matter the size, retirement contributions should always be considered.

Important:
The pastor should never set his or her own salary.
Only the board may set compensation.

2. Has Your Pastor Opted Out of Social Security?

Opting out of Social Security carries major risks:
  • No retirement, disability, or Medicare benefits.
  • Heavy reliance on private savings.

Solutions:
  • Save aggressively.
  • Work nonministerial jobs to earn Social Security credits.
  • Consider spousal Social Security eligibility if applicable.

Caution:
Social Security should supplement retirement savings—not replace them.

3. How Does Housing Affect the Pastor’s Future?

Pastors often live in church-provided parsonages, raising critical questions:
  • Where will the pastor live after retirement?
  • Has the pastor built home equity?

Solutions:
  • Equity Allowance:
    An equity allowance provides additional taxable income for future housing needs.
  • Housing Allowance:
    A tax-free housing allowance to help pastors purchase homes during active ministry.

Important:
Neither method replaces the need for a retirement savings plan.

4. What Types of Retirement Plans Are Available?

Churches must thoughtfully plan:
  • Set up retirement plans early—even at the pastor’s hire date.
  • Follow denominational plans when available, but review needs individually.
  • Small early contributions grow significantly over time.

Late-stage retirement planning is very difficult and raises compensation risks discussed below.

Funding the Plan: What Churches Must Know

Reasonable Compensation Limits

Contributions to a pastor’s retirement plan count toward total compensation.
Total compensation must remain reasonable to avoid legal risks:
  • Private Benefit: Church assets must serve church purposes.
  • Private Inurement: No insider (e.g., the pastor) may receive personal enrichment from church assets.
  • Intermediate Sanctions:
    If a pastor (or “disqualified person”) receives excess benefits, the IRS can impose severe personal penalties (up to 225%).

How to Ensure Compensation Is Reasonable

Compensation is reasonable if:
  • It matches what similar organizations pay for similar roles.
  • It includes all forms of cash and noncash benefits.
  • It is properly documented and board-approved.

Vesting Retirement Plans:
Deferred compensation (like pensions) must also fit into the overall reasonableness calculation over time—not just in the year it vests.

Achieving a “Safe Harbor” (IRS Best Practices)

To shield the church and pastor, follow these steps:
  1. Approval by a Disinterested Board:
    No board members with personal financial interests vote on compensation.
  2. Use Independent Data:
    Base salaries and benefits on outside surveys and comparable compensation research.
  3. Maintain Adequate Documentation:
    Keep detailed minutes showing how decisions were made and the data reviewed.

When all three are followed, the burden of proof shifts to the IRS if the IRS brings a challenge.

Protecting the Church: Conflicts of Interest

Key Point:
The church does not belong to the pastor.
  • Pastors must not dominate salary or retirement decisions.
  • Churches should have a conflict-of-interest policy and disinterested boards must determine compensation.
  • Board minutes must reflect all retirement plan decisions.

Setting Up Church-Wide Programs for Retired Ministers

Some churches or denominations create benevolence funds to help retired pastors in need.
This does not replace retirement planning but provides important supplemental support.

Transitioning to Full Retirement

When pastors near retirement:
  • They may continue limited duties with reduced salaries.
  • Churches may offer consulting roles or “Pastor Emeritus” positions—but compensation must match services provided.
  • Severance packages may be negotiated if retirement transitions are difficult.

Best Practices for Retirement Planning

To ensure fairness and compliance:
  • Plan early.
  • Fund retirement accounts steadily over time.
  • Use safe harbor procedures for all salary and retirement decisions.
  • Document everything clearly.

Revisited: Resolving the Six Real-Life Examples

Church Forced to Sell Property
  • Documentation showed the pastor’s financial contributions and prior board intentions.
  • The state attorney general allowed an annuity to be purchased.

Pastor’s Widow Receives Payments
  • IRS accepted payments as deferred compensation, due to historical documentation.
  • The small payment amounts also reduced IRS scrutiny.

Merger Retirement Conflict
  • Without documented work performed post-merger, continued salary would violate private inurement rules.
  • A better solution: agree on transition roles and compensation before merger.

Pastor/CEO Separate Fund
  • Solution: Contributions made annually, subject to board approval and reasonable compensation limits.
  • Consider use of a rabbi trust to hold retirement funds.

Monk’s Widow Support
  • A trust fund supported the widow while keeping assets under church control.
  • Payments were taxed appropriately as deferred compensation.

“Pastor Emeritus” Arrangement
  • The pastor continued part-time ministry, justifying ongoing salary and retirement contributions.
  • Compensation was adjusted appropriately based on workload.

Final Thought

The best way to avoid retirement problems is to plan early.
Pastors and churches must work together to ensure long-term financial security, following legal standards and protecting the church’s mission.

We’ve used a combination of AI and human review to make this content easier to read and understand.
Lisa A. Runquist has more than 40 years of experience as a transactional lawyer, both with nonprofit organizations and business organizations.
Image: bsd555 Getty

How Should Items Donated for a Silent Auction Be Treated for Tax Purposes?

Discover if silent auction items are tax-deductible and how churches can comply with IRS guidelines for noncash donations.

Kaylyn Varnum, CPA
Bio

Q: My church is planning a silent auction to raise money for a missions trip. What should we say to potential donors to help them understand any tax implications for their donations—whether it involves a donated item, a service, or, say, the use of a vacation cottage for a week?

Are Silent Auction Items Tax Deductible?

Items donated to a silent auction are treated as noncash contributions under federal tax law. Donors are responsible for determining the value of their noncash gifts and calculating the appropriate amount to deduct as a charitable contribution. However, it’s important to note that certain donations, such as services or the use of property (e.g., a vacation cottage), are not tax-deductible.

What Are the Rules for Noncash Contributions?

For items donated to a silent auction, donors who contribute noncash items valued at more than $500 must generally file IRS Form 8283 with their tax returns. Depending on the type of item and the claimed deduction amount, donors may also need a church official’s signature on the Form 8283 to confirm receipt of the donation.

If the church sells, exchanges, or disposes of a donated item within three years of the contribution date and previously signed a Form 8283, the church must file IRS Form 8282 within 125 days. A copy of Form 8282 should also be provided to the donor.

What Acknowledgment Should the Church Provide?

The church should issue a contribution acknowledgment that includes:
  • The date of the gift;
  • A description of the property donated (but not its value);
  • A statement indicating whether the donor received any goods or services in exchange for the gift.

If no goods or services were provided, the acknowledgment should clearly state that. If goods or services were provided, the acknowledgment must include their estimated value and a statement noting that the donor may only deduct the excess of their gift amount over the value of the goods or services received.

What About Donations of Services or Use of Property?

Donors should be aware that contributions of services (e.g., professional skills or labor) and gifts of the right to use property (e.g., a vacation home for a week) are not tax-deductible. While the church can acknowledge such gifts, the acknowledgment should state that these types of donations are generally not deductible, and donors should consult a tax advisor for guidance.

Special Rules for Vehicle Donations

For donations of vehicles such as cars, boats, or airplanes, special IRS rules apply. Donors should refer to IRS Publication 4303 for detailed guidance on vehicle contributions.

Additional Resources

For more information about charitable contributions and IRS requirements, refer to Chapter 8 of the Church & Clergy Tax Guide. This resource provides comprehensive details on acknowledgment requirements, filing forms, and other aspects of charitable giving.

Frequently Asked Questions

Are silent auction items tax-deductible?

Physical items donated to a silent auction are generally tax-deductible, but donors must determine their value. Services or the use of property are not deductible.

What forms are required for noncash donations?

Donors must file IRS Form 8283 for noncash contributions over $500. If the church sells the item within three years, it must file IRS Form 8282.

What should be included in a donation acknowledgment?

The acknowledgment must include the date of the gift, a description of the donated property, and whether goods or services were provided in exchange for the gift.

How should the church handle vehicle donations?

Vehicle donations are subject to special rules outlined in IRS Publication 4303. Donors must follow specific IRS guidelines for these contributions.
Kaylyn Varnum is a partner and the assistant national director for tax services at Batts Morrison Wales & Lee (BMWL), an Orlando-based national CPA firm serving churches and nonprofits. Varnum’s primary responsibilities involve serving and advising tax-exempt organizations.

Helping Church Boards Set Pastoral Compensation

What church leaders should know about paying pastors.

Bob Smietana
Bio

Last Reviewed: May 20, 2025

Setting Pastoral Compensation: A Guide for Church Boards

When Steve Hoden became pastor of Salem Covenant Church in Oakland, Nebraska, he had one simple request for the church board: take care of his family.

The board understood the local cost of living. Hoden trusted them to fairly set his compensation—and they always did.

“We’ve never talked money for 14 years,” said Hoden, who has since retired.

When the church searched for Hoden’s successor, setting a fair salary was front and center.

“[We] start[ed] all over,” said Jim Goth, chairman of Salem Covenant. “[We had] no idea what the starting salary for a new pastor should be.”

Salem Covenant’s situation was not unique. Many churches face this challenge. To help, Church Law & Tax asked financial experts and church leaders what boards and finance committees need to know about setting fair and responsible compensation for pastors.

Start with the Big Picture

Dan Busby, former president and CEO of the Evangelical Council for Financial Accountability (ECFA), said churches must first assess:
  • The church’s overall budget
  • Cost of living in the community
  • The goals and vision of the church’s ministry

With that information, churches can create a compensation philosophy tailored to their context.

“How do we compensate the pastor so that they want to stay and so that they are not stressed out every minute?” Busby asked.

The goal: Let pastors focus on ministry—not on how to pay their bills.

Research Matters: Gather the Right Data

Churches should collect compensation data from:
  • Similar-sized local congregations
  • Community leaders in non-ministry roles
  • Denominational and national salary surveys

➡️ Visit ChurchSalary for current data based on education, experience, church income, setting, and more.

This research is especially valuable for small churches, where tight budgets can lead to underpaying staff.

“The challenge is whether the church can identify enough money to adequately compensate a pastor,” Busby said.

Learn from Other Churches

At Seven Mile Road Church in the Boston area, compensation decisions are informed by:
  • External compensation consultants
  • A committee of lay leaders
  • Local cost of living data
  • The financial maturity of new church plants

“We want to be generous, to be good stewards, and to be able to set people up to stay over the long term,” said Justin Gottlieb, who served as the church’s executive pastor before later becoming its lead pastor.

Stan Reiff, a former partner at national nonprofit accounting firm CapinCrouse, suggested that compensation also reflect the congregation’s income levels.

“A rule of thumb is that you probably shouldn’t have the pastor paid more than the 80th percentile of your congregation,” Reiff said.

Elaine Sommerville, a CPA and senior editorial advisor for Church Law & Tax, emphasizes the importance of reasonable compensation under IRS rules.

Key guidelines:
  • Churches must document how they determine compensation.
  • Compensation must reflect the value of the pastor’s work.
  • The IRS is more concerned about overpaying than underpaying.

“If a pastor’s job is worth a maximum of $100,000 and the church pays $120,000, that can cause problems,” Sommerville warned.

Be Actively Involved in the Process

At Maury City First Baptist Church in Tennessee, deacons set the pastor’s salary.

“We looked at our budget, talked to our local Baptist association, and negotiated with our new pastor,” said deacon chair Mike Gilliland.

Churches should consider:
  • Salary
  • Housing allowance
  • Vehicle, book, and education allowances
  • Insurance and retirement contributions

Don’t assume the pastor should determine how to divide the package. Churches must approve and document each part, including:
  • Housing allowances
  • Health benefits
  • Reimbursement processes

At Seven Mile, pastors submit housing allowance forms, which are reviewed and approved by a compensation committee.

Health Insurance: A Common Challenge

Churches handle insurance in various ways:
  • Some use denominational health plans.
  • Others purchase group or individual policies.
  • Some, like Salem Covenant, reimburse for out-of-pocket expenses.

⚠️ Caution: Simply giving pastors a cash equivalent for insurance can cause tax issues for all staff.

“It ruins the tax benefits for the rest of the staff,” Sommerville warned.

Don’t Miss These Important Details

Here are other key issues to keep in mind:

1. Social Security
  • Ministers do not pay FICA taxes—they pay self-employment tax instead.
  • Churches cannot withhold and match FICA for ministers.

2. Expense Reimbursements
  • Approved, receipt-based reimbursements (e.g., mileage, books) are tax-free.
  • Lump-sum allowances without receipts are taxable.

3. Recordkeeping
  • Keep detailed meeting minutes on compensation decisions.
  • Document housing allowances and reimbursable expenses.

4. Ask for Help
  • Use denominational guidance and compensation surveys.
  • Consult nonprofit tax attorneys or financial experts.

5. Pension Contributions
  • Only taxable compensation can be used for pension calculations.
  • Don’t include housing allowances unless permitted—and be careful not to exceed IRS limits.

“If a pastor designates 100% of salary as housing allowance, they’ve removed their wage base for retirement contributions,” Sommerville explained.

6. Liability for Overpayment
  • Board and finance committee members can be personally liable for excessive compensation.
  • The IRS may impose penalties of 225 percent of the excess amount.

Every Pastor Needs an Advocate

Compensation can be awkward for pastors to discuss directly.

Busby suggested that pastors need someone on the board to represent them:

“Every pastor needs a champion, someone who understands their situation and who can advocate for them.”

This advocate should:
  • Have the pastor’s trust
  • Be respected by the board

We’ve used a combination of AI and human review to make this content easier to read and understand.
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Navigating ADA Compliance for Churches: Avoiding Disability Discrimination

Understand the ADA’s impact on churches, from legal obligations to reasonable accommodations. Avoid common pitfalls, ensure fair treatment, and align practices with biblical principles and the law.

Steven Adamian
Bio

Last Reviewed: May 22, 2025

A church office manager’s job performance was declining. She took frequent days off for doctor’s appointments. When her supervisor confronted her, she admitted she was struggling with depression and life circumstances. The supervisor warned that improvement was needed to avoid termination.

Over time, her performance worsened, and she took more leave. She eventually emailed a doctor’s note requesting four weeks off to recover from depression. The church’s business administrator worried that the office could not function without her and terminated her the next day for poor performance.

The employee sued for disability discrimination and failure to accommodate her chronic depression. The church leaders were surprised, believing they didn’t know she was disabled. However, even without actual knowledge of the disability, liability could exist. Where did the church go wrong?

Disability discrimination is one of the most litigated areas of employment law today.
Key facts:
  • In 2016, about one-third of all discrimination charges filed with the EEOC were disability-related.
  • Disability claims ranked second only to race-related claims.

In many cases, lawsuits arise not from intentional discrimination, but from employers’ lack of understanding of their legal obligations.

Below is a guide to those obligations and the landmines churches must avoid.

How the ADA May Apply to Your Church

Under the federal Americans with Disabilities Act (ADA), churches may be required to comply if:
  1. They have 15 or more employees, and
  2. They affect interstate commerce.

Employee Threshold:
  • A church counts as having 15 employees if it maintains 15 or more employees on payroll for each working day across 20 or more weeks in the current or previous year.

Interstate Commerce:
  • Minimal activities like online communications, online purchases, hiring across state lines, or receiving out-of-state donations may be enough.
  • Always consult legal counsel before assuming the ADA doesn’t apply.

Religious Protections:
  • The “ministerial exception” allows dismissals of discrimination claims if the employee is classified as a minister (Hosanna-Tabor v. EEOC).
  • Churches may also require employees to adhere to religious tenets.
  • However, outside of ministers, churches cannot discriminate against otherwise qualified disabled applicants or employees.

Learn more about how the ministerial exception may—or may not—apply to church employees.

Common ADA Compliance Landmines

Landmine 1: Obligations Go Beyond Not Discriminating

The ADA does not only prohibit discrimination. It also requires:
  • Providing reasonable accommodations for disabilities.
  • Engaging in a good-faith interactive process to find accommodations.

Failure to meet these duties can lead to costly lawsuits, including potential punitive damages and attorney’s fees.

Landmine 2: Misunderstanding What “Disability” Means

Under the ADA, “disability” includes:
  1. A physical or mental impairment that substantially limits a major life activity.
  2. A record of such impairment.
  3. Being regarded as having such an impairment.

Common qualifying impairments include:
  • Major depressive disorder
  • Bipolar disorder
  • Post-traumatic stress disorder (PTSD)
  • Obsessive-compulsive disorder (OCD)
  • Autism
  • Cancer
  • Diabetes

“Major life activities” include walking, speaking, learning, reading, working, and more.

In the Office Manager’s Case:
  • Her depression and request for medical leave likely qualified as a disability.
  • Even if the church claimed ignorance, she could argue the disability was obvious—or that the church regarded her as disabled.

“Regarded as” disabled individuals are protected, even if no substantial limitation exists.
Minor, transitory conditions lasting six months or less are an exception.

Landmine 3: Failure to Recognize Reasonable Accommodation

Even if performance issues exist, churches must ask:
Can the employee perform essential job functions with reasonable accommodation?

Examples of Reasonable Accommodations:
  • Temporary unpaid medical leave
  • Modified work schedules
  • Facility accessibility modifications

In the Office Manager’s Case:
The office manager could argue that four weeks of leave was a reasonable accommodation. The church should have engaged in dialogue to evaluate this request.

Landmine 4: Discrimination Isn’t Limited to Termination

Disability discrimination also covers:
  • Hiring
  • Promotion
  • Training
  • Job assignments
  • Compensation
  • Benefits
  • Work conditions
  • Recruitment
  • Leave

Important:
Discrimination can be found even without termination—such as reducing hours or demoting an employee.

Landmine 5: Retaliation Risks

Retaliation claims are separate from discrimination claims.
  • Retaliation occurs if an employer punishes an employee for requesting an accommodation.
  • An employee does not have to prove an actual disability to succeed on a retaliation claim.

In the Office Manager’s Case:
Firing the office manager one day after her leave request creates a strong appearance of retaliation.

Landmine 6: Neglecting to Provide Reasonable Accommodation

Churches must accommodate unless they can prove “undue hardship.”

Examples of accommodations:
  • Facility modifications
  • Modified schedules
  • Temporary unpaid medical leave

Note:
The ADA notes:

(A)n individual must have, have a record of, or be regarded as having a substantial, as opposed to a minor, impairment. A substantial impairment is one that significantly limits or restricts a major life activity such as hearing, seeing, speaking, breathing, performing manual tasks, walking, caring for oneself, learning or working.

Landmine 7: Proving Undue Hardship

Claiming “undue hardship” requires proof, not assumption.
Factors considered:
  • Cost of the accommodation
  • Impact on operations
  • Size and financial resources

In the Office Manager’s Case:
The church presumed four weeks of leave was too disruptive without performing a proper hardship analysis.

Landmine 8: Ignoring the Good-Faith Interactive Process

When the need for accommodation becomes known, churches must:
  1. Open a dialogue with the employee.
  2. Explore possible accommodations in good faith.
  3. Document all efforts and communications.

In the Office Manager’s Case:
The church failed to engage in this process before terminating the office manager.

Landmine 9: Failing to Assess and Document Accommodations

Employers must:
  • Analyze job duties.
  • Consult with the employee.
  • Explore potential accommodations.
  • Document all steps taken.

Good documentation protects churches in case of litigation.

Landmine 10: Confusing the ADA with the FMLA

If an employee’s situation also falls under federal Family and Medical Leave Act (FMLA) protections, do not assume that the ADA does not apply once any FMLA protections expire.

Key Point:
  • The ADA may require additional leave beyond the 12 weeks guaranteed by FMLA.

Learn more about the FMLA and its application to churches.

Landmine 11: Don’t forget state law

Many states have adopted disability discrimination laws, too, and these sometimes offer broader protections than the federal law.

Key Point:
  • If the state where your church is located offers broader protections than the federal ADA, and your church’s situation falls under the state law’s coverage, it must comply with those broader protections.
  • If a state law covers less than the federal ADA, or no state law exists, and the federal ADA applies to your church, then your church must comply with the federal ADA.

Conclusion

Navigating ADA requirements can be challenging—even Fortune 500 companies struggle.
However, churches can protect themselves by:
  • Training a designated ADA coordinator.
  • Establishing clear accommodation policies.
  • Consulting with employment attorneys early.

Above all, following the biblical commandment to “love thy neighbor” can help prevent many legal disputes.

What If the ADA Doesn’t Apply to Your Church?

Even if your church falls below the 15-employee threshold:
  • Consider following the spirit of the ADA.
  • How you treat disabled employees affects your witness to the broader community.
  • Compassionate, good-faith treatment reflects Christ’s love—and helps avoid perceptions that secular employers are more caring.

Tip:
If adopting ADA-like practices voluntarily, document in your employee handbook that you are not waiving any legal protections.

We’ve used a combination of AI and human review to make this content easier to read and understand.
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Why You Should Remove Certain Reports from Your Meeting Agenda

And how to find which ones don’t need to be presented.

Sarah E. Merkle, Attorney
Bio

You’ve most likely been in meetings that drag on forever because of unnecessary committee reports. There is good news straight from the parliamentary procedure powers that be: you do not have to include “Time-Wasting Committee Reports” on your meeting agenda.

How is “Time-Wasting Committee Report” defined?

A “Time-Wasting Committee Report” is given dedicated space on the agenda to describe a committee’s activities, even though the committee doesn’t have any items to present for action.

You don’t need Robert’s Rules to tell you these reports are eating up precious minutes during meetings. But parliamentary procedure can give guidance on how to tactfully, responsibly pare down the unnecessary verbal reports.

Steps to Save Time

The first step to remove time-wasting committee reports from the agenda is to ask each committee to submit an official written report and a completed committee activities form at least one day prior to when staff prints the agenda and meeting materials.

The committee activities form is a one-page summary of who’s been doing what (recently). The form is simple to fill out and only asks the committee to state the following information:
  • Committee name
  • List of committee members
  • Summary of committee activities since the last meeting of the entire group
  • List of action items for the entire group

Simply put, the Committee Activities Form is an at-a-glance method of determining which committees need a place on the agenda—and it simultaneously functions as a method of seeing which committees are actually functioning.

Once you have a Committee Activities Form for each committee, the second step to removing time-wasting committee reports from the agenda is to review the forms and give dedicated space on the agenda only to committees that have actions items to present to the entire group.

The rest of the reports should be printed for distribution at the meeting (or loaded to an internal website) so members can read them on their own time. Similarly, at the meeting, the committees that are placed on the agenda can simply rise and present the action items they’ve listed, leaving the rest of the report to be read later at members’ leisure.

One Final Point of Clarification

Even without any action items to present for a group decision, reports of committee activity are still important. My goal is certainly not to diminish the good, hard work that committees perform for any well-functioning organization. Sometimes active committees do need to be on the agenda, even without any action items: especially when they have vital information to communicate. But the status quo in many organizations is to allow all committees time to report, with little thought for the effect reports have on the length of the meeting and the valuable time of dedicated members.

Before your next meeting, give some thought to your agenda and consider whether you can do just fine without a verbal presentation from every committee.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
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Should We Make a Bargain Sale of Church Property to the Pastor?

This action could create taxable income in the amount by which the property’s fair market value exceeds the bargain sale price.

Richard R. Hammar, Attorney, CPA
Bio

Last Reviewed: February 12, 2024

Q: Our pastor will soon retire after 30 years of service to our church. The pastor and his wife have resided in our church parsonage for all of these years, and the church board would like to sell the parsonage to the pastor at half of its market value as a retirement gift in recognition of his services.

Some board members believe that the difference between the market value of the parsonage and the sales price must be reported as taxable income by the church on the pastor’s W-2, but others disagree. How should we handle this?

Pick up a copy of the 2025 Church & Clergy Tax Guide today, or, upgrade to an advantage membership and receive a copy for free, along with a 20% discount off all future purchases!

If a church allows an employee to buy church property at less than fair market value, the employee ordinarily realizes taxable income in the amount by which the property’s fair market value exceeds the bargain sale price (Treas. Reg. 1.61-2(d)(2)).

This assumes that the property is owned by the church debt-free, or that the church remains responsible for any indebtedness.

Before making a bargain sale of church property to an employee, a church must also consider whether the employee’s total compensation is unreasonable in amount. If it is, this may constitute prohibited inurement of a church asset to the personal benefit of a private individual in violation of one of the conditions for tax-exempt status listed in section 501(c)(3) of the tax code.

Such a sale also may also expose the retired minister and members of the church board to substantial excise taxes known as “intermediate sanctions.”

For these reasons, be sure to check with a tax professional before approving a bargain sale of church property to a church employee.

Adapted from the Church & Clergy Tax Guide.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Effective Fraud Prevention Strategies for Churches

Discover practical fraud prevention strategies to protect your church and maintain trust.

Bobby Ross Jr.
Bio

Last Reviewed: January 25, 2025

Nathan Salsbery is a partner and executive vice president with the accounting firm CapinCrouse. As the son of a pastor and the son-in-law of a retired FBI agent, it’s perhaps no surprise that he’s become an expert in forensic accounting and rooting out fraud in churches. We asked him to talk about his forensic accounting work and offer insights for identifying and preventing fraud in churches.

Effective Fraud Prevention Strategies for Churches

Fraud is a serious issue in many churches. Understanding fraud prevention in church operations is essential to protect funds, maintain trust, and reduce risks. Learn how to safeguard your church through effective practices and oversight.

Understanding Fraud and Embezzlement

Fraud: A broad term encompassing asset misappropriation, fraudulent reporting, and corruption. Embezzlement: A subset of fraud, involving asset misappropriation such as theft of cash or misuse of resources.

Common Types of Church Fraud
  • Asset Misappropriation: Stealing cash through offerings, checks, or reimbursements.
  • Skimming: Misappropriating non-offering revenues like daycare fees or event registrations.
  • Misuse of Credit Cards: Personal expenses charged to ministry accounts.

How Forensic Accounting Helps

Forensic accounting uses professional skills to uncover fraud. Experts analyze areas of risk, gather evidence, and help leadership decide on corrective actions. Findings may be used in litigation if necessary.

Fraud Risk Factors in Churches
  • High-trust environments with little oversight.
  • Centralized financial responsibilities with one individual.
  • Lack of financial acumen among leadership.

Best Practices for Fraud Prevention
  • Implement checks and balances with multiple people overseeing finances.
  • Train leadership and staff on financial controls.
  • Use secure methods for handling cash and tracking revenues.
  • Leverage affordable tools like cameras to monitor high-cash areas.
  • Send bank and credit card statements to a board member or elder for review.

FAQs

1. What are red flags for fraud in churches?

Unusual expenses, missing funds, or single-person control over finances are common red flags.

2. How can small churches prevent fraud?

Engage volunteers to oversee offerings, establish accountability, and review financial statements regularly.

3. Is forensic accounting necessary for fraud prevention?

While not required, it can help uncover fraud and provide evidence for legal actions if needed.

4. Why do churches face unique fraud risks?

High-trust environments and lack of financial oversight make churches vulnerable to fraud.

Final Thoughts

Fraud prevention in churches requires vigilance, proper controls, and clear oversight. By adopting robust policies and monitoring processes, churches can safeguard their resources and maintain the trust of their community. For more resources, visit Church Law & Tax.
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3 Ways Church Members Can Be Good Samaritans In a Disaster

What the Good Samaritan parable can teach us abut helping after hurricanes and other disasters.

Jamie D. Aten

“Good Samaritan” is a common term used to describe volunteers who go above and beyond to help after a disaster. There’s even a Good Samaritan law in every state to help protect uncompensated volunteers spontaneously providing aid in emergency situations.

The parable of the Good Samaritan, from which this term gets its name, is one of the most told and taught parables in the Bible. Found in the Gospel of Luke (Luke 10:25-37), it offers an example of how to love God, embrace strangers as neighbors, and help others in need.

A closer look at the Good Samaritan parable can provide inspiration and guidance for Christians seeking to help in the wake of disasters.

1. It’s not about you

Before volunteering, stop and ask yourself why you want to help. The telling of the Good Samaritan parable was sparked by an interaction Jesus had with an expert of the law. This expert wanted to know how to earn eternal life. Jesus redirected the conversation, shifting his thinking from “What’s in it for me?” to “How can I love God and others well?”

Help because of your faith, not to prove your faith.

Disaster relief is not about you. Volunteer to meet the needs of survivors, not to satisfy your own extrinsic needs (e.g., to be seen as a do-gooder). Make sure you are helping for the right reasons. Good reasons for wanting to help should be inwardly motivated: you want to help others for the sake of helping others. You want to help because you believe it’s the right thing to do.

2. Know your neighbor

Reach beyond your comfort zone; focus especially on helping underserved and vulnerable neighbors affected by hurricanes. Don’t cross to the other side of the road, like the priest or Levite, if you encounter someone in need whom you perceive to be different than yourself.

Disasters impact those with fewer social or economic resources more significantly. Because they have fewer resources at hand, it also makes recovery typically longer and more difficult.

Following the Good Samaritan’s example means broadening your notion of “neighbor” beyond shared geography and backgrounds.

You are called to show compassion to all people, regardless of religion, class, or difference—not just survivors you might easily identify with or relate to.

Reach out to help people living with major challenges: those in poverty, the medically fragile, the elderly, immigrants.

For example, some immigrants and refugees may live in fear of deportation, and as a result, they might not ask for the help they need to rebound.

Elderly people in high crime areas live in fear of being harmed and may not open their doors to people they don’t know, even if those people are trying to help them survive.

People living in poverty may not have the resources to evacuate and get to safety when that means paying for extra gas and a hotel.

3. Know how to love your neighbor

Empathize.

To love your neighbor in the wake of hurricanes, start by empathizing with what they are going through. When the Samaritan saw the injured man beaten by robbers, he connected with the man’s suffering. It’s common for disaster survivors to feel alone or isolated—like no one else understands their experience. Create space for them to lament what they have gone through.

Another way you can empathize with survivors is through prayer. As people of faith, we are called to pray for others, especially for those in need, and prayer is one of the most powerful ways we can help.

Meet basic needs.

The Good Samaritan took care of the man’s most immediate physical needs by bandaging his wounds, helping him to an inn, and taking care of him through the night.

Focus on attending to survivors’ most basic needs, like injuries, transportation, shelter, and safety.

Remember: Aid happens where needs meet resources.

Don’t assume you know the best way to help or what your neighbor needs.

Instead, ask how you can help and what your neighbor’s most immediate and tangible needs are—then take steps to try and help meet those needs.

Give financially.

Research has shown the vast majority of giving is done in the early phase of disaster response and often runs dry during later stages of recovery. Commit to supporting long-term assistance, as social and financial capital often dry up well before tangible signs of disaster recovery are evidenced.

The Good Samaritan gave two denarii to the innkeeper to help the man while he was gone. He informed the innkeeper of his plan to come back and cover expenses incurred in his absence.

Another way you can help like the Good Samaritan is to financially contribute to recovery efforts. Note that the Good Samaritan anticipated more resources were likely to be needed as time passed. Giving money now is one of the most effective ways you can help in the immediate aftermath of natural disasters.

Yes, giving a monetary donation can feel a bit sterile. Yet giving to those on the ground means your dollars will be utilized immediately and where they are most needed. To make sure your dollars go to work, give to established relief organizations and nonprofits.

Jamie Aten (@drjamieaten) is founder and executive director of the Humanitarian Disaster Institute at Wheaton College, Illinois, and author of the Disaster Ministry Handbook. In 2016 he received the FEMA Community Preparedness Champion award at the White House. Read more at jamieaten.com.

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Before a Hurricane Strikes: What You Can Do

Before a hurricane strikes, your church can take a variety of proactive steps to reduce and minimize the risk of damage.

Jamie D. Aten

Last Reviewed: September 10, 2024

Before a hurricane strikes, you can help prepare your church property in various ways to reduce and minimize disaster risk and damage.

The path of destruction and the fallout caused by disasters can be random. Despite planning and mitigating preparations, there may be times when no course of action could have prevented property damage.

There are other cases in which churches—seemingly miraculously—go unscathed or experience just minor damage.

Regardless, you should still take precautions where you can to enhance your property’s ability to weather adversity. You should prepare your church to the best of your abilities and resources, as though your church will be the one still standing after the storm. Doing so will better position your church to continue to minister to those around you once that storm passes.

Here are several strategies you can implement to help get your church property ready, as well a worksheet to help guide your preparedness efforts.

What to Do Before the Storm Strikes

The following steps are taken from a FEMA guide and are examples of easy-to-implement, low-to-no-cost mitigation steps.
  • Remove all debris from culverts, streams, and channels to allow the free flow of potential floodwaters.
  • Clean storm drains and gutters and remove debris from around the church.
  • Move shrubs and other landscaping away from the sides of the building.
  • Clear dead brush and grass from the property so that it won’t serve as fuel to spread fire.
  • Install cabinet locks.
  • Secure televisions, computers, or other heavy appliances and equipment with flexible straps.
  • Anchor bookshelves and large cabinets to walls.
  • Strap water heaters to walls.
  • Secure or remove items that could become projectiles in high winds.
  • Consider raising water heaters and other appliances to avoid flood damage.
  • Cover and board up windows.

Note: these steps are examples of ideal ways to prepare, but they should only be implemented if you have time to prepare before the disaster strikes. Don’t try them if doing so will put you or others in danger, and take evacuation notices seriously.

What to Do After a Hurricane Strikes

Though you may be anxious to see the condition of your property, do not return to it before local officials have determined the area is safe.

Carefully go around the outside and look for loose power lines, gas leaks, and structural damage. If there is any doubt about safety, have your facility inspected by a qualified building inspector or structural engineer prior to entering.

Once it is safe to enter your property, you should take any steps you can to prevent further loss or damage:
  • Do what you can safely do to attend to damages that, if left unaddressed, could lead to more significant losses.
  • If your roof was damaged but is still largely intact, you might have someone with construction experience from your congregation patch the damaged area with a tarp.
  • Be prepared for the fact that it may take the insurance company days, weeks, or even months before they can assess your damage.
  • As soon as you have phone access and have had a chance to check on your property, you should report a claim.
  • Ask your insurance agent for advice about what other steps you might take to help prevent damage.
  • Contact your insurance provider as soon as you can to get guidance regarding your policy.
  • Consider seeking volunteer help from an established disaster relief organization that’s skilled in building repair.

A Word of Caution

After major disasters, most people who come in to help repair damage mean well and truly want to help. Others, however—including fake companies—may respond in order to take advantage of people, including churches. One pastor I interviewed after Hurricane Katrina said that a “construction company” offered to repair their church roof, but they needed payment up front. Long story short: once the money exchanged hands, the construction company never returned. When the church tried to track down the company, they found out that the company didn’t really exist.

Property Preparedness Worksheet

Building Description

INSTRUCTIONS: Provide some basic building data by completing the line items below. The emphasis should be on information that may be helpful to your congregation leadership as well as outside sources, such as emergency services personnel.

Facility Features

Occupancy type (church, office building, etc.):

Total square footage:

Year built/date of most recent renovation:

Number of stories (is there a basement?):

Type of construction:

Insurance company:

Describe any unique features (inside or outside):

NOTE: Attach any floor plans of the facility at the end of the document.

Building Supplies and Safety

INSTRUCTIONS: Find (or purchase or ask others to donate) these items in your church building. Document where the items can be found and check to make sure they are working properly. Keep this list up to date to ensure resources remain available and are working properly.

Emergency Supplies and Equipment Locations:

  • Portable radios and extra batteries:

  • Emergency first-aid supplies:

  • Flashlights and extra batteries:

  • Stored drinking water:

  • Emergency (three-day) food supply:

  • Basic tool kit:

  • Fire alarm system:

  • Location of fire alarm:

    • Location of fire extinguishers:

    • If system monitored by outside agency, name and phone:

    • Sprinkler system (water flow valves and standpipes, including tamper alarms):

  • Exits: information on fire escapes (type and location):

  • Information on fire doors (if applicable):

Utility Shutoffs and Tools

  • Main gas valve:

  • Crescent wrench or gas shutoff tools:

  • Main water valve:

  • Electrical fuse box/circuit breaker:

  • Emergency or portable generator (if applicable):

Inventory of Neighborhood Resources

  1. Where can you rent or borrow a generator?

  2. Where is the nearest medical treatment facility? (Attach driving and walking directions.)

  3. Where is the nearest fire station?

  4. Where is the nearest police station?

  5. Where can you go for additional water?

  6. Where can you go for additional food supplies?

  7. Where can you go for additional medical supplies, medicines, and special equipment?

  8. Vital Records Checklist (may include but are not limited to):
  9. Articles of incorporation
  10. Artwork (e.g., stationery, logo)
  11. Blank checks and account information
  12. Board minutes and rosters
  13. Bylaws
  14. Computer passwords
  15. Contracts
  16. Diagram of building layout
  17. Donor records
  18. Emergency plan
  19. Financial statements (bank accounts, credit cards)
  20. Insurance information
  21. Inventory of organization equipment
  22. Leases/deeds
  23. Personnel records/payroll information
  24. Photographs of the facility and key equipment
  25. Tax exemption status certificate
  26. Vendor records
  27. Volunteer records
  28. Used with permission from Bloomington Public Health. L. Brodsky, M. Drews, K. Henslee, N. Kafumbe and M. Schweizer, “Ready, Set, Go! Faith Community Emergency Preparedness Toolkit.” Non-exclusive permission to photocopy for congregational disaster preparedness use is granted by Bloomingdale Public Health, 1800 West Old Shakopee Road, Bloomington, MN 55431, www.bloomingtonmn.gov
  29. Jamie D. Aten is founder and executive director of the Humanitarian Disaster Institute at Wheaton College, Illinois, and author of the Disaster Ministry Handbook . In 2016 he received the FEMA Community Preparedness Champion award at the White House. Follow him on Twitter @drjamieaten and jamieaten.com. Adapted from Disaster Ministry Handbook by Jamie D. Aten and David M. Boan. Copyright (c) 2016 by Jamie D. Aten and David M. Boan. Used by permission of InterVarsity Press, P.O. Box 1400, Downers Grove, IL 60515, USA, www.ivpress.com.
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How to Keep Your Church Board Meetings Short

The secret to making meetings brief and efficient.

Sarah E. Merkle, Attorney
Bio

No one likes sitting in a meeting any longer than necessary. So here’s the best kept secret for shortening a meeting: bypass debate on non-controversial motions.

Not all motions or topics need to be discussed. Sometimes—more often than you might think—members of a board, committee, or even a larger group are already in agreement. Why waste time with needless debate in that case? Save everyone’s energy, and simply put the matter to a vote.

To be clear, if your rules permit discussion on a motion, the presiding officer or president must allow it. But allowing it and explicitly asking “Is there any discussion?” are two different things.

There are two primary ways to bypass discussion on a motion while still technically “allowing” for it. Key point: both require the presiding officer or president to have a firm handle on the agenda and the topics set to come before the group.

Method 1

Use unanimous consent, also known as general consent. If a presiding officer knows in advance that an agenda item is entirely non-controversial (and some are), she should use unanimous consent to move directly to a vote on that topic.

For example, to take a unanimous consent vote on approving the previous meeting’s minutes, the presiding officer would say, “If there is no objection, the minutes are approved.” The alternative is to ask for a motion, second, and discussion on approving the minutes, and then to say, “All those in favor of approving the minutes say, ‘aye.’ . . . All those opposed say, ‘no.’” Do you see how the unanimous consent method saves time?

Of course, if the presiding officer is mistaken about the consensus, and a member does want to discuss the topic, that member can simply object by saying “I object” during the unanimous consent vote. This forces the presiding officer to ask for discussion and take a vote that seeks a response both from those in favor and those in opposition.

Method 2

Clarify who is in favor and who is opposed. In small groups, this happens by a show of hands. The presiding officer can simply ask, “Who would like to speak in favor of/opposition to this motion?”

When a presiding officer sees that the members who want to discuss are from only one side (pro or con), she should gauge the group’s interest in having a discussion at all. For example, she could say, “I see that the only members lining up for debate are in favor of the motion. Is there anyone who would like to speak in opposition? [Pause] If not, is there any objection to dispensing with discussion and moving directly to a vote?”

Sometimes a group will want to hear from everyone, even if they are all on one side of an issue, but more often than not the members will see the time-saving advantage of moving directly to a vote.

Bottom line: do your members a favor by ascertaining in advance which topics can be put to a vote without discussion. You’ll be surprised how quickly your meetings will move along!

Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
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Why Churches Need Workers’ Compensation Insurance for Staff and Volunteers

From mission trips to maintenance work, accidents happen. Learn why workers’ compensation insurance is crucial for churches.

Bob Smietana
Bio

Last Reviewed: January 31, 2025

Ministry can be a surprisingly hazardous profession.

Just ask Luke Trouten.

Back in 2010, Trouten, a youth pastor at Northwood Church in Maple Grove, Minnesota, was on a missions trip with junior high students when they decided to cool off at a local park.

Things went well till Trouten fell off a ledge and busted his leg.

“I ended up with some rods and screws and all kinds of things,” he said. “Didn’t walk for almost a year.”

Fortunately for Trouten, workers’ compensation covered all of his medical bills—including a couple of surgeries and a long hospital stay.

The process, at least as far as paperwork went, was fairly simple. The church’s office manager took care of contacting the insurance company. Once the company determined Trouten was working when he was injured, his bills were covered.

Accidents like Trouten’s aren’t that uncommon.

Staff and volunteers get hurt at church all the time, said Bill Mech, assistant vice president for health services and workers’ compensation at GuideOne Insurance, a company that specializes in insuring churches.

That’s in part because churches do a lot—from youth-group trips and kids programs to church work days and community concerts. And church staff can throw out their backs while picking up a box or volunteers can trip and fall, just like they do at any other workplace.

Then there’s the tendency for church staff and volunteers to do things themselves because finances are tight. So they may take a few more risks.

“There are a lot of times when a pastor gets up on a ladder and bad things happen,” Mech said.

Know your state’s rules

Workers’ compensation rules are set by each state. In many states—such as Illinois, Colorado, and Michigan—any organization with more than one staff person has to have workers’ compensation insurance. For the most part, churches are required to purchase it for their employees. A few states, like Texas, allow churches and other organizations to opt out of workers’ compensation. Also, most states draw a clear line between employees and volunteers, but a few, such as California, allow volunteers to be covered by workers’ compensation—more on this later. (To find workers’ compensation rules in each state, go to dol.gov.)

Still, there are advantages to having workers’ compensation insurance, even if it is not required, said Ryan Inzenga, an underwriting specialist for GuideOne.

“The injured worker can have their medical bills paid,” he said, “and the employer doesn’t have to worry about being sued.”

In general, the state laws that govern workers’ compensation prohibit employees from suing their employer if they are injured on the job, said Frank Sommerville, an attorney who specializes in legal issues facing churches and serves as an editorial advisor for Church Finance Today.

And churches are still responsible when an employee is injured, even if they don’t have workers’ compensation insurance.

“Even if a state allows churches to opt out, it’s probably not a good idea to do so,” said John A. Anthony, an attorney whose clients include churches, ministries, healthcare businesses, and physician practices. “Churches think if they do that, they are off the hook. But they are still responsible for what happens on their property and to their employees.”

Classify employees correctly

There are more than 600 classifications for employees. Not all position classifications are treated the same, either—roofers, for example, are more expensive to cover under workers’ compensation than office workers.

Sommerville said churches can run into trouble by misclassifying workers in order to save money on premiums. He knows of churches that classified maintenance staff as office workers, since it’s less expensive to insure them—only to be hit with thousands of dollars in penalties.

“That should not have happened in the first place,” he said.

Handling volunteers

Some states allow insurance companies to add an endorsement in their policies that includes volunteers.

GuideOne’s Inzenga and Mech are skeptical about that approach.

For one, volunteers aren’t really employees, they pointed out, and so trying to cover them through workers’ compensation is complicated.

Unlike employees, volunteers are not restricted to making workers’ compensation claims if they are injured, Sommerville said. So they may still sue a church, even if an endorsement is in place.

Further, if churches use an endorsement, said Inzenga and Mech, they would likely have to keep track of every volunteer, including logging each volunteer’s hours and duties performed. That’s because the price of workers’ compensation insurance is tied to the size of an organization’s payroll. And since volunteers aren’t paid, insurance carriers need to estimate the value of the labor done by volunteers.

“In some cases, the church could be facing a 50 percent increase in the cost of their coverage,” Mech said.

One alternative is to add an accident policy for volunteers, which would cover volunteers injured while working at the church, suggested the representatives of GuideOne.

Jeffrey Szalacinski, vice president of claims for Church Mutual Insurance Company, said a church’s general liability policy can cover volunteers, and churches can also purchase policies that specifically cover injuries to volunteers.

What about volunteer waivers?

Ron Smedley of California-based Employers Resource Associates believes that many churches have volunteers sign a waiver, agreeing to hold a church harmless if they get injured.

That approach may appear to be cost effective, he said, and some churches may feel they need to take that approach. But waivers can be challenged if someone is actually injured. And a waiver can create the perception that the church does not see their employees or volunteers as valuable.

In addition, as attorney Richard R. Hammar warns, waivers and releases often are viewed with disfavor by courts, and will not hold up when a situation involves gross negligence.

Pursuing prevention

Rather than leaning on some sort of waiver, Smedley believes churches should strive to provide some form of insurance for injured volunteers. Churches should also be proactive about preventing injuries in the first place.

Churches should designate someone to serve as volunteer coordinator and put together a volunteer handbook that includes safety rules and procedures. The handbook should also outline a plan for responding when an accident or injury happens. It’s a way to practice good stewardship, Smedley said, and to show care and concern for the well-being of volunteers.

The goal should be to prevent injuries—and to help people recover if they are injured, he said.

Having the right safety policies and insurance coverage helps create an environment that demonstrates the church’s messages that God loves and cares for his people, Smedley said.

Szalacinski also stressed that churches should be proactive with preventing injuries. An approaching big event or missions trip is a good time to go over a safety plan, he said. And insurance companies that work with churches publish guides for how churches can avoid or reduce risk.

Work closely with your agent

While churches need to be proactive about creating a safe environment for workers and volunteers, it’s very important that they also have the right insurance—just in case, Sommerville said.

“You are trying to keep your volunteers and your workers safe—but you also need the insurance in case bad things happen,” he stressed. “Because bad things can happen.”

In order to purchase the kind of insurance that’s best for your church, Sommerville said it’s crucial for a church to work closely with its insurance agent to audit its coverage. The more homework churches do, he said, the better price they’ll get.

Szalacinski recommended the same approach when exploring liability coverage for volunteers. And be sure to explain to your insurance agent all the different kinds of work that volunteers do at your church. The more your insurance agent understands about your church, the easier it will be to tailor a plan to meet your church’s needs and budget, he said.

Mech said most insurance companies have a minimum annual premium they charge, which can be as low as $500 to $1,000 for a smaller church. For a megachurch with many programs—such as a daycare, school, or camp—the premiums can reach six figures, he said.

If a church does have a workers’ compensation claim, their insurance may cost more. Mech said a claim in the vicinity of $5,000 can qualify for what’s known as an “eligibility rating,” and could cause rates to go up. It depends, in part, on the size of the church and how many claims are expected in a year.

Respond immediately to accidents

If an employee or a volunteer gets hurt, it’s important to respond immediately and also take the injury seriously, Anthony said.

“You’d be shocked at how often someone says they’re fine when an accident happens at church,” Anthony said. “And then it turns out they were injured and need to file a workers’ compensation or liability claim.”

If someone gets hurt at church, make sure they get immediate assistance, Szalacinksi stressed, then report any injuries to your insurance company as soon as possible.

“The earlier those claims are reported, the quicker a claims representative can provide guidance to the church and to the injured worker or volunteer,” he said.

Court cases offer insights into who qualifies for workers’ comp

Three kinds of people generally work at churches, said Inzenga. There are employees, volunteers, and then independent contractors or “casual labor.”

Employees are paid staff, like pastors or office workers—those who generally qualify for workers’ compensation. Volunteers aren’t paid for their work—though they can be reimbursed for expenses or receive gifts, like meals, from the church. Then there are independent contractors—those who are hired to mow the lawns, fix the air conditioning, or do other tasks.

And what about a missionary? If a missionary speaks at a church and gets a “love offering” or other honorarium, they’re unlikely to be treated as an employee if they get hurt.

Things are more complicated if a church supports a missionary in the field. If a missionary is funded by the church—and isn’t employed by a mission board or other agency—then the missionary is likely an employee and needs to be covered by workers’ compensation.

Sometimes categories overlap. And that can cause headaches, confusion, and lawsuits—if someone gets injured.

A case out of Pennsylvania

A small congregation, the church relied on volunteer members to take care of maintenance. Among them was Edwin Halvorson, who joined the church in the late 1980s. As a volunteer trustee, he did a number of tasks—painting a bathroom, changing light bulbs, and vacuuming rugs. Eventually the church paid him to cut the lawn.

After mowing the lawn one day, Halverson also trimmed some bushes and decided to burn the leftover brush. He set them on fire, after dousing the brush with gasoline. The flames got too high and burned Halvorson. He died as a result of his injuries.

His family claimed he was an employee of the church—because he was paid to cut the lawn and used the church’s equipment—and filed a workers’ compensation claim. A workers’ claim tribunal agreed with the claim. The church appealed and in 2006, the Pennsylvania Supreme Court ruled that because Halvorson was serving in his role as a volunteer trustee, he was not eligible for workers’ compensation benefits.

A case out of Kansas

A similar case occurred in Kansas, after a group of church volunteers decided to cut down trees on church property. They brought their own chainsaws. One of the volunteers, the son of a board member, volunteered to haul away the wood from the trees with his pickup.

A week later, the church’s pastor asked the same volunteer to get rid of the stumps from the trees that had been cut down. Unfortunately, he cut his hand with the chainsaw while working on the stumps and ended up with $50,000 in medical bills.

So he filed a workers’ compensation claim, arguing that the church’s pastor had set the time and date the work on the stumps would be done and that his father and the pastor had supervised the job. In addition, he was allowed to keep the wood from the trees—which he claimed was a form of payment or compensation.

The courts ruled that the volunteer was an independent contractor—rather than an employee—and wasn’t eligible for workers’ compensation.

A tool for ministry

Insurance is a tool for ministry—helping a church or an injured worker or volunteer get back to where they were before an accident occurred.

Northwood Church’s Trouten is grateful his church had the right workers’ compensation insurance.

Four years after he broke his leg, he got hurt again, this time during a church clean-up day. He and other church staff and volunteers had piled up some brush to burn. Trouten went inside to get a lighter to set it on fire.

While he was gone, one of the other workers dumped gasoline on the brush but didn’t tell him.

When he leaned over to light the fire, there was a huge fireball—landing Trouten back in the hospital with burns over 20 percent of his body.

Fortunately the burns weren’t too severe and workers’ compensation insurance paid his medical bills.

He still helps out during the annual work day at church—though he steers clear of fire.

“I do have a great anecdote to use when I preach about hell,” he said.
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