Many churches struggle with how best to record their financial transactions. Even the smallest of churches should get past manually recording financial information. Technology can speed things up and improve accuracy.
There are dozens of software packages, but many have more features than your church may need, can be difficult to use without extensive training, and are often quite expensive. If you want a basic, easy-to-use package at a reasonable price, you may settle on QuickBooks.
Some accountants cringe at the name QuickBooks. However, I believe that if you are aware of the possible shortcomings and create a couple of good processes, you can use this software package successfully within your church.
Six tips for QuickBooks success
Go “Pro.”
I recommend getting the Pro version of QuickBooks. There is little cost difference and the ability to export reports to a spreadsheet can be very useful for identifying trends and informing leaders.
Maintain a simple chart of accounts.
Only set up accounts you need and only add ones as you find it necessary. If you have used the program for a while, consider whether you should delete or merge any accounts.
Use class tracking for departmental and restricted activity.
This will minimize the number of revenue and expense accounts required and allow you to generate financial statements for individual ministry leaders and provide a good method for tracking donor-restricted activity.
Set a monthly closing date.
This helps prevent errors and minimizes the concerns some accountants have with the ability to change transactions easily in QuickBooks. It is not a fail-safe control, but it is helpful. Bank reconciliations are easily performed in QuickBooks. Setting the closing date should be done each month once the reconciliations are complete. To increase security, also use the password feature.
Turn on the audit trail.
A QuickBooks report can provide necessary information if you ever need to determine how a transaction was changed or which user performed a certain action. This helps bolster financial accountability.
Manage each new year well.
This is my favorite tip. Create a new income account called “Beginning Balance” (or something else recognizable). It allows you to carry over ending balances to the next year. You can record an entry as of January 1 each year crediting this income account for each class that has a balance to carry forward. The offsetting debit is also to this account, but in a class such as general, operations, or administration. The result is a net $0 on the profit and loss, but it shows the beginning balance at the top of the revenue section for each profit and loss by class, resulting in a true ending balance throughout the year. This is just a once-a-year entry, with no reversal required.
Remember, QuickBooks is a general ledger package. I believe it works best when that is all it is used for. You may consider a donor software solution or a church data management program to use in conjunction with QuickBooks.
Please be aware that I am neither endorsing nor encouraging the use of a particular program. I simply recognize the need for a low-cost, high-functioning option and many ministries may use QuickBooks to meet that need.
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.
Image: AdobeStock/ Iryna
Responding to Anonymous Allegations in Church
An unknown party seriously accuses a church leader. What should be done?
Many ministers have received anonymous letters. Some, such as those expressing criticism of a sermon or music, have little legal significance. But some accuse a staff member or volunteer of misconduct, and these messages may be legally significant depending on what they communicate and how they are handled.
Church leaders should consider the following points when deciding how to respond to anonymous letters that accuse someone of misconduct:
1. Ignoring anonymous letters
Some pastors adopt a policy of never reading anonymous letters, and some periodically inform the congregation of this policy. For some, this is a way of avoiding criticism. But for others it stems from a conviction that the views of persons who are unwilling to identify themselves are not worthy of consideration. But as noted below, such a response to anonymous letters may expose a pastor and church to liability.
Zimmerman, 2012 WL 2049493 (E.D.N.Y. 2012)
Several adult males (the “plaintiffs”) sued a private high school and members of the school board of trustees (the “defendants”), claiming they had been sexually molested by the school’s football coach, and that the defendants were legally responsible for these wrongful acts as a result of their inadequate and negligent response to numerous complaints of inappropriate sexual behavior by the coach.
The coach was employed by the school from 1966 through 1991. The plaintiffs alleged that in the 1970s the school’s principal received several anonymous letters accusing the coach of “doing terrible things to your students.” The principal threw out the letters and later testified that “unsigned complaints just should be tossed.”
The principal also received an anonymous phone call in which the caller reiterated language similar to that found in the letters, accusing the coach of “doing terrible things to our kids.” But, as in the case of the anonymous letters, he did nothing with this information and did not keep records of either the phone call or the letters in any way. The parties reached an out-of-court settlement in 2012 under which the school agreed to pay an undisclosed amount of damages.
This case illustrates the potential civil liability that churches face if pastors adopt a policy of ignoring all anonymous letters, including anonymous letters that contain serious accusations of misconduct by a church employee or volunteer that exposes others to potential harm.
Bernard v. East Stroudsburg University, 2014 WL 1454913 (M.D. Pa. 2014)
A state university was sued by several former students who alleged that they had been sexually harassed by a university administrator. In support of their claim, the students claimed that the university president had received several anonymous letters asserting sexually inappropriate behavior by the administrator with students, but failed to fully investigate these accusations or terminate his employment.
One letter made reference to the administrator’s sexual liaisons with students. Another noted that “people are disgusted with those that use their position to gain sexual favors from young people.” Another referred to the administrator as a “full fledged predator.”
The university had a policy of not accepting or acting on accusations “made solely through anonymous letters.” Nevertheless, because some of the anonymous letters alleged that the administrator had previously been arrested, the university asked campus police to check on prior arrests. No prior arrests or convictions were found. Nevertheless, some of the letters were turned over to the municipal police department and to the FBI.
The court concluded that the university’s response to the anonymous letters was adequate, and dismissed the students’ claim of sexual harassment. This case suggests that recipients of anonymous letters containing allegations of serious misconduct by a staff member may subject their employer to liability if they fail to respond to the allegations with a thorough investigation.
Melzer v. Board of Education, 196 F.Supp.2d 229 (E.D.N.Y. 2002)
Public school officials received an anonymous letter stating that a science teacher (whose identity was provided) was a member of the North American Man-Boy Love Association (NAMBLA). NAMBLA advocates the release of all convicted pedophiles, decriminalization of child pornography, and opposition to all attempts by the state to interfere with “consensual and non-coercive” sexual activity between men and minor boys. Upon receipt of this letter, school officials immediately launched an investigation which ultimately led to the teacher’s termination.
This case involved school officials who chose to investigate, rather than ignore, a serious accusation against a teacher. A duty to investigate accusations of misconduct in an anonymous letter is strongest when a failure to respond immediately with an investigation would place minors at risk of harm.
2. Negligence
Pastors who refuse to read anonymous letters containing accusations of misconduct may be guilty of negligence. Negligence is a legal term that simply means carelessness or failing to act with reasonable care under the circumstances. Negligence is more likely if a pastor ignores an anonymous letter that:
contains verifiable information; or
contains evidence of reliability, such as information demonstrating that the writer is familiar with facts that support his or her accusation.
The critical question is what kinds of evidence are sufficient to trigger a duty to investigate anonymous accusations of misconduct? Consider the following examples:
Example. A pastor receives an anonymous letter from a person who attended worship services the previous Sunday. Part of the letter includes: “I attended your church on Sunday for the first time, and was shocked to discover that your music pastor is a convicted child molester.” The pastor was not aware of any prior criminal behavior by the music pastor. He is not sure what to do. He considers discarding the letter. A better response would be to verify the letter’s central accusation—that the music pastor was previously convicted of child molestation. He accesses a state criminal records database and discovers that the music pastor was incarcerated for ten years for a prior incident of child molestation. The music pastor is terminated immediately.
Example. Same facts as the previous example, except the pastor elects to disregard the letter based on his policy of never reading anonymous letters. This response may expose the pastor, and church, to liability based on “negligent retention” should the music pastor sexually molest a minor on the church premises or during a church activity. Liability would be based on the church’s retention of the music pastor despite the anonymous letter’s allegation of a criminal record that easily could have been verified. This example demonstrates the potential legal risks associated with a policy of disregarding all anonymous letters.
Example. A pastor receives an anonymous letter claiming that the church’s youth pastor “engaged in inappropriate contact with a minor in a prior church.” Assume that this prior incident did not result in a criminal record that would be searchable and verifiable. Given the seriousness of an accusation of child abuse by a youth pastor, the church should investigate. While the prior incident did not result in a criminal conviction that would be verifiable by searching public records, the church could take the following steps that would help negate an allegation of negligence should the youth pastor engage in similar conduct in the future: (1) Interview the youth pastor and have him respond to the accusation. (2) If this was not done previously, obtain references from each church where the youth pastor previously worked in youth ministry as an employee or volunteer. (3) Conduct a criminal records check, and sex offender registry search, to uncover prior incidents that did result in criminal prosecution. Other precautions are summarized at the end of this article.
Example. A pastor receives an anonymous letter complaining about the music performed during worship services. Disregarding anonymous letters like this, that are critical of music and sermons, do not expose a church to any material risk since the pastor’s disregard of such letters does not expose anyone to a risk of injury.
Example. A pastor receives an anonymous letter claiming that “a registered child molester is attending the church’s worship services.” According to some courts, no duty to investigate arises when an anonymous letter is received containing no verifiable information (such as the identity of the sex offender), and no extrinsic evidence of reliability. If the identity of the sex offender had been revealed, the church could mitigate its risk by verifying the conviction using the national sex offender online registry, and instituting a conditional attendance agreement allowing the offender to attend under strict, specified conditions.
Example. A pastor receives an anonymous letter accusing the church’s bookkeeper of embezzling church funds. The alleged misconduct is not of such a nature as would place persons attending church services and activities at risk of injury. As a result, there probably are no adverse legal consequences should the letter be ignored. However, many would consider the investigation of such an accusation to be a moral imperative.
Example. A pastor receives an anonymous letter containing an accusation that a staff member has had her driver’s license revoked for reckless driving. The staff member often drives church vehicles on church business. This allegation involves behavior that could expose others to harm. A person’s driver’s license status can be easily verified by checking with the department of motor vehicles, a step a church should take. Based on my recommendations at the end of this article, the accusation should be investigated. If validated, the staff member must immediately be suspended from driving her own, or the church’s, vehicles on church business.
3. A child abuse reporting analogy
Every state has enacted a child abuse reporting law that requires persons designated as “mandatory reporters” to report abuse to civil authorities if they have actual knowledge or reasonable suspicion or belief that it has occurred.
Child abuse reporting laws can be helpful to church leaders in deciding how to respond to anonymous letters because the laws use the standard of reasonable suspicion or belief in triggering a duty to report. This is similar to my recommendations at the end of this article, which suggest that pastors have a duty to investigate anonymous accusations of misconduct if there is reliable and relevant evidence that creates a reasonable basis for the accusation.
State legislatures have struggled to define the threshold requirement of “reasonable suspicion or belief.” To illustrate, the California child abuse reporting law requires mandatory reporters to report abuse if they have “reasonable suspicion” that child abuse has occurred, and it defines reasonable suspicion as follows:
Reasonable suspicion means that it is objectively reasonable for a person to entertain a suspicion, based upon facts that could cause a reasonable person in a like position, drawing, when appropriate, on his or her training and experience, to suspect child abuse or neglect. “Reasonable suspicion” does not require certainty that child abuse or neglect has occurred nor does it require a specific medical indication of child abuse or neglect; any “reasonable suspicion” is sufficient.
Such definitions provide little clarification, and this has left to the courts the task of defining reasonable suspicion or belief. This is a vital task since it will determine whether a mandatory reporter has a legal duty to report child abuse to the agency designated by the reporting statute.
“Reasonable suspicion or belief” that a child has been abused not only imposes upon mandatory reporters a legal duty to report, but it also serves as a potentially useful analogy for pastors to consider in deciding whether to respond to anonymous letters accusing an employee or volunteer of misconduct. As noted above, pastors who elect to ignore an anonymous letter accusing a staff member of misconduct may be liable on the basis of negligence or negligent retention if the staff member injures another person and, in the exercise of reasonable care, the allegation should have been investigated. This makes legislative and judicial clarification of “reasonable suspicion or belief” relevant in assessing an appropriate response to anonymous accusations.
Key point. If the circumstances surrounding an allegation of child abuse in an anonymous letter create a reasonable belief that it occurred, then: (1) the allegation should not be ignored on the ground that it was contained in an anonymous letter, and (2) it must be reported to the child abuse hotline by the recipient if the recipient is a mandatory reporter under state law.
Some of the leading cases interpreting “reasonable suspicion or belief” are summarized below:
In re O.K., 2015 WL 655106 (Ill. App. 2015). A state social services agency received several anonymous letters alleging incidents of abuse against children while in their foster parents’ care. The court noted that “as the allegations in these letters had not been verified, the state sought more time to determine the safety of the children while in the parents’ care.” This case suggests that an anonymous letter by itself, without any corroborating evidence, does not constitute reasonable suspicion or belief that child abuse has occurred, and so no duty to report arises.
Croft v. Westmoreland County, 103 F.3d 1123 (3d Cir. 1997).A federal appeals court ruled that a child welfare agency must independently corroborate reports of child abuse from an anonymous informant in order to separate a child and parent. In other words, an allegation of child abuse in an anonymous letter does not, by itself and without any additional corroborating evidence, constitute reasonable suspicion or belief triggering a duty to report.
Kraynak v. Youngstown City School District, 889 N.E.2d 528 (Ohio 2008). A fourth-grade teacher asked her students to keep a creative-writing journal. Once or twice a week, the teacher instructed students to make entries in their journal. The journals were not turned in, and were only spot-read by the teacher because they were used only to practice writing. One student wrote entries in her journal that mentioned physical abuse by her mother. The teacher read this entry, but did not report the abuse to the child abuse hotline because the student “didn’t take this journal entry very seriously. He wasn’t crying. He wasn’t upset. He wasn’t scared. He wasn’t emotionally upset about it.” The student’s father later sued the school as a result of the teacher’s failure to report the abuse. A jury returned a verdict in favor of the school, concluding that the preponderance of the evidence did not establish that the teacher knew or suspected that the student had suffered or faced abuse, and therefore she had no duty to report.
On appeal, the Ohio Supreme Court agreed that the school was not liable. It noted that the child abuse reporting law requires mandatory reporters who “know or suspect that a child under eighteen years of age … has suffered or faces a threat of suffering any physical or mental [abuse] that reasonably indicates abuse or neglect of the child, shall immediately report that knowledge or suspicion to the public children services agency or a municipal or county peace officer in the county in which the child resides or in which the abuse or neglect is occurring or has occurred.”
The Court concluded that the reporting statute established a “subjective standard” in deciding whether a person was required to report:
The statute asks whether the school employee knows of child abuse or suspects child abuse. The statute does not ask whether the school employee “knew or should have known” or “suspected or should have suspected” or “knew or had reasonable cause to suspect” that a child had been abused. Rather [it] simply asks whether the school employee “knows or suspects” that there has been child abuse.
The Court noted that the reporting statute had been amended following the filing of the lawsuit in this case: “The new version of the statute changes the standard from ‘knows or suspects’ (a subjective standard) to ‘knows, or has reasonable cause to suspect based on facts that would cause a reasonable person in a similar position to suspect,’ a clearly objective standard. Accordingly, we hold that pursuant to [the prior statute] in determining whether a person knows of or suspects child abuse for purposes of reporting it to the proper authorities, the standard is subjective.”
Keisling v. Keisling, 196 S.W.3d 703 (Tenn. App. 2005). Following a divorce, the former wife filed a petition to restrict the former husband’s visitation rights with the couple’s minor child on the ground that the father had sexually molested the child. A Tennessee appeals court observed:
Accusations of child sexual abuse by one parent against the other parent presents one of the most difficult issues faced by a trial court. Suspicion of such abuse must be taken seriously and [was] investigated thoroughly, for the consequences to the child of allowing any abuse to continue are grave. However, mistakenly concluding that a parent has abused his child, when in fact there has been no abuse, has serious consequences as well, including the almost-certain destruction of the parent-child relationship and disgrace to the accused parent. In addition, determining whether abuse has occurred can be enormously difficult; there is frequently a paucity of physical evidence, and the alleged child victim may be unable to accurately relate pertinent events. Finally, even investigating the accusation is delicate; the suggestibility of the alleged victim is almost invariably an issue, and heavy-handed or repetitive interrogation or physical examination can itself inflict long-lasting trauma on a child. In this case, it is clear that the accusations of sexual abuse of the parties’ daughters were taken seriously and investigated thoroughly.
But the court cautioned that “in a case such as this, any concern about reporting allegations of child sexual abuse must be balanced with the awareness that false accusations of such abuse can be a reprehensible tool against an ex-spouse.”
This case suggests that anonymous accusations of misconduct should be investigated rather than ignored if the alleged misconduct is serious in nature and exposes others to possible harm. However, a duty to report must be balanced against facts suggesting a motive to lie.
O’Heron v. Blaney, 583 S.E.2d 834 (Ga. 2003). The Georgia Supreme Court explained the “reasonable cause” standard as follows:
Once a reporter has reasonable cause to suspect child abuse has occurred, she must report it or face criminal penalties. The trigger for the duty to report is “reasonable cause to believe,” which requires an objective analysis. The relevant question is whether the information available at the time would lead a reasonable person in the position of the reporter to suspect abuse.
4. A “probable cause” analogy
The Fourth Amendment to the United States Constitution protects “the people” from “unreasonable searches and seizures,” also providing that “no warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing … the persons or things to be seized.”
The courts frequently are called upon to determine if law enforcement personnel have probable cause of criminal behavior to justify the issuance of a warrant. In general, probable cause to arrest exists “when the officers have knowledge or reasonably trustworthy information of facts and circumstances that are sufficient to warrant a person of reasonable caution in the belief that the person to be arrested has committed or is committing a crime.” Weyant v. Okst, 101 F.3d 845 (2d Cir.1996).
Several courts have addressed the question of whether anonymous letters and tips can constitute probable cause. The United States Supreme Court has ruled that an anonymous letter can provide the probable cause needed for a search warrant. Illinois v. Gates, 462 U.S. 213 (1983). The Court noted:
[Anonymous] tips, particularly when supplemented by independent police investigation, frequently contribute to the solution of otherwise “perfect crimes.” While a conscientious assessment of the basis for crediting such tips is required by the Fourth Amendment, a standard that leaves virtually no place for anonymous citizen informants is not.
Part of the Court’s reasoning was that the anonymous letter contained a range of details relating “not just to easily obtained facts and conditions existing at the time of the letter, but to future actions of third parties ordinarily not easily predicted.” In other words, there were “indicia of reliability” that strengthened the value of the anonymous letter.
How is this relevant to a pastor’s response to an anonymous letter? The argument could be made that just as anonymous letters, when combined with “indicia of reliability,” can constitute probable cause supporting an arrest or search warrant, so too may the credibility of an anonymous letter received by a pastor be enhanced by additional information in the letter—information that may create a reasonable basis for an accusation warranting further investigation.
Example. A pastor receives an anonymous letter accusing a staff member of misconduct. The letter also contains references to facts that are not widely known. The pastor has a policy of never reading anonymous letters, and so the letter is ignored. The letter, along with the “indicia of reliability,” would likely constitute probable cause supporting a search or arrest. The staff member engages in future misconduct that injures a member of the congregation. The victim sues the church, claiming that it is responsible for her injuries on the basis of negligent retention of the staff member. To bolster her claim, she asserts that the anonymous letter, together with the “indicia of reliability,” would constitute probable cause supporting a warrant to arrest. If the evidence constitutes probable cause to arrest, then it may suggest that the pastor had a duty to investigate the anonymous letter’s accusation. While certainly not conclusive, this argument may support the victim’s negligent retention claim.
Conclusion
Anonymous letters containing accusations of misconduct by staff members or volunteers present pastors with a difficult decision. This is especially true for anonymous letters containing no verifiable information supporting an accusation. Few, if any, courts have found churches liable on the basis of a pastor’s disregard of anonymous accusations of misconduct, but, as noted in this article, it is possible that a church could be found liable in such cases based on negligent retention.
The best practice, which will reduce legal risk and potential future harm to innocent victims, is to investigate anonymous accusations of misconduct that:
(1) are verifiable by available public records (i.e., criminal records, sex offender registry); or
(2) contain “indicia of reliability” based on:
information provided by references; information provided by the victim identified in the anonymous letter, or by other persons identified in the letter who may have information about the accusation; information provided by former churches where the accused previously served as an employee or volunteer; information provided by law enforcement officers who may have investigated the individual in the past; information provided by potential witnesses having relevant information regarding the accusation; other relevant evidence, such as the writer’s knowledge of facts suggesting personal knowledge of the information shared in the anonymous letter; or
(3) involve misconduct of such a nature as would place persons attending church services and activities at risk of injury. The duty to investigate is greatest when an anonymous letter accuses an employee or volunteer of behavior making him or her a risk of harm to minors.
Key point. Anonymous letters containing unverifiable allegations of misconduct by named individuals are the most troublesome. As we have seen, such accusations generally are insufficient to trigger a duty to report child abuse, or serve as probable cause for an arrest, and these analogies suggest that pastors have no legal duty to independently investigate such accusations and therefore they, and their church, cannot be liable on the basis of negligent retention for future harm caused by the accused. That may be true in a legal sense, but there is also a moral dimension to be considered. Jesus’ harshest words were directed at those who “cause one of these little ones who believe in me to stumble.” These words will persuade many pastors to investigate anonymous accusations of sexual misconduct by an employee or volunteer involving a minor victim, whether the accusations are verifiable or not.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Adobe/touseef
Six Questions to Ask When Choosing a Church Management System
Six questions every church should ask when thinking about buying a church management system.
Justin Deeter
Last Reviewed: July 30, 2024
A Church Management System (CMS) is the administrative hub of a church. It stores pertinent information, including membership data, attendance trends, group health, and giving records. Today, there are more options than ever for church leaders to choose from. Here are six questions to ask when looking for a Church Management System for your church.
1. Is It Cloud Ready?
When choosing a CMS, the ability to have your database in the cloud is an important feature to consider. Without cloud services, you can only access your CMS at the physical site of the church. A cloud-based CMS allows you to put information in the hands of key leaders whether they are on site at the church, at home, or half-way around the world.
2. Is It Mobile Ready?
Ask if the CMS has mobile apps developed that are actively supported. Apps allow church leaders to reach into their pockets and with a few taps get the data that they need.
3. Is It User Friendly?
Is the interface cumbersome and difficult, confusing and overwhelming? What about frustrating and off-putting? Many companies allow you to trial their apps and programs for a period of time, which allows you to assess whether the CMS is user-friendly for your volunteers and leaders.
4. Is It Full of Features?
What are your needs as a church? Find a CMS that matches your church’s needs, but also one that your church can grow into as well. Does the developer regularly update the apps with new features? Do you need a CMS that manages group communication and attendance? What about children’s check-in? Online giving? Know the features you need before you go CMS shopping.
5. Is It Reasonably Priced?
An expensive CMS that is used is better than a cheap CMS that isn’t used. Check the pricing structure of each CMS you are considering. Many companies now offer a monthly service fee, which allows you to jump into the CMS with minimal upfront investment. In addition, most developers offer a scalable pricing model depending on the volume of your church’s needs.
6. Is It Actively Supported?
If you have problems with the CMS, how will those problems be fixed? How is their customer support? Does the developer offer any types of training that will help you educate staff and volunteers on how to use it? Everyone encounters snags at some point. When you do, you’ll want a company that’s quick to respond and help you in your moment of need.
Justin Deeter is the founding and lead pastor of Redemption Church in Wilson, North Carolina. He was formerly senior pastor of Forest Hills Baptist Church in Wilson, North Carolina. Find him at JustinDeeter.comand @JustinDeeter.
For information on church IT strategies and solutions, check out the latest version ofChurch IT by Nick B. Nicholaou.
Image: Adobe/IBEX Media
Matching Grants vs. Challenge Grants
Why one is better in church fundraising.
Christopher J. Kopka
Matching grants are a reasonably common tool used in churches, particularly for church planting, as well as ministries and nonprofit organizations. However, a small body of research strongly suggests that challenge grants work more effectively than matching grants in terms of overall fundraising.
Key differences
What’s the difference? A typical matching grant works along the following lines: For every dollar you give, another partner organization/foundation/donor “matches” your dollar with another dollar (or $0.50). According to research, a matching grant is at least somewhat more motivating than a direct appeal for funds.
A challenge grant is subtly distinct from a matching grant, and is often worded along the following lines: “If we raise $X in total, then we’ll also get $Y from some other source.” Or sometimes, “If we get X number of new donors, then we’ll also get $Y from some other source.” A challenge grant is, according to the findings, more motivating than a matching grant.
Challenge grants more compelling?
The fascinating question is, why are challenge grants more compelling than matching grants? My survey of the research has not returned a satisfactory answer. My hunch is that many people have an innate sense both of competition (“I want to meet the challenge”) and of cooperation (“If we do this together, we’ll achieve such-and-such goal”).
In other words, I think challenge grants are better able to bring out the best in us, both cooperatively and competitively. Future research, I’m sure, will shed more light on the validity of my hunch.
There’s a further consideration. Most matching grants I’ve heard about for church planting encourage the planter to go after bigger dollars, rather than a bigger pool of donors (even if those donors represent relatively small amounts).
“If you raise X amount for your church, we’ll match with Y amount.” The practical problem with this approach is obvious: If you lose even one high-ticket donor, you’re in trouble.
Wise to have large base of small donors
Contrast this with the approach of college alumni associations, which reveal the wisdom and long-term sustainability of amassing a large base of small, individual donors. Over time, a few of them will mature into large-dollar donors. But even if most don’t, the natural ebb and flow of donor rolls will have little effect on the association’s ability to meet its fundraising goals, based as it is on volume, not mass.
Ministries—particularly church planters operating under matching grants—tend to do just the opposite. They focus on relatively few, high-ticket donors, at the expense of growing their individual donor base. I strongly believe granting organizations should test a challenge grant structure that matches “sending church dollars” to benchmark growth of the church plant’s donor base. My hypothesis is that, compared to matching grants, the challenge to grow a broad donor base will result in more economically stable and sustainable ministries over the long haul.
Adapted from The Habit of Asking by Christopher J. Kopka. Copyright 2016 by Chris J. Kopka. Used with permission.
Christopher Kopka conducts Habit of Asking workshops for churches. He is president of Thrivent Church Solutions Group. In this role, Kopka leads Thrivent’s church-related businesses and functions, which presently reach over 30,000 churches through products and services provided by Thrivent and partner organizations. He is also the senior vice president for Mergers, Acquisitions & Strategic Partnerships.
Q: Each of our missionaries is responsible for purchasing his or her airline tickets. Would this be considered a tax-deductible contribution or just a personal expense? Further, a church member wants to purchase the ticket so that a participant can go on the missions trip. Is the payment—made directly by the church member to the airline for the participant’s airfare—tax deductible?
Short-term missions trips often involve participants covering their own travel expenses, raising the question: Is airfare for a missions trip tax deductible? Understanding the rules surrounding taxes on mission trip airfare is essential for both participants and donors to ensure compliance with IRS guidelines.
When Is Airfare Tax Deductible for the Participant?
If a participant purchases their own airline ticket to participate in a missions trip, the expense can be considered tax deductible as a volunteer expense. To qualify, the participant must obtain a statement from the church confirming:
The airfare payment is required to perform volunteer services on the missions trip.
No goods or services were provided by the church in exchange for the purchase.
In addition, the participant will need:
A copy of the travel itinerary.
Proof of performing sufficient volunteer services during the trip.
If the trip includes a mix of volunteer service and personal or sightseeing days, only a portion of the airfare is deductible. Specifically:
If personal or sightseeing days make up less than 50% of the trip, a proportional amount of airfare may be deducted.
If personal or sightseeing days exceed 50% of the trip, the airfare is not deductible.
When Is Airfare Not Tax Deductible for a Donor?
If a church member directly purchases an airline ticket for a participant (other than themselves or an immediate family member), the payment is not tax deductible. However, the donation can become deductible if:
The donor gives the money directly to the church.
The donor only suggests that the funds be used for the participant’s ticket.
The church retains full control over how the funds are spent.
This distinction is critical, as IRS guidelines require the church—not the donor—to determine how designated donations are allocated for them to qualify as charitable contributions.
Additional Considerations for Churches and Donors
Churches should ensure proper documentation is provided for participants and donors to comply with tax regulations. Maintaining clear policies and transparent communication with members can help avoid misunderstandings and ensure accurate reporting.
FAQ: Taxes on Mission Trip Airfare
Is airfare always tax deductible for a missions trip participant? Only if the airfare is directly related to volunteer services and meets IRS guidelines.
What documentation is required for deducting airfare? A statement from the church, an itinerary, and proof of volunteer service are necessary.
Can a donor deduct the cost of a ticket they buy for another participant? No, unless the donation is given directly to the church, and the church controls how the funds are spent.
Are mixed-purpose trips partially deductible? Yes, but only if volunteer days exceed 50% of the trip; otherwise, no deductions are allowed.
Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Image: AdobeStock/KN Studio
A Usable Metric for Any Church
Implement data-driven decision making to improve your church’s financial planning with a simple and scalable per-person giving metric.
Matthew Branaugh and Chris Lutes
Data can transform how churches operate, regardless of their size. By adopting data-driven decision making, churches can better understand giving patterns and make informed financial decisions. Norwood Davis from 12Stone Church emphasizes the importance of tracking a per-person-per-week giving metric as a powerful yet simple tool for any church.
How to Track the Per-Person-Per-Week Giving Metric
“Here’s what’s beautiful about this metric,” says Davis. “It’s flexible and scalable, regardless of your church’s size.” To start, follow these simple steps:
Step 1: Create a table with four columns: date, attendance, total giving, and per-person giving.
Step 2: Record the date in the first column, the number of attendees in the second column, and the total dollars given in the third column.
Step 3: Divide the total dollars by the number of attendees and record the result in the fourth column.
With consistent data collection, patterns will emerge. Seasonal highs and lows, holiday changes, and even trends tied to congregants’ pay periods become apparent. For 12Stone Church, these insights shifted their entire budgeting process. “Instead of dividing annual revenue projections equally over 52 weeks, we adjusted our budget to reflect seasonal and other variabilities,” Davis explains.
Visualizing and Interpreting the Data
Once you’ve collected enough data, Davis advises creating a simple graph to identify long-term trends. This process can be done using Microsoft Excel, which offers intuitive tools for graphing. For beginners, online tutorials and affordable Excel classes at local colleges can help build the necessary skills.
“The most important thing is to keep collecting data and think in terms of long-term trends,” says Davis. “The key is to take disciplined, small steps. Just start collecting the data, keep it going, and keep improving.”
Benefits of Data-Driven Decision Making for Churches
Implementing this metric offers several benefits:
Financial Accuracy: Aligning budgets with actual trends improves financial planning and stability.
Seasonal Insights: Identifying seasonal giving patterns helps churches prepare for high and low periods.
Scalability: This metric works for churches of all sizes and is easy to implement with minimal resources.
What are the long-term benefits of tracking this metric? Over time, it helps identify patterns, align budgets with trends, and improve financial decision-making.
Why is per-person giving an important metric? It provides a clear and scalable way to track financial trends regardless of church size.
How do I start tracking data for this metric? Create a table with attendance, total giving, and per-person giving as key components.
What tools can help with data visualization? Microsoft Excel is a great starting point. Affordable online tutorials or local classes can teach you graphing basics.
What I Learned from Advising the Boy Scouts of America During Their Abuse Crisis
An attorney’s advice for organizations on preventing and responding to child sexual abuse.
Richard J. Mathews
Churches, ministries, and youth-serving organizations today must recognize that child sexual abuse is a critical issue. The prevalence rate of people who are victims of child sexual abuse is estimated to range from 1 in 12 to 1 in 7 (8–14%) for men and from 1 in 6 to 1 in 2 (17–51%) for women. Estimates of abuse within organizations and institutions are not available, but media, lawsuits, and anecdotal information suggest it is significantly higher. Child sexual abuse is now the number one reason that churches are sued.
I know that reality only too well. For 11 years, I was the Deputy General Counsel and then General Counsel for the Boy Scouts of America (BSA). I saw first-hand the cases of child sexual abuse and how devastating they can be on children, families, and even organizations. Organizations and institutions have historically focused on protecting children in their care from sexual victimization from “external threats” (e.g., “stranger danger,” such as breaches of facility security, intercepting children traveling to or from locations or activities, and so on). Particularly because of the experiences of BSA, it has only been over the last two decades that the attention has been turned to the victimization of children from within an organization by those inside, or affiliated with, that organization.
There are many lessons that churches and ministries can learn from the failures of BSA to protect children and protect ministries from the devastating consequences of child sexual abuse.
Lessons Learned the Hard Way
Acknowledgement and awareness of the threat: Data from the Centers for Disease Control in 2006 indicated that 1 in 4 women and 1 in 6 men were sexually abused before the age of 18. BSA had thousands of reports of boys being sexually abused by volunteers, but continued to view them as “aberrations” not worth review and analysis because the number was such a small percentage of BSA’s total membership. Plaintiffs claimed that BSA ignored these reports primarily because it was concerned its image might be damaged. Even law enforcement and government officials ignored the reports despite awareness of the incidents. It was not until decades later, and a punitive damages verdict of some $20 million in the case brought by six “Jack Does” (anonymous plaintiffs) against the BSA in Oregon, that BSA commissioned a detailed analysis of the more than 7,000 incidents of child sexual abuse in an attempt to determine the magnitude, root causes, opportunities for prevention, and reporting deficiencies.
Communicate, educate, and enlist others in recognizing, responding, reporting, and reacting: Failure to genuinely focus on the welfare of constituents and stakeholders (church congregations and families) can create a blind spot and an inability to be proactive. Churches are, by nature, trusting. According to at least one expert, 93 percent of sex offenders describe themselves as “religious.” By increasing the awareness and engagement of those who would be directly, or even indirectly, impacted by child sexual abuse in your church and community is fundamental in protecting children from abuse. Again, as a result of the Oregon case, BSA made its Youth Protection Training mandatory for all registered adult leaders.
Provide compassion, counseling, and honest responses to victims, victims’ families, and all others impacted by abuse: BSA’s failure to be open, transparent, and sincerely compassionate by its “canned” responses and its perception that victims were only interested in a financial windfall alienated victims, the media, and jurors. This helped result in tens of millions of dollars being paid out in verdicts or settlements. Being responsive, genuinely compassionate, and empathizing with the pain and anguish in incidents of child sexual abuse greatly assists in the healing process of those victimized. Genuinely empathizing with victims and apologizing on behalf of the organization can significantly help reduce the victim’s anger and sense of betrayal. It can facilitate not only a more acceptable resolution but is also an opportunity to learn from victims’ personal experiences how to improve safeguards and assist them and others who have been affected.
In fact, one of those victims whom I met in mediation many years ago is now a close friend. He credits my time with him in mediation as helping his healing and stopping him from finding and killing the perpetrator and committing suicide. I am thankful that despite the anguish he had suffered over the 40 years since he was abused, this wonderful husband and father decided not to end his life. That’s the power of empathy.
Implementation of consistently and universally applied policies and procedures for:
Screening and training of all employees and volunteers;
Reporting of any incident of actual or suspected abuse to the proper authorities; and
Supervision and accountability of all employees, volunteers, and participants, including reporting and addressing “boundary violations” before they might result in abuse.
There is no one-size-fits-all profile of child sexual abusers. Teachers, attorneys, doctors, senators, mayors, police officers, servicemen, youth leaders, church leaders, coaches, counselors, family members, neighbors, married, single, old, young, well-known, and strangers—all have been characteristics of child sexual abusers. This is why screening of all employees and volunteers, no matter how well-known they may be to you or others in your community, is important, along with training everyone as to the policies and the importance of promptly reporting any concerns.
Because victims of child sexual abuse generally allege that the organization (church) is responsible for their injuries on the basis of negligent selection, retention, or supervision of the perpetrator, many such cases have been lost due to the failure to implement appropriate safeguards in the selection and supervision of employees and volunteers who work with children. This even applies to other children volunteers (e.g., youth staff). Therefore, screening, background investigations, reference checks, and interviews before the individual’s involvement are essential.
In many cases, there were several warning signs, red flags that observers (even parents) ignored because they did not rely on their instincts. They overlooked “minor” boundary violations. In hindsight, it became obvious that the abuser had “groomed” the child to develop a relationship of trust and friendship that enabled the abuser to manipulate the child into complying with being sexually abused. Everyone must be trained to recognize and report any such occurrences. Early recognition and intervention can prevent abuse.
So far, the sexual victimization of children in their care by staff members who have developed an acquaintance relationship has presented the greatest problems for such organizations. But organizations are now more often recognizing cases in which children are victimizing other children. Of all sexual crimes committed against children, over one third (36%) are committed by other children. Approximately 1 out of every 4 (27%) child sexual abusers started sexually abusing children when they themselves were children. The average age at which abusers committed their first criminal sexual assault was 14 years old.
The cost of developing and implementing a reasonable program to protect children is significantly less than the cost of a single adverse judgment for a serious incident. One of the biggest obstacles in implementing these strategies is getting organization members and the public they serve to accept and integrate the reality that the sexual victimization of children is not always by “evil predator strangers” and that there are ways to reduce the risk of child sexual abuse. But organizations have to be willing to change their policies and, in some cases, their cultures.
Richard J. Mathews is a licensed attorney in the states of Michigan and Texas. He served as the Deputy General Counsel and then General Counsel with the Boy Scouts of America for 11 years. He currently lives and works in Arlington, Texas, and can be reached at RichardJ.Mathews@gmail.com.
Image: AdobeStock/Cloud Cap
Who Should Know What People Give at Church?
Discover six approaches to managing church giving records and promoting financial stewardship with integrity.
The question “Who should be able to see individual church giving records?” is difficult to answer. Indeed, it is such a difficult question that I will not attempt to give a concrete answer. I will let you know what I’ve done in the past and six perspectives:
1. The lead pastor and one layperson
This perspective argues that financial stewardship is a spiritual discipline, and the pastor should have access to individual giving to be able to see how the members are doing in this regard. The layperson, of course, is the person who actually keeps the records.
2. One layperson who guides the pastor
The layperson again is the member keeping financial records. He or she is the only one who has access to giving records. But that person is able to share information with the pastor or other leaders as needed. For example, the financial secretary can inform the pastor or elders about potential future elders according to their giving patterns. I took this approach as a pastor. I did not have access to individual giving patterns, but our financial secretary would let me and other leaders know if a person should be eligible for a leadership role according to that person’s stewardship in the church.
3. One layperson only
In this example, only the financial secretary (or equivalent) has access to individual giving records. He or she does not provide any input that would reflect this information.
4. A key group in the church
In some churches, this group is the elders. In some other churches, it is the nominating committee.
5. A staff person other than the pastor and a layperson
The pastor is specifically precluded from individual giving visibility. Instead, another staff person, such as an associate or executive pastor, has access to the records along with the financial secretary.
6. No church members
No church member can see the records. Instead, a non-member is recruited or hired to keep the records, but that person does not share the information with any church members.
There are certainly different options and different variations of these options. I can see some rationale in each of them.
This postwas adapted from an article that first appeared atThomRainer.comon April 13, 2016. Thom S. Rainer serves as president and CEO of LifeWay Christian Resources. Among his greatest joys are his family: his wife Nellie Jo; three sons, Sam, Art, and Jess; and ten grandchildren. Dr. Rainer can be found on Twitter@ThomRainerand atfacebook.com/Thom.S.Rainer.
Image: Ozge Emir | Getty
Do Overtime Hours at Church Camp Qualify as an Exemption?
Overtime hours for part-time employees is just one of several key compensation considerations.
Q: We have a camp trip this summer and are looking to send one of our part-time hourly employees. This will require them to essentially be working the entire trip. Are we required to pay overtime for all hours worked or are there exemptions for “camp” time? I have seen mention of exemptions of camp counselors, but it seems since they are already a regular employee that we may be crossing a line.
Understanding labor laws and regulations
The Fair Labor Standards Act (FLSA) and US Department of Labor (DOL) regulations do recognize an exemption from overtime pay for employees of an organized camp operated as a “distinct physical place of business.”
See 29 U.S.C. 213(a)(3); 29 C.F.R. § 779.23. Under the facts described, it is unlikely the part-time hourly employee will qualify for this statutory overtime exemption, either because the employee is employed by the church, and not by a camp with a “distinct physical place of business,” or because the camp trip is not an organized camp (or perhaps for both reasons).
But the inquiry should not stop here.
‘Volunteer’ v. ‘Employee’
The DOL has recognized a narrow exception from the definition of employment, an exception in which an employee of a nonprofit organization “volunteers” in an activity sponsored by the organization. In determining whether an individual’s participation in an activity is as a “volunteer” and not an “employee,” the DOL considers several factors, including whether the services are:
Offered freely without pressure or coercion;
Of the kind typically associated with volunteer work; and
Different in nature from the employee-volunteer’s normal work activities.
Therefore, if the camp trip will be attended by youth of the church, and the part-time hourly worker’s normal duties include working with the church’s youth, then this exception would not apply.
However, if the employee’s normal duties are different in nature, such as providing finance and accounting services, then this exception for volunteers should apply so long as the employee is not required to participate (a requirement to participate would alter the nature of the employee’s participation from “voluntary” to “within the scope of employment”).
Set clear policies
To ensure that volunteer services are distinguishable from work performed within the scope of the employment relationship, the church’s governing body should establish policies governing the conditions under which church employees may volunteer and requiring job descriptions with sufficient detail to clearly distinguish employment services from volunteer services.
If the employee is not exempt from overtime pay and doesn’t qualify as a volunteer for the camp trip, then given that the employee will “essentially be working the entire trip,” the church must determine how many hours are considered “work hours” for the purpose of determining compensation, including overtime pay.
In general, an employee must be paid for hours worked.
The importance of “sleep time” arrangements
When an employee is essentially on duty around-the-clock, DOL regulations permit the employer and the employee to mutually agree to exclude from hours worked (i) sleep time of not more than eight hours, (ii) mealtimes where the employee is completely relieved of duty, and (iii) rest periods (e.g., breaks) of not less than 30 minutes (see 29 C.F.R. §§ 785.18, 785.19(a), 785.22). To qualify as excluded sleep time, the employer must provide the employee with “adequate sleeping facilities” where the “employee can usually enjoy an uninterrupted night’s sleep” (29 C.F.R. § 785.22(a)).
If the employee’s sleep time is interrupted by employment-related duties, then the hours related to the interruption must be included in hours worked (29 C.F.R. § 785.22(b)).
Further, if the employee cannot get at least five hours of sleep during the eight-hour sleep period due to employment-related interruptions, no portion of the sleep time is excluded from hours worked (29 C.F.R. § 785.22(b)). It is important that an employee’s sleep time, meal times, and rest periods are documented to ensure there are records supporting the hours worked.
Other considerations
Depending on the activities (both planned and unplanned) on the camp trip, it may be difficult, if not impossible, to allow the employee mealtimes where the employee is completely relieved of duty.
In addition, the nature of many camp trips, particularly those involving youth, often result in short nights with fewer than five hours of sleep. Accordingly, it is conceivable that an employee would be eligible to be compensated for every hour of the day.
The FLSA does not require that all hours worked be compensated at the same rate, however. Therefore, with advance notice to the affected employee, it is possible to pay the employee a lower rate for hours worked during the camp trip.
It is advisable to establish that the lower rate is consistent with the rate paid to similarly situated persons performing the same duties that the part-time employee in the question will be required to perform during the camp trip. For example, if the employee’s normal hourly rate is $15 per hour, but the industry standard for employees performing these duties is $9 per hour, then paying a lower rate for these services is permissible and defensible. Note that the lower rate cannot be lower than the applicable minimum wage.
Final thoughts
An employee cannot waive their right to compensation for hours worked or overtime pay.
While the camp trip may be to a camp facility owned and operated by the church, it is likely that the overtime exception for camp employees will not apply for a part-time church employee because of rules that do not permit interchanging employees between camp and non-camp activities.
From the description of the employee in the question as a “part-time hourly employee,” we can assume that the employee is a nonexempt employee for DOL wage and hour purposes and therefore not exempt under another regulation.
There are state wage and hour laws which should be examined to ensure that they do not provide an employee with additional benefits not provided by the FLSA.
If the part-time employee can be properly classified as a “minister,” additional research would need to be performed to determine if the so-called ministerial exception applies.
Ted R. Batson Jr. is a CPA and tax attorney, and serves as a partner and Professional Practice Leader – Tax for CapinCrouse LLP, a national CPA and consulting firm. He speaks and teaches frequently for national conferences and organizations on exempt organization and charitable giving matters.
Image: getty/boonchai wedmakawand
Creating a Successful Church Succession Plan
When planning for a ministry leader’s successor, the best time to start is now.
Many ministries only think about succession planning if they have a senior leader near or past the standard retirement age. This thinking does not take into consideration any surprise transitions, lengthy absences, or the importance of many other leadership positions: all considerations that are important from a risk-management perspective.
A few years ago, I knew three ministries that all experienced a tragedy unexpectedly striking their senior leaders. Two of those leaders passed away suddenly, and one was diagnosed with an aggressive form of cancer. Each organization scrambled to find solutions, and some were better prepared than others. It was an eye-opening experience for me, as an outsider, to consider what should be learned from their difficulties.
For some denominationally-affiliated churches, there may be formal structures and procedures in place that must be followed for succession planning. (If in doubt, check with your denomination or governing authority first.) For churches without such a mandated structure, however, crafting a succession plan requires key considerations. For these churches, creating a succession plan requires the cooperation of the church’s governing board as well as the leaders whose roles are being considered. If the parties don’t understand the importance of this project, it is unlikely to get the support and attention required to make it successful.
Making a Plan: First Steps
Start by determining which roles are the most critical and therefore require contingency plans. This should certainly include the senior pastor, and depending on your church, it may also include associate pastors, the executive pastor, and the business administrator (as well as the school principal or other key ministry leaders).
After this is accomplished, make sure up-to-date job descriptions are available for each of those positions. The descriptions should include the required tasks and outcomes, desired education and experience, and necessary competencies.
Once you have considered “who,” you should look at “why.” An absence may be the result of any of the following:
Death
Serious illness or injury
Moral failure
Resignation
Firing
The circumstances will change the response, such as whether the vacancy should be filled temporarily or permanently. There are also different factors to consider depending on whether the individual left willingly or under duress. Clear and effective communication with the congregation during this time will be critical, and these factors play a significant role in that task.
Establishing a Final Solution
The next step is to determine what the ultimate solution is—and what steps are necessary to get from where you are now to where you would like to be.
Having replacements on staff who are trained for the position they would assume is optimal. While that is often not the case, it should be considered in this planning process (and also when hiring for any new positions).
The goal is to identify the best candidates and then adequately prepare them for their future roles. Often employees desire to grow in their careers and seek to take on new challenges. Recognizing their leadership potential and intentionally investing in them will likely lead to more engaged staff as well as better candidates for succession.
A formal mentoring and coaching program can be a helpful tool in preparing future leaders. As senior leaders identify staff members who may play significant roles in the future of the church and may take over their positions someday, they should invest deliberate and thoughtfully planned time in those staff members. It is important to gain a clear understanding of what their strengths are and what areas they need to develop to be prepared to take on the added responsibility.
Such mentorships can help potential future leaders prepare both personally and professionally. A leadership position can take a toll on an individual’s personal life; preparing future leaders in advance would be a blessing. Professional help could involve coaching through opportunities as they arise, suggesting professional readings or conferences to attend, and promoting an awareness of how specific situations could be handled more effectively. This takes an investment of time by current leaders in your ministry, but if done consistently and intentionally, it will yield beneficial results long-term.
Don’t Wait to Get Started
As with any other policies or procedures, succession planning is not something you can do once and put on a shelf. You should revisit your policy periodically to ensure the strategy—including roles and plans—is up-to-date. Remember, too, that after a transition is made, the planning process needs to start again to consider the possibility of that individual’s eventual transition out.
You don’t want your leaders to think you are planning prematurely for their home-going, but you do want them to understand the vital role they play and the impact their departure will have on the ministry. Those who desire to finish well or even leave a lasting legacy should be supportive of this process and appreciate its importance.
Rather than waiting for the perfect time or the perfect solution, get started now! Don’t delay any longer, and do make sure you are documenting the process as you go, so nothing gets lost through communication channels, committees, meetings, or the passage of time.
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.
10 Commandments for Pastors, Politics, and Social Media
10 commandments for pastors thinking of preaching, speaking, or posting about politics in an election cycle. Or any other time.
Thom Rainer
There are few topics that evoke as much emotion as politics, and church leaders would do well to remember these 10 commandments for pastors when it comes to engaging in politics—particular on social media.
Pastors and church staff are not oblivious to political emotions. Indeed, some of them can be among the most intensely emotional.
The purpose of this post is not to imply that pastors and staff should abandon their convictions. Nor is it to suggest that silence is always the best option. Instead, I hope it is a gentle reminder of ten issues pastors and church staff may want to consider before posting political views and opinions on social media.
10 Commandments for Pastors Posting About Politics on Social Media
You shall remember you are an ambassador for Christ.
All of your written and spoken words should be a reflection of Him.
You shall remember you are your church to many people.
Your words, for better or worse, are a direct reflection on your congregation.
You shall not be a stumbling block to unbelievers.
Many are watching you. Many are reading your words.
You shall refrain from posting when your emotions are high.
Take a break for a day. If you don’t, you will likely regret it later.
You shall remember that others are often posting in the throes of their own anger and emotions.
It is usually best not to engage them then.
You shall remember your words are permanent.
The moment you post, someone has likely captured your article or post, even if you delete it later.
You shall understand some members of your congregation likely have a different view than you.
Is your post worth the disunity that may follow?
You shall not be a distraction to the gospel.
Politics are often an easy detour from that which really matters.
You shall be aware of the long political memory many people have.
Some people are talking today about the comments Christians made in the presidential election four years ago!
You shall be aware that your political opinions may cause disunity with other churches in the community.
Make certain the words are worth the price that is paid.
The writer of Ecclesiastes reminds us in chapter 3, verse 7, that there is “a time to be silent and a time to speak.” For the sake of the gospel, please make certain you have sought God’s wisdom to discern what time it is for you.
This postwas adapted from an article that first appeared atThomRainer.comon March 21, 2016. Thom S. Rainer serves as president and CEO of LifeWay Christian Resources. Among his greatest joys are his family: his wife Nellie Jo; three sons, Sam, Art, and Jess; and seven grandchildren. Dr. Rainer can be found on Twitter@ThomRainerand atfacebook.com/Thom.S.Rainer.
For information on the tax and legal guidelines faith-based organizations need to know before jumping into the political fray, see the downloadable resourcePolitics and the Church.
Image: adventtr | Getty
Assumption of Risk Forms: A Legal Blind Spot for Many Churches
Without careful legal review, these forms are useless to churches.
Key point 10-16.06. A release form is a document signed by a competent adult that purports to relieve a church from liability for its own negligence. Such forms may be legally enforceable if they are clearly written and identify the conduct that is being released. However, the courts look with disfavor on release forms, and this has led to several limitations, including the following: (1) release forms will be strictly and narrowly construed against the church; (2) release forms cannot relieve a church of liability for injuries to minors, since minors have no legal capacity to sign such forms and their parents’ signature does not prevent minors from bringing their own personal injury claim after they reach age 18; (3) some courts refuse to enforce any release form that attempts to avoid liability for personal injuries on the ground that such forms violate public policy; and (4) release forms will not be enforced unless they clearly communicate that they are releasing the church from liability for its negligence.
Many churches, schools, youth-serving charities, and recreational venues attempt to reduce the risk of liability for injuries occurring during sponsored events by having participants sign a form that purports to exempt the host organization from liability for injuries caused by its own negligence. Such forms typically are called release forms, waivers of liability, or assumptions of risk. All too often churches and other organizations use forms found online, with no legal input or review. This can result in forms that are useless or of limited value.
There are a number of important considerations that church leaders should understand about release forms, including the following:
Definition of release forms, waivers of liability, assumption of risk forms (collectively referred to as “release forms” in this article).
Legal requirements for a valid release form.
Relevance of state laws.
When release forms are rejected by the courts.
Injuries to minors.
Indemnification agreements and hold harmless clauses.
Impact on insurance coverage and risk management.
Each of these considerations is addressed below, along with a summary of all the leading cases involving release forms used by churches and other charitable organizations.
Definitions
A “release form” is a form, signed by two parties, in which one party releases the other from liability for specified risks. Release forms can be retroactive or prospective. A retroactive release is one that ordinarily is executed as part of a settlement of a legal claim. A prospective release is one that purports to relieve one party from liability for legal claims arising after the release is signed. Prospective releases are the most common form of release used by churches and other charitable organizations.
The term “waiver” is generally used synonymously with “release,” and is defined as “the intentional relinquishment of a known right.”
An “assumption of risk” is similar to a release agreement. As one court observed: “In its most basic sense, assumption of risk means that the plaintiff, in advance, has given his express consent to relieve the defendant of an obligation of conduct toward him, and to take his chances of injury from a known risk arising from what the defendant is to do or leave undone. The result is that the defendant is relieved of legal duty to the plaintiff; and being under no duty, he cannot be charged with negligence.” Cohen v. Five Brooks Stable, 159 Cal.App.4th 1476 (Cal. App. 2008).
The purpose of release forms
”The main purpose of a release typically is the voluntary relinquishment of a claim or right by one who, absent the release, could have enforced such a claim or right.” Penunuri v. Sundance Partners, 257 P.3d 1049 (Utah App. 2011).
While release agreements and assumptions of risk are similar, there are subtle differences. Most importantly, a release agreement seeks to mitigate risk by having one person release another of all risks, while in an assumption of risk, one party voluntarily assumes all known risks of a particular activity. Often, release forms combine both release and assumption of risk forms.
Some courts have classified assumption of risk as:
express or implied assumption of risk
primary or secondary assumption of risk
Express assumption of risk occurs when someone signs a form expressly agreeing to assume the risks of an event. These forms are frequently used by charities, schools, fitness centers, and places of amusement or recreation. As one court observed:
Express assumption occurs when parties agree in advance that one of them is under no obligation to use reasonable care for the benefit of the other and will not be liable for what would otherwise be negligence. When such a plaintiff is injured by one of the risks for which he or she has agreed to forgo suit, the claim will be barred because that risk was assumed by the plaintiff. The bar of express assumption is based on contract and survives the enactment of comparative negligence statutes. However, such assumption only bars a claim with regard to the risks actually assumed by the plaintiff. Scott v. Pacific West Mountain Resort, 834 P.2d 6 (Wash. 1992).
In contrast, implied assumption of risk arises when someone is aware of a risk that already has been created by the negligence of another, yet chooses voluntarily to encounter it. In most jurisdictions, implied assumption of risk has been merged into the principle of comparative negligence, which requires a negligent defendant’s damages to be reduced by the plaintiff’s percentage of fault.
You may see the term “exculpatory clause” in a release agreement. The word exculpatory derives from the Latin “exculpate” meaning to free from guilt or blame.
The importance of legal counsel
The importance of legal counsel in drafting release forms is illustrated by a recent federal court ruling in Tennessee. Hayward v. Trinity Church, 2015 WL 1924552 (M.D. Tenn. 2015).
A federal district court in Tennessee ruled that an agreement between a church and a church employee to arbitrate all employment disputes was enforceable, and therefore a dismissed church employee’s lawsuit seeking unpaid overtime compensation had to be arbitrated.
However, the court noted that the agreement contained a “venue clause” mandating that any arbitration occur in Orange County, California, and referencing several remedies employees can assert before the California Department of Fair Employment and Housing. Clearly, the church was using a template that was intended for use in California, and neglected to make it Tennessee-specific. An attorney would have flagged this provision, and spared the Tennessee church of the needless expense of litigating in California.
Legal requirements for a valid release form
Many courts have noted that release forms are contracts, and as a result are governed by contract law. This means that a release form, to be legally enforceable, must satisfy the following elements of a valid contract:
1. Two or more contracting parties
A release form generally is a contractual agreement between an organization sponsoring an event and a participant.
2. Consideration
In the typical contract, one person (the “promisor”) makes a promise to do something for the benefit of another (the “promisee”), in return for which the promisee provides the promisor something of value. The value provided by the promisee to the promisor in exchange for the promisor’s promise is referred to as “consideration.” The requirement of consideration is what distinguishes legally enforceable promises (i.e., contracts) from unenforceable promises.
Example. X promises to sell his car to Y for $5,000. The consideration for X’s promise to sell his car is Y’s payment of $5,000.
Example. X promises to give his car to Y. Y provides nothing of value in return. This is a gift. Note that the requirement of consideration serves to distinguish those promises that will be legally enforceable with the full weight of the law, from those that are not. So, unless Y has done something in reliance on X’s promise, X’s promise is legally unenforceable.
Many release forms used by churches are legally unenforceable because the church provides nothing of value (consideration) in exchange for the promisor’s promise to release the church from liability. The same is true for many release forms used by schools and other youth-serving charities, recreational and amusement facilities, and employers.
How can this lack of consideration be corrected? How can church leaders ensure that this contractual requirement is met? Perhaps the simplest way is for the release form to declare that “in consideration of” the promisor being allowed to participate in a specified church activity, the promisor releases the church, its employees, volunteers, staff, and board, from liability for death or injury occurring during the activity. Here’s an excerpt from a release form used by a state university for nonstudent adults who participate in a specified activity:
In consideration of my participation in the Activity or Trip, I hereby accept all risk to my health and of my injury or death that may result from such participation and I hereby release the University, its governing board, officers, employees and representatives from any and all liability to me, my personal representatives, estate, heirs, next of kin, and assigns for any and all claims and causes of action for loss of or damage to my property and for any and all illness or injury to my person, including my death, that may result from or occur during my participation in the Activity or Trip, whether caused by negligence of the University, its governing board, officers, employees, or representatives, or otherwise. I further agree to indemnify and hold harmless the University and its governing board, officers, employees, and representatives from liability for the injury or death of any person(s) and damage to property that may result from my negligent or intentional act or omission while participating in the described Activity or Trip.
Note that this form satisfies the consideration requirement since it specifies that the promisor’s participation in the activity is the consideration provided by the University in exchange for the promisor’s promise to release it from liability.
But compare the following excerpt from a release form from a private college:
I also agree, for myself, my heirs and my personal representative(s) to release the College and its trustees, agents and employees, including student leaders of such activities, from any and all liability for damage to personal property, or for personal injury of any kind, including death, which may result from the inherent risks of my participation in the activity. I further waive any and all such claims, and agree to indemnify and hold the College and its trustees, agents, and employees, including student leaders of such activities, harmless from and against any and all claims that may be made against them as a result of injury to me or damage to my property.
This form is unenforceable since a promisor receives nothing of value in return for his or her promise to release the college from all liability for death or injury.
The courts generally do not evaluate the adequacy of consideration. In a famous British case, a court ruled that a “peppercorn” is sufficient. In a frequently cited case, New York’s highest court observed, “The slightest consideration is sufficient to support the most onerous obligation; the inadequacy . . . is for the parties to consider at the time of making the agreement, and not for the court when it is sought to be enforced. It is competent for the parties to make whatever contracts they may please, so long as there is no fraud or deception or infringement of law. Hence the fact that the bargain is a hard one will not deprive it of validity.” Mandel v. Liebman, 100 N.E.2d 149 (N.Y. 1951).
As a result, the courts will not evaluate whether allowing a person to participate in a specified church activity constitutes sufficient consideration for his or her promise to release the church from liability for injuries that may occur.
The lack of consideration renders any contract or promise unenforceable, as the following case studies illustrate.
Case study. A Tennessee court ruled that a church’s decision to make biweekly payments to a former pastor’s widow was unenforceable since the church received nothing of value (“consideration”) in return for its commitment, and therefore the church’s decision to discontinue making the payments did not amount to a breach of contract. Cochran v. Robinwood Lane Baptist Church, 2005 WL 3527627 (Tenn. App. 2005).
Case study. A Pennsylvania court addressed the issue of whether a church acted properly when it dissolved due to declining attendance, sold its assets, and transferred most of the sales proceeds to the pastor as compensation for wages that it was previously unable to pay. The court concluded that the pastor’s claim for compensation for his past service was unenforceable under contract law. It noted that contracts, to be enforceable, must be supported by consideration, meaning that both parties must receive something of value in exchange for their commitments. The court noted that the church’s commitment to pay the pastor $635,000 in back wages was unenforceable since “past services” are never valid consideration for current obligations and commitments. As a result, the court concluded that payment of additional sums to the pastor in excess of his specified salary would constitute a gift, which would be inconsistent with the charitable purposes of the church. First Church, 2011 WL 2302540 (Pa. Common. 2011).
3. An agreement that is sufficiently definite
The essential terms of a contract must be sufficiently definite to be understood by the parties. As one court noted, “The intent of the parties must be specifically stated in the four corners of the contract.” Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190 (Texas 2004).
4. Parties with legal capacity to make a contract
The parties to a contract must have the legal capacity to enter into the contract. This means that they have “sufficient mental capacity to understand the nature and effect of the particular transaction.” McElroy v. Mathews, 263 S.W.2d 1, 10 (Mo.1953).
It also means that they must not be under any “disability,” including being underage. In all states one must be 18 years of age or older to enter into a valid and enforceable contract. As noted below, this has direct relevance to the release forms often used by churches. Anyone under the age of 18 lacks contractual capacity, and cannot sign an enforceable release form. Whether parents can sign a release form that releases their minor child’s claims is a question that is addressed later in this article.
5. Mutual assent
The parties to a contract must both assent to the agreement. Mutual assent may be negated by a number of conditions, including fraud, mistake, undue influence, or duress. Consider these case studies.
Case study. A federal court in New York observed: “Under New York law, a party claiming that it was unduly influenced to enter a contractual relationship must prove that it contracted under circumstances indicating that a relationship of control existed and that the stronger of the two parties had exerted influence over the other to destroy the weaker party’s free will and substitute for it the will of the other. . . . The burden is heavy: A party seeking to invalidate a contract must demonstrate that it was manipulated into signing a contract as a consequence of conduct worse than pressure, no matter how bad, because undue influence is tantamount to a species of cheating.” Sun Forest Corp. v. Shvili, 152 F.Supp.2d 367 (S.D.N.Y. 2001).
Case study. “To rescind a contract because of unilateral mistake, therefore, the plaintiff must show ‘misrepresentation, concealment or nondisclosure of a material fact; an intent to deceive; and an injury resulting from justifiable reliance by the aggrieved party.’” Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40 (2d Cir.1991).
Case study. A misrepresentation can be the basis for a party’s avoidance of contractual obligations through rescission or reformation when the contract is based in material part on that misrepresentation. In order for this to occur, the recipient of the misrepresentation must show that (1) there was a misrepresentation that was (2) material or fraudulent and which (3) induced the recipient to enter into the agreement and that (4) the recipient’s reliance on the misrepresentation was justified. Christy v. Travelers Indemnity Company, 810 F.3d 1220 (10th Cir. 2016).
6. No legal prohibition precluding contract formation
Even if the technical requirements for a legally enforceable contract are met, a court may refuse to enforce an agreement on several grounds. This often happens when the civil courts review the validity of release forms and assumption of risk forms given the disdain with which they view attempts to avoid liability for injuries caused by the releasee’s negligence. The more common grounds for refusing to enforce otherwise valid contracts include the following.
Gross negligence or intentional acts
Several courts have ruled that release forms cannot release claims for injuries caused by the gross negligence or intentional acts of another. Note these case studies.
Case study. A woman (the “victim”) hired a guide for a family adventure in the Colorado Rockies that included an overnight rafting and camping excursion on a popular stretch of the Arkansas River running through Brown’s Canyon. After she arrived at the outfitter’s office, the victim and the other rafters received the usual guidance, made the usual preparations, and signed the usual release before heading down river. The next day, the raft capsized while maneuvering around a rapid. Everyone else was fished out of the water, but in a heartbreaking turn of events, the current swept the victim into a logjam where, despite repeated efforts to save her, she drowned. Eventually, her son brought a lawsuit against the rafting company alleging negligence. In reply, the company sought summary judgment, arguing that the release the victim signed shielded it from liability. With this the trial court agreed and proceeded to enter judgment for the company.
On appeal, a federal appeals court upheld the validity of the release form and the dismissal of the family’s claims on the basis of the release form the mother had signed. The appeals court noted that “no one before us doubts that [the victim] signed a release. Or that the release purported to absolve the rafting company from any claim of negligence. The only question in this appeal is whether the law permits private parties to enforce a contract like this. Under common law, it’s long settled that courts will not give effect to contracts purporting to release claims for intentional, knowing, or reckless misconduct. But claims of negligence are a different matter. The law does not categorically prohibit the enforcement of contracts seeking to release claims of negligence.” Espinoza v. Arkansas Valley Adventures, LLC, 809 F.3d 1150 (10th Cir. 2015).
Case study. A developmentally disabled child attended a special summer camp for disabled children run by a city. Because she had frequent seizures, the child was assigned a counselor to monitor her closely. However, when her counselor momentarily turned her attention away from the child, who was at that time swimming toward the side of the pool, the child suffered a seizure and drowned. The city contended that a release signed by the child’s mother had absolved the city of liability for any negligence. On appeal, the California Supreme Court held that the family’s gross negligence claim was not barred by the release because an agreement purporting to protect the releasee from liability for conduct rising to the level of gross negligence is against public policy.
Church leaders should not assume that a release or assumption of risk form signed by a competent adult will apply to deaths or injuries caused by the gross negligence of the church or its agents. Distinguishing between ordinary negligence and gross negligence is often a difficult task, but this distinction is significant because it generally will determine the validity of a release or assumption of risk form. Note the following attempts to define gross negligence:
“Gross negligence is substantially and appreciably higher in magnitude than ordinary negligence. . . . It is very great negligence, or the absence of slight diligence, or the want of even scant care. . . . Gross negligence is a manifestly smaller amount of watchfulness and circumspection than the circumstances require of a person of ordinary prudence.”
“The distinction between ‘ordinary and gross negligence’ reflects ‘a rule of policy’ that harsher legal consequences should flow when negligence is aggravated instead of merely ordinary. . . . Ordinary negligence—an unintentional tort—consists of a failure to exercise the degree of care in a given situation that a reasonable person under similar circumstances would employ to protect others from harm. Gross negligence long has been defined . . . as either a want of even scant care or an extreme departure from the ordinary standard of conduct. . . . A liability release, to the extent it purports to release liability for future gross negligence, violates public policy and is unenforceable.” Jimenez v. 24 Hour Fitness, 188 Cal.Rptr3d 228 (Cal. App. 2015).
“Negligence is defined as ‘any conduct, except conduct recklessly disregardful of an interest of others, which falls below the standard established by law for protection of others against unreasonable risk of harm.’ A claim for gross negligence, however, sets the evidentiary hurdle at a higher elevation: Gross negligence is an intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another, and also implies a thoughtless disregard of the consequences without the exertion of any effort to avoid them. Stated conversely, a wrongdoer is guilty of gross negligence or acts wantonly and willfully only when he inflicts injury intentionally or is so utterly indifferent to the rights of others that he acts as if such rights did not exist. The distinction between negligence and gross negligence, however, can be a difficult one to establish in practice. . . .” Beall v. Holloway-Johnson, 130 A.3d 406 (Md. 2016).
“We have viewed gross negligence as something more than simple negligence, and likely more akin to reckless conduct.” Id.
How can a church be guilty of gross negligence? It is possible, depending on an examination of all the facts and circumstances, that the following practices could be grossly negligent:
A church’s governing board refuses to institute a policy to reduce the risk of child molestation at church or during offsite church activities. The church uses a volunteer in its children’s ministry for whom no criminal records check or references were obtained. The volunteer sexually molests a child during a church activity. It is later discovered that the volunteer is a pedophile who molested children in a previous church.
A church uses a van to transport children to an offsite activity. It selects a driver whose driving record was not examined. The driver’s negligence results in a collision that injures some of the children. It is later determined that he had a suspended driver’s license.
A church board is aware that the youth pastor frequently sends and reads text messages on his cell phone while driving his car on church business. Nothing is done about it. The youth pastor swerves into the oncoming lane while texting his girlfriend and collides with another vehicle.
The church youth group goes swimming at a lake. No life guards are present, and the church provides only two chaperones to oversee 50 minors. Neither chaperone is certified in CPR. One of the minors drowns, and no one is available to start CPR.
It is important for church leaders to be familiar with the concept of gross negligence for the following three reasons:
Gross negligence is a bar to the enforcement of release and assumption of risk forms.
Gross negligence is the same standard that is applied to the availability of “punitive damages.” Punitive damages are damages that a court can award to an injured person, over and above compensatory damages, based on the defendant’s gross negligence or willful and wanton conduct. It is important for church leaders to be aware of this, since punitive damages are not covered under church insurance policies due to the public policy of not allowing entities to insure against their gross negligence.
Gross negligence negates the limited immunity from personal liability accorded to the uncompensated officers and directors of churches and other nonprofit organizations.
These potentially disastrous consequences make it imperative for church leaders to understand the concept of gross negligence, and to avoid any decisions that, in retrospect, may be grossly negligent.
Unequal bargaining power
Many courts have refused to enforce release forms that are the product of unequal bargaining power between the parties. City of Santa Barbara v. Superior Court, 62 Cal.Rptr.3d 527 (Cal. 2007). Consider these case studies.
Case study. A fitness club member sued the fitness club for injuries he sustained when a large mirror fell from a wall and struck him. The fitness club claimed that a release form signed by the victim when he joined the club prevented him from suing. An Illinois appeals court noted that “because liability release clauses are highly disfavored, courts closely scrutinize them and they are strictly construed against the party seeking to rely on them.” However, “absent fraud or willful and wanton negligence, a contract’s exculpatory clause will be valid and enforceable unless (1) the bargaining position of the parties reflects a substantial disparity, (2) enforcement violates public policy, or (3) the social relationship between the parties militates against upholding the clause. Absent any of these factors, the question of whether or not an exculpatory clause will be enforced depends upon whether or not defendant’s conduct and the risk of injury inherent in said conduct was of a type intended by the parties to fall within the scope of the clause.” Hawkins v. Capital Fitness, 29 N.E.3d 442 (Ill. App. 2015).
Case study. A North Carolina court concluded: “Contracts which exculpate persons from liability for negligence are not favored, and must be strictly construed against the person seeking to escape liability. . . . An exculpatory contract that has been gained through inequality of bargaining power is unenforceable. In applying this exception to the general rule allowing the enforcement of otherwise-enforceable exculpatory clauses, reviewing courts give consideration to the comparable positions which the contracting parties occupy in regard to their bargaining strength, i.e., whether one of the parties has unequal bargaining power so that he must either accept what is offered or forego the advantages of the contractual relation in a situation where it is necessary for him to enter into the contract to obtain something of importance to him which for all practical purposes is not obtainable elsewhere.” The fact that a party could obtain the same or similar services from other vendors is a key factor in demonstrating equal bargaining power. Hyatt v. Mini Storage on Green, 763 S.E.2d 166 (N.C. App. 2014).
Public policy
Many courts have ruled that to be legally enforceable a release must not violate public policy. Some have concluded that any attempt to avoid the consequences of one’s negligence by utilizing release forms is a violation of public policy. This view is nearly universal in cases involving attempts to have minors release a church or other entity from liability for its negligence. But some courts interpret “public policy” more broadly and refuse to enforce release forms signed by competent adults. The use of release forms to release a church or other entity from liability for its negligence in cases involving injuries to minors is addressed later in this article.
Case study. “All contracts are subject to judicial scrutiny to determine their enforceability. Here, defendant seeks to shield itself from all civil liability, based on a one-sided contractual arrangement that offers no countervailing or redeeming societal value. Such a contract must be declared unenforceable as against public policy.” Walters v. YMCA, 96 A.3d 323 (N.J. App. 2014).
Unconscionability
Some courts have refused to enforce release forms on the basis of unconscionability. A contract or clause is unconscionable when there is an “absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” 8 Williston, A Treatise on the Law of Contracts § 18:9.
Many courts have distinguished between “procedural” and “substantive” unconscionability. Procedural unconscionability may arise when a party lacks a meaningful choice. Determination of whether a contract is procedurally unconscionable includes an inquiry into “the manner in which the contract was entered, whether each party had a reasonable opportunity to understand the terms of the contract, and whether the important terms were hidden in a maze of fine print.” Schroeder v. Fageol Motors, Inc., 544 P.2d 20 (Wash. 1975).
Agreements that are “adhesion contracts” may be unconscionable. An adhesion contract is usually “(1) a standard form agreement, (2) prepared by one party and submitted to another party on a ‘take it or leave it’ basis, (3) when the bargaining power between the parties was not truly equal.” Eelbode v. Chec Medical Centers, 984 P.2d 436 (Wash. 1999).
That an agreement constitutes a contract of adhesion ordinarily is insufficient to support a finding that the agreement is procedurally unconscionable. Additional factors that tend to demonstrate procedural unconscionability include:
the length and complexity of the written agreement;
the use of fine print to “conceal” the fact that the releasor is releasing the other party from liability; and
a failure to emphasize language of release through bold and larger font text.
Note. “Substantive unconscionability” involves the use of a clause or term in a contract that is one-sided or overly harsh. “Shocking to the conscience,” “monstrously harsh,” and “exceedingly calloused” are terms sometimes used to define substantive unconscionability.
Consider these case studies.
Case study. “A release of prospective negligence may be valid. Such a release must be clear and unequivocal to insulate a party from liability. . . . It must also not be unconscionable. Unconscionability is a concept that is used sparingly. Traditionally, an unconscionable contract is one which no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other. But mere disparity between the bargaining powers of parties to a contract will not support a finding of unconscionability. There must be an absence of meaningful choice and contract terms unreasonably favorable to one of the parties. There is no deprivation of meaningful choice if a party can walk away from the contract.” Ketler v. PFPA, 2016 WL 192599 (Del. 2016).
Case study. “It has been suggested that an unconscionable contract is one such as no man in his senses and not under a delusion would make on the one hand, and as no honest or fair man would accept, on the other. . . . The inequality . . . must be so strong and manifest as to shock the conscience and confound the judgment of any man of common sense.” Hughes v. Hughes, 16 N.Y.S.3d 861 (N.Y. App. 2015)
Ambiguity
Many courts have refused to enforce release forms that contain ambiguities. Consider the following case study.
Case study. A federal district court in Connecticut awarded $42 million in damages to a minor who contracted tick-borne encephalitis (TBE) on a school-sponsored month-long trip to China. The victim sustained permanent brain damage as a result of a tick bite, and the court concluded that the injury was due to the school’s negligence.
The court disregarded a release signed by the victim’s parents. It noted that the courts “disfavor broad waivers of negligence liability” and that “unless the intention of the parties is expressed in unmistakable language, an exculpatory clause will not be deemed to insulate a party from liability for his own negligent acts.” A party “cannot shed his ordinary responsibility in the absence of language that expressly provides so.”
When evaluating a release or waiver, “the question is whether an ordinary person of reasonable intelligence would understand that, by signing the agreement, he or she was releasing the defendants from liability for their future negligence. . . . In general a waiver should refer to negligence, or some close synonym, in order to clearly communicate its message. That is why the [Connecticut Supreme Court] held an exculpatory clause that explicitly used the word ‘negligence’ several times to be sufficiently clear, while it refused to enforce a release that only referred to risks involved in an activity, but which made no reference to the possible negligence of the defendant.” Citing Lewis v. Habitat for Humanity, 2012 WL 386391 (Conn. 2012). The court concluded:
In this case, an average person would not have understood the release to absolve the school of liability for its careless acts. The portion of the waiver that lays out the release’s general scope never references the school’s basic responsibility to use reasonable precautions, and the exception to the waiver appears to carve out negligent or willful conduct by the school from the scope of the waiver.
The general scope is, of course, written quite broadly; it covers “any and all claims” and “acts or omissions of any persons,” and waives “responsibility for” not just “any accident, illness, injury,” but also “any other damage.” But that broad language uses common words to describe breach (“an act or omission”) and harm (“accident, illness, injury”), and never refers to a standard of care (by using a word like “negligence”). An ordinary person might interpret the release to shield the school from most litigation, but would not know that the school intended to eschew the most basic duty each of us has to others—the duty to act with reasonable care, or, when referred to in the negative, not being negligent. This ambiguity is underscored by the clarity with which the release refers to the standard of care taken by others: it waives “any liability, damage, or injury that may be caused by Student’s negligence” and “any liability, damage, or injury caused by the intentional or negligent acts or omissions of any other participant in the Program” (bold added for emphasis). Thus, the release speaks with clarity about the “negligence” of everyone but the school. Indeed, the natural reading of the waiver does not suggest that students are waiving the chance to proceed against the school in the event that Hotchkiss acts carelessly. Just the opposite—in the long, bullet-pointed list of things that could go wrong, it never once mentions that the school itself might be the one to make a mistake.
Because the portion of the release that delineates its basic scope does not appear to waive the school’s liability for its negligence . . . the release is not enforceable in this case. Munn v. Hotchkiss School, 933 F.Supp.2d 343 (D. Conn. 2013).
Why release forms are disfavored
Many courts have noted that attempts to avoid the consequences of one’s negligence through release forms, assumption of risk forms, and exculpatory clauses, are highly disfavored. As a result, the courts will invalidate any form of liability release that fails to strictly comply with the legal requirements for an enforceable release (summarized above).
The low regard the courts have for liability releases is based on two considerations. First, as noted above, allowing a church or other entity to avoid liability for deaths and injuries caused by its negligence is inappropriate, especially if there is a disparity in bargaining power. Second, many courts have noted that the use of release forms makes organizations less vigilant in assessing and managing risks. As one court noted: “The law does not favor exculpatory agreements because they encourage a lack of care.” Walters v. YMCA 96 A.3d 323 (N.J. App. 2014).
Minors
Church leaders often assume that minors can sign release forms that purport to release the church from injuries caused by the negligence of the church and its agents, or, that parents can sign such forms on behalf of their minor children. These perceptions ordinarily are false, since in all states minors (persons under the age of 18) have no “contractual capacity” and therefore cannot sign enforceable liability releases, and in most states parents cannot release the legal claims of their minor children.
Consider the following case studies.
Case study. A Colorado court ruled that a release form signed by a parent whose minor daughter attended an offsite church activity did not relieve the church from liability for catastrophic injuries sustained by the daughter during the activity. A group of 60 teenagers attended a three-day church retreat at a ranch. All of the participants were required to submit a registration form, signed by at least one parent, that contained the following release of liability provision:
I give permission for my child to participate in [the event] and all activities associated with it. I further give consent for any medical treatment necessary to be given to my child in case of injury or sickness. I will not hold [the church] or its participants responsible for any liability which may result from participation. I also agree to come and pick up my child should they not obey camp rules.
After arriving and checking in at the ranch, the participants engaged in church-sponsored activities. One activity was riding an inner tube tied to an all-terrain vehicle (ATV) driven around a frozen lake. A large boulder was embedded in the lake some 35 feet from shore. Two adult leaders drove the ATV towing youth participants around the frozen lake. A 17-year-old girl (the “victim”) got on an inner tube, and the ATV began towing her. On her second loop around the lake, the ATV went between the boulder and shoreline. The victim’s inner tube, still tied to the ATV, veered off and crashed into the boulder. The crash broke the victim’s back, resulting in permanent injuries.
The victim sued the church, claiming that its negligence resulted in the accident. The church asserted that the release form, signed by the victim’s mother, precluded it from any liability for the victim’s injuries. The jury returned verdicts against the church totaling more than $4 million. The court reduced the total to $2 million (the limits of the church’s insurance). With prejudgment interest and costs, the final judgment was $2.6 million. The church appealed.
The appeals court noted that the state legislature had enacted a statute allowing parents to “release or waive a child’s prospective claim for negligence.” The legislature concluded that parents have a fundamental right to make decisions on behalf of their children, including deciding whether the children should participate in risky activities. It added that “so long as the decision is voluntary and informed, the decision should be given the same dignity as decisions regarding schooling, medical treatment, and religious education.” But it further provided that the statute does not permit a parent to waive a child’s prospective claim for “willful and wanton, reckless, or grossly negligent” acts or omissions.
The court concluded that the release signed by the victim’s mother in this case was not an “informed” decision as required by the statute permitting parents to release their minor children’s claims. It observed:
There is no information in the registration form describing the event activities, much less their associated risks. Stating that the children would ‘participate in [the event] and all activities associated with it’ does not indicate what the activities would involve and certainly does not suggest they would include ATV-towed inner-tube excursions around a frozen lake.
The court stressed that release clauses “must be closely scrutinized” because they are “disfavored.” A release “need not contain any magic words to be valid; in particular, it need not specifically refer to waiver of negligence claims.” But, “in every Colorado Supreme Court case upholding an exculpatory clause, the clause contained some reference to waiving personal injury claims based on the activity being engaged in.” The release clause in this case did not satisfy this requirement, and therefore was not enforceable. Wycoff v. Community Church, 251 P.3d 1260 (Colo. App. 2010)
Case study. In 2005, a 14-year-old female (the “victim”) attended a field trip with Classic Upward Bound, a youth outreach program organized by the University of Northern Iowa and the State of Iowa. On the field trip, the victim was injured when she was struck by a car as she attempted to cross a street. Before she went on the field trip, the victim’s mother signed two documents titled “Field Trip Permission Form” and “Release and Medical Authorization.” The first document read, in part:
Field Trip Permission Form
Each summer the participants of the Classic Upward Bound Program attend field trips locally and out-of-town. This form must be completed in order for your son/daughter to participate in said events.
As the parent/guardian of [the victim] I hereby give my permission for him/her to participate in ALL field trips sponsored by the University of Northern Iowa Classic Upward Bound Program during the Summer Residential and the Academic Year Program. [He/she] understands he/she is to follow all rules of the Classic Upward Bound Program while participating in these field trips.
Furthermore, I will not hold the University of Northern Iowa or any of its employees or agents responsible for any accidents, losses, damages or injuries resulting from the son/daughter’s participation in any or all the field trips. I also release the Classic Upward Bound Program, the University of Northern Iowa, and its employees and agents from all liabilities.
The victim’s mother signed and dated the form, and also signed another form which read, in part:
Release and Medical Authorization
Read Carefully –
This document is a release and authorizes medical treatment.
In consideration of the University of Northern Iowa granting the student permission to participate in the Classic Upward Bound Program, I hereby assume all risks of her/his injury (including death) that may result from any program activity. As parent/guardian I do hereby release and agree to indemnify, defend and hold harmless the University of Northern Iowa, State Board of Regents, State of Iowa, Classic Upward Bound and its officers, employees, agents and all participants in the program from and against all liability including claims and suits of law or in equity for injury (fatal or otherwise) which may result from any negligence and/or the student taking part in program activities.
I certify that within the past year the student has had a physical examination and that she/he is physically able to participate in all Upward Bound activities.
In the event of injury or illness, I hereby give my consent for medical treatment, and permission to program staff for supervising and performing, as deemed necessary by staff, on-site first aid for minor injuries, and for a licensed physician to hospitalize and secure proper treatment (including injections, anesthesia, surgery, or other reasonable and necessary procedures) for the student. I agree to assume all [costs] related to any such treatment. I also authorize the disclosure of medical information to my insurance company for the purpose of this claim. I understand each student must provide her/his own medical insurance.
I understand that I am responsible for any medical or other charges related to the student’s attendance at the University of Northern Iowa Classic Upward Bound Program.
The victim’s mother sued the State of Iowa and the university (the “defendants”). The defendants asked the court to dismiss the lawsuit on the ground that the mother waived any claims for negligence. A trial court ruled that the release form constituted a valid waiver of the mother’s claims. The mother appealed.
On appeal, the Iowa Supreme Court ruled that public policy prevented parents from releasing the legal claims of their minor children: “Like a clear majority of other courts deciding such releases are unenforceable, we believe the strong policy in favor of protecting children must trump any competing interest of parents and tortfeasors in their freedom to contractually nullify a minor child’s personal injury claim before an injury occurs.” The defendants asserted that if parental waivers are rendered unenforceable, then “recreational, cultural, and educational opportunities for youths will cease because organizations sponsoring them will be unable or unwilling to purchase insurance or otherwise endure the risks of civil liability.” But the court disagreed: “We believe the fear of dire consequences from our adoption of the majority rule is speculative and overstated. We find no reason to believe opportunities for recreational, cultural, and educational activities for youths have been significantly compromised in the many jurisdictions following the majority rule. In the final analysis, we conclude the strong public policy favoring the protection of children’s legal rights must prevail over speculative fears about their continuing access to activities.” Galloway v. State, 790 N.W.2d 252 (Iowa 2010).
Case study. A New York court ruled that a release form signed by a high school student and his parents did not relieve a church-operated school from liability for injuries sustained by the student when he was sexually assaulted by other students while on a school-sponsored trip to Europe. The court concluded that the release form was “unenforceable because it does not clearly and unequivocally express the intention of the parties to relieve the [defendants] from liability for injuries sustained as the result of their negligence.” John Doe v. Archbishop Stepinac High School, 729 N.Y.S.2d 538 (2001).
Case study. A 5-year-old boy had his birthday party at a commercial facility with an indoor play area that contained inflatable play equipment. Before the party, the boy’s father signed a liability waiver on his son’s behalf. The waiver provided in pertinent part:
THE UNDERSIGNED, by his/her signature herein affixed does acknowledge that any physical activities involve some element of personal risk and that, accordingly, in consideration for the undersigned waiving his/her claim against BOUNCE PARTY, and their agents, the undersigned will be allowed to participate in any of the physical activities.
By engaging in this activity, the undersigned acknowledges that he/she assumes the element of inherent risk, in consideration for being allowed to engage in the activity, agrees to indemnify and hold BOUNCE PARTY, and their agents, harmless from any liability for personal injury, property damage or wrongful death caused by participation in this activity. Further, the undersigned agrees to indemnify and hold BOUNCE PARTY, and their agents, harmless from any and all costs incurred including, but not limited to, actual attorney’s fees that BOUNCE PARTY, and their agents, may suffer by an action or claim brought against it by anyone as a result of the undersigned’s use of such facility.
During the party, the boy jumped off a slide and broke his leg. The boy’s mother sued the facility (the “defendant”) alleging negligence. The defendant asked the court to dismiss the case on the ground that the boy’s claims were waived by the release form signed by the father. The trial court ruled that the waiver barred the child’s negligence claim. A state appeals court held that the waiver was invalid to bar the negligence claim, and the case was appealed to the Michigan Supreme Court, which ruled that a preinjury release signed by a parent does not bar a child’s claims. The court observed:
A parental preinjury waiver is a contract. [The father] purportedly signed the contract on behalf of his son. Consequently, defendant necessarily asserts that the contract is enforceable against [the child] because [his father] had authority to bind his son to the contract. The well-established common law rule is that a minor lacks the capacity to contract. It is undisputed that if the five-year-old child had signed the waiver, the defendant could not enforce the waiver against him unless he confirmed it after he reached the age of majority.
At issue is whether a minor can be bound by a contract signed on his behalf by a third party. Specifically, can a parent bind his child by contract if the child could not otherwise be bound? Defendant insists that, under the common law, a parental waiver is enforceable to bar the claim of a minor child. However, the Michigan common law rule is clear: a guardian, including a parent, cannot contractually bind his minor ward. . . . The application of the common law in this case is simple and straightforward. The waiver at issue is a contractual release. [The father] signed the waiver on behalf of his son, thereby intending to bind [the child] to that contract. Under the common law, he was without authority to do so. Accordingly, the waiver is not enforceable against [the child] and does not bar his cause of action. Woodman v. Kera LLC, 486 Mich. 228 (Mi. 2010)
A few courts have reached the opposite conclusion, and have allowed parents to execute preinjury releases on behalf of their minor children. But note:
These cases represent a minority view that has been recognized in only a few states.
Many of these cases are older, and are of dubious precedential effect today.
Some of these cases are based on state laws that empower parents to sign preinjury releases on behalf of their minor children only in specific circumstances, such as equine events or skiing, and up to specified limits. These laws are subject to change.
Conclusion
While the courts loathe attempts to avoid the consequences of one’s negligence through release forms and assumption of risk forms, and will scrutinize such forms for any basis to avoid them, many will enforce them if several conditions are met.
For more information on the subject of release forms, see the partner article “A 16-Point Evaluation.”
State Statutes Allowing Parents to Sign Preinjury Releases on Behalf of Their Minor Children Note: Do not rely on information in this table without first consulting with legal counsel.
State
Statute
Text of Statute
Alaska
AK Stat. 09.65.292
(a) Except as provided in (b) of this section, a parent may, on behalf of the parent’s child, release or waive the child’s prospective claim for negligence against the provider of a sports or recreational activity in which the child participates to the extent that the activities to which the waiver applies are clearly and conspicuously set out in the written waiver and to the extent the waiver is otherwise valid. The release or waiver must be in writing and shall be signed by the child’s parent.
(b) A parent may not release or waive a child’s prospective claim against a provider of a sports or recreational activity for reckless or intentional misconduct.
AK Stat. 05.45.120
A ski area operator may not require a skier to sign an agreement releasing the ski area operator from liability in exchange for the right to ride a ski area tramway and ski in the ski area. A release that violates this subsection is void and may not be enforced.
Arizona
AZ Stat. 12-553
A. An equine owner or an agent of an equine owner who regardless of consideration allows another person to take control of an equine is not liable for an injury to or the death of the person if … the person or the parent or legal guardian of the person if the person is under eighteen years of age has signed a release before taking control of the equine.
B. Subsection A does not apply to an equine owner or agent of the equine owner who is grossly negligent or commits willful, wanton or intentional acts or omissions.
Colorado
CO Stat. 13-22-107
A parent of a child may, on behalf of the child, release or waive the child’s prospective claim for negligence.
Nothing in this section shall be construed to permit a parent acting on behalf of his or her child to waive the child’s prospective claim against a person or entity for a willful and wanton act or omission, a reckless act or omission, or a grossly negligent act or omission.
Florida
FL Stat. 744.301(3)
Nothing in this subsection limits the ability of natural guardians [includes parents] on behalf of any of their minor children, to waive and release, in advance, any claim or cause of action against a noncommercial activity provider, or its owners, affiliates, employees, or agents, to the extent authorized by common law.
Virginia
VA Stat. 3.2-6202
No participant or parent or guardian of a participant who has knowingly executed a waiver of his rights to sue or agrees to assume all risks specifically enumerated under this subsection may maintain an action against or recover from an equine activity sponsor or an equine professional for an injury to or the death of a participant engaged in an equine activity. The waiver shall give notice to the participant of the intrinsic dangers of equine activities. The waiver shall remain valid unless expressly revoked in writing by the participant or parent or guardian of a minor.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Regina Podolsky | Getty
A 16-Point Evaluation for Assumption of Risk Forms
Consider these key points in evaluating the validity of a release or assumption of risk form.
Many churches nationwide use some version of waivers and release forms with their events and activities, especially ones involving children and youth. Leaders wish to notify participants—or the parents or guardians of participants—about the potential risks involved.
They want a signature signaling the participant or parent acknowledges those risks and will not attempt to hold the church legally liable should one of those risks somehow result in an injury either to themselves or their children.
While waivers and release forms are an important part of a church’s risk management strategy, they aren’t perfect. They can help limit a church’s legal liability but often, they cannot fully eliminate it.
Unfortunately, many church leaders get lulled into a false sense of security about these documents, and these misunderstandings can lead to costly situations. Richard Hammar offers 16 key points to consider when creating and using waivers and releases at your church.
Release forms will be strictly and narrowly construed against the church.
The courts are more likely to enforce a customized release or assumption of risk form than a generic form found on the internet. Ideally, the form should be drafted, or at least reviewed, by legal counsel. The importance of legal counsel in drafting release forms is illustrated by a recent federal court ruling in Tennessee. The case involved a legal form used by a church that was found on the internet. Church leaders failed to notice that the form required all employment disputes to be arbitrated in California! Clearly, the church was using a template that was intended for use in California, and neglected to make it Tennessee-specific. An attorney would have flagged this provision, and spared the Tennessee church of the needless expense of arbitrating in California.
Release forms will not be enforced if they are ambiguous.
Release forms will not be enforced if the person signing the form does not do so voluntarily.
Release forms will not be enforced if the person signing the form is not informed (by the language of the form) as to the specific risk that is being released. Activities giving risk to injuries must be specifically described along with a listing of the possible injuries.
Releases and assumption of risk forms should contain language releasing the releasee from liability based on the negligence of itself or its agents “to the fullest extent permitted by law.”
Releases and assumption of risk forms should refer to both known and unknown risks associated with the planned trip or activity.
Releases and assumption or risk forms are contractual documents, and so the requirements for a valid contract must be met in order for such forms to be legally enforceable. One common mistake in drafting such forms is a failure to identify “consideration” provided by the releasee to the releasor in exchange for the releasor’s commitment to release the releasee from liability. The form should begin with the following or similar language: “In consideration of my being allowed to participate in [name the event] and other valuable considerations the receipt of which is acknowledged, I hereby agree to the following … .”
Several courts have ruled that release forms cannot relieve a church from liability for injuries to minors, since minors have no legal capacity to sign such forms and their parents’ signature does not prevent minors from bringing their own personal injury claim after they reach age 18. Some states have enacted legislation giving parents the legal authority to release their minor children’s claims. But, there are still limitations that may prevent parents from releasing their children’s claims (i.e., voluntary and informed consent, and no release of gross negligence or reckless conduct).
Many courts have refused to enforce release forms that attempt to avoid liability for intentional acts, gross negligence, or willful or wanton conduct. If a release form does not explicitly exclude such conduct from its terms, the form may be invalidated by a court.
Some courts refuse to enforce release forms if they are “contracts of adhesion” based on a gross disparity in bargaining power between the releasor and releasee. To illustrate, if the person signing a release form has no ability to change it, this may suggest an unenforceable adhesion contract. On the other hand, some courts have ruled that a release form is not an unenforceable contract of adhesion if the party signing the form could walk away from the transaction and do business elsewhere. This exception may or may not apply to a church, depending on the circumstances. After all, is it realistic to say that a church member has the right to walk away and attend another church, and therefore a release form is not a contract of adhesion?
Some courts refuse to enforce a release form that is inconspicuous. To illustrate, if the language of release is not in bold font that is larger than the remainder of the document text, or is buried in another, larger document, without a bold heading and other devices to draw attention to it, it may be unenforceable. A release or assumption of risk form should be a separate document that is not commingled in a larger document, such as an application or registration form.
Some courts have ruled that release forms that do not contain a signature by the releasor are unenforceable. To illustrate, if the language of release is contained in a larger document, a signature line should appear directly after the language of release as well as at the end of the document.
Avoid use of release forms that contain the signatures of everyone on a trip. Each participant should sign his or her own form.
Churches that send groups of adults to other locations for short-term missions projects should consider having each participating adult sign an assumption of risk form. So long as these forms clearly explain the risks involved, and leave no doubt that the signer is assuming all risks associated with the trip, they may be enforced by the courts. This assumes that the signer is a competent adult. Churches should consult with an attorney about the validity of such forms under state law.
Churches should not allow a minor child to participate in any church activity (such as camping, boating, swimming, hiking, or some sporting events) unless the child’s parents or legal guardians sign a “parental consent form” that:
consents to their child participating in the specified activity;
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);
lists any allergies or medical conditions that may be relevant to a physician in the event of an emergency;
lists any activities that the parents or guardians do not want the child to engage in; and
authorizes a designated individual to make emergency medical decisions for their child in the event parents or guardians cannot be reached.
Ideally, a parental consent 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.
Note: Churches should not use releases or assumption of risk forms without discussing them with their insurance agent and a local attorney.
A pastor’s sabbatical is a time of refreshment and rejuvenation is common, but a sabbatical comes with tax implications.
While churches desire a sabbatical to be both beneficial to the pastors and a blessing, when it comes to taxes, many common practices surrounding sabbaticals create unanticipated adverse consequences for both churches and pastors. Several questions commonly arise from the practice of sabbatical programs offered by churches.
If a church wants to provide a month-long sabbatical to all full-time, credentialed pastors, can the church continue to pay a pastor’s regular salary during the sabbatical?
A sabbatical is generally a vacation and can be offered at will by the church. A sabbatical can be considered “paid” time off and compensation related to the time off is fully taxable. However, the extent of paid time off should be reasonable considering the pastor’s tenure with the church. For example, the IRS could consider granting an extended sabbatical a form of unreasonable compensation, if the pastor has only worked at the church for a few years.
If a church provides its pastor a sabbatical and agrees to cover the cost of a special trip providing a time of renewal with the pastor’s family, are the related expenses taxable to the pastor?
Yes, the payment of personal travel expenses is taxable to the pastor. While a church may see the benefit of a time of renewal, this purpose is not recognized as a business purpose by the Internal Revenue Code (IRC) and a pastor cannot convert personal expenses into business expenses.
Our pastors are expected to study and pray for the future vision of the church during their sabbatical. Does this required activity allow the related expenses to be business expenses?
An expectation of spiritual development may appear to have a business purpose for a church, but it does not turn travel that is inherently personal in nature into a business trip. There must be a business purpose for the travel for it to be considered business travel. Since activities involving personal spiritual development and prayer don’t require a destination, the IRS doesn’t agree that traveling to another destination is required to accomplish these purposes.
Our pastor believes visiting various historical sites provides a better education or understanding of biblical events, places, and people and is planning on spending part of the sabbatical in the Holy Land. Can the church cover the expenses, tax-free, related to this trip?
IRC Section 274(m) disallows a deduction for any travel expenses where the travel itself is a form of education. While the “deduction” is not in question, amounts disallowed under IRC Section 274 generally fail the definition of business expenses allowed under IRC Section 162. These rules apply to trips where a taxpayer is not completing a specific course of study or attending a specific educational event, but rather the trips simply provide a greater knowledge and understanding of an area that will enhance the traveler’s abilities. In cases when pastors may determine their own itinerary, the trip is considered a personal trip and not a business trip.
Are there times when the church can pay sabbatical expenses without creating taxable income to the pastor?
For a church to pay sabbatical expenses tax-free, the trip expenses must rise to the level of a business expense as allowed by IRC Section 162 and Section 274. The IRC requires the predominant or primary purpose for travel to be the conduct of a business activity. Emphasis on the “predominant” or “primary” is an important attribute. Where the predominant purpose for the trip is personal in nature, integrating a small amount of a business activity does not translate the entire trip into a business trip.
For example, during a sabbatical a pastor and his family go to California for two weeks. During the trip, the pastor attends a conference for two days. Since the majority of the days are spent on personal activities, the trip is not considered as “primarily” taken for business. Likewise, travel expenses, such as airfare, are not considered business expenses in this scenario. The church may only pay for the conference fee and any of the related travel expenses on a tax-free basis, i.e., the cost of the hotel during the conference and any meals on conference days.
How are any taxable expenses reported?
Personal expenses covered by the church represent additional taxable compensation and must follow the compensation rules:
Payment of the expenses must be approved by the appropriate board or committee.
Payment of the expenses must not cause a pastor’s compensation to exceed reasonable compensation for services provided to the church.
Payment of the expense must be included in Box 1 of the pastor’s Form W-2.
Should the church be concerned about excess benefit transactions and intermediate sanctions under IRC Section 4958?
If the pastor taking the sabbatical is considered a disqualified person under IRC Section 4958, the church must be concerned about excess benefit transactions. There are two common ways excess benefit transactions are created from sabbaticals:
If the payment of personal expenses results in excess or unreasonable compensation, the amount of unreasonable compensation is an excess benefit; or
If the payment of expenses is not approved by the proper board or committee as additional compensation, and it is not included on the pastor’s Form W-2 as compensation, then it is considered an automatic excess benefit transaction even if the expenses would not have created unreasonable compensation if properly approved and reported.
What are the consequences of excess benefit transactions (EBT)?
The assessment of intermediate sanctions and the required repayment of the expenses to the church are the consequences of the EBT. Sanctions include an initial sanction of 25 percent of the EBT with a potential additional assessment of 200 percent if the expenses are not repaid to the church in a timely manner. Additionally, any individual who agreed with the transaction, for example a finance committee member or a board member or other executive officer, may be assessed a sanction of 10 percent of the EBT. In rare cases, and generally only when EBTs are extensive, a church’s tax-exempt status may be revoked (although the law does provide that the church’s tax-exempt status may be revoked at the existence of one EBT). In cases where an EBT could exist, the church should never pay for the expenses initially—thus avoiding any future potential sanctions or complications.
Conclusion
If a church is going to create a sabbatical policy for its pastors, the church should clearly state the expenses it will and will not cover during the sabbatical and what expectations it has of pastors during a sabbatical.
If a church is providing for personal expenses, a policy should clearly indicate the expenses to be included in taxable income. Not only does this create clear expectations between a church and its pastors, this allows both planning for the payment of expenses and planning for any related tax consequences. And, while we have addressed pastoral sabbaticals, in general, the rules apply to any staff member when working with a sabbatical.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
IT Strategies for Churches: Expert Tips for Effective Management
Discover IT strategies for churches to manage technology, budgets, and personnel effectively.
Nick B. Nicholaou is president of MBS Inc., based in Huntington Beach, California. In his role with MBS—which stands for Ministry Business Services—Nicholaou has served churches as an IT (Information Technology) consultant and strategist for many years. Since 1987, he has helped churches through a number of IT transitions, and he wrote the forthcoming Christianity Today book Church IT: Strategies and Solutions. I spoke with him about how churches should approach IT.
What common mistakes do churches make when it comes to IT support and personnel?
Church leaders tend to think they need somebody who’s a network administrator or engineer, and network engineers are really only needed when you’re designing a network or doing major updates to the network, and I mean at the server level and the configuration level.
What they really typically need is a help-desk person, someone who provides basic technological help, who can answer the question, Why can’t I print? or Why can’t I connect to this webpage? Here’s why the difference is significant: engineers communicate very differently than help-desk people. Help-desk people tend to be very patient and much better at supporting folks who are in the church community.
Also, there’s a big difference in annual salary. The difference is between $20,000 and $25,000 lower for a help-desk support technician than it is for a network administrator or network engineer.
How difficult is it for a church to balance its desire to stretch its budget with the need to maintain essential IT services and proper security?
Well, it’s not difficult if the people setting your technological strategy and standards understand the balancing needed to do so. Typically, churches either underspend or overspend in their purchasing. The same is true for engineering needs.
Underspending would suggest that a church is looking for an inexpensive solution, typically the kind of thing on the shelf of a big-box store. But those are usually consumer-grade technologies rather than enterprise-level technologies—and the difference is significant, as far as how reliable the system is going to be on an ongoing basis. So actually, those inexpensive technologies can end up costing you much more over time. What churches really need to do is buy technologies with enterprise-level specs but be careful to not add a bunch of unnecessary features to those options, because that wastes money.
I recommend churches buy what they need now and up to two years into the future. Don’t buy thinking, Well, in the next four or five years, we’ll be at this level or that level, because technology is going to go down in cost by then. Plus, some technologies may move in a different direction.
The term you used was enterprise-level specs. What do you mean?
Enterprise-level specs are technologies that come with specs—or specifications—that fit the needs of businesses. Typically, you cannot buy enterprise-level specs in a retail store. Retailers stock consumer-grade items. You must purchase enterprise-level hardware and software directly from the manufacturer.
Generally, when people build computers for home use, they say, “Well, I need a hard drive,” look up all the specs, and then choose the one in the price range that will meet the target specs. If someone is looking for a less expensive price, the enterprise-level versus the consumer-level might not be a very big difference in dollars; it might only be $20.
But the consumer-grade solution won’t perform as well over time under stress in an enterprise (business) environment like a church office. As a result, churches end up spending more in the long run, not only on support issues, but also on the loss of time and productivity as staff members experience delays from the poor performance of the consumer-grade solution.
What are software charity licenses, and how can churches take advantage of them?
Microsoft and other companies have different license categories, more than just the retail category offered in stores and online. Most of the time we only think of retail because that’s all we know. But if a church is paying retail for its software licenses, then it’s most likely significantly overpaying.
Microsoft offers charity licensing, as do a number of other companies. In that, the church is able to save significant dollars. For instance, Microsoft Office, which might go for about $350 per license at retail, costs only about $50 with charity licensing.
How do churches learn more about charity licensing?
You can ask the company. When you do, make certain to read the fine print involved with the charity licensing to make certain the company’s requirements for qualifying align with your church’s beliefs and values.
What is the difference between a Voice over Internet Protocol (VoIP) telephone system and a traditional telephone system?
A traditional phone system uses phone lines called POTS lines, and believe it or not, that stands for plain old telephone system.
VoIP systems transmit calls using network cables rather than POTS wires. With VoIP systems, it can all be done over the internet.
What are the pros and cons of VoIP versus POTS?
VoIP systems can be significantly less expensive than the normal telephone company, but that’s a very small slice of the savings. The bigger savings is the cost of the internal phone system for a church.
Typically, people will spend tens of thousands of dollars on a phone system, and VoIP takes the most expensive component of that phone system and reduces it to zero, or maybe a little bit because you’re going to have to pay somebody to configure it for the church, but it’s not very much money at all.
Some church leaders feel like their churches are IT-challenged, as far as strategy and direction. What advice do you have?
One of the things that will help them is to understand that there are really four disciplines in IT: audio/video, graphic design, social networking, and infrastructure, and each one has different strengths and weaknesses. So, you really need to think about the four disciplines to make sure you’re accomplishing all you want to.
If you’re a typical church with a limited staff, what’s the best way to get the most bang for your buck personnel-wise to deal with the most common IT issues?
As I mentioned, there are really four different disciplines in IT, so churches need to recognize the fact that if somebody is great at graphic design, they are probably not the best person to do infrastructure. Or, if somebody is infrastructure, they’re probably not the best person to do social networking.
It’s important to frame the question or identify the need in light of the four disciplines and look for a solution that is discipline-specific.
Image: Tetra Images | Getty
Why Financial Documentation Is a “Must” for Your Ministry
Keeping track of paperwork and processes is vital for your church.
One saying that’s been used in our organization for years is “If it’s not documented, it’s not done.”
Documenting your processes and procedures is important for efficiency and effectiveness. From a risk-management standpoint, it is also imperative. Consider what would happen if your key financial person was suddenly out for three months—a realistic possibility that has affected many ministries in the past. Would your ministry be prepared to have someone step in and continue providing the same level of financial service without significant difficulty?
The Sarbanes-Oxley Act of 2002 is commonly thought to only impact for-profit companies. However, it contains two provisions that apply to all corporations, including nonprofits: (1) whistleblower policies and (2) document retention and destruction policies. This reflects the importance that should be placed on documentation—not only what you document, but how long you keep documentation and how you dispose of it when an appropriate amount of time has passed.
If you don’t have effective written documentation in place, start by considering the following:
Corporate and administrative matters
Are you in compliance with your governing documents, such as the bylaws or constitution?
Do you have a conflict of interest policy, and are questionnaires completed annually by board members as well as individuals in leadership?
Have you adopted an accountable reimbursement plan to allow for non-taxable reimbursement of expenses?
If anyone in the church creates intellectual property (such as books, music, or dramatic presentations), do you have a policy identifying the owner of those works?
Human resource matters
Do you have a personnel manual? Are employees required to sign that they have read and understood its contents?
Are you consistently enforcing personnel policies?
Who is responsible for confirming that all employment laws are being followed?
Accounting matters
Consider documenting the following processes:
Risk management
Ensure leadership has brainstormed the various risks related to the organization, identified those of greatest concern, considered options to mitigate the risks, and created a monitoring policy to verify those practices continue to operate as planned.
Cash receipts
Document how money comes in and how it is controlled. You certainly have contributions, but even those amounts could be received through offerings, online, or in other ways. You also have various forms of program revenue, and those amounts can sometimes be the most difficult to control because you may not be certain when and how the funds will be collected. Create written procedures for handling cash received and distribute the instructions to anyone involved in those processes.
Cash disbursements
This is one of the most common areas in which fraud is committed. Review your current practices to ensure suitable segregation of duties are in place and document those procedures so everyone understands their role. You don’t want to put the ministry—or your employees and volunteers—at risk.
Payroll
Payroll processing should not only be well-documented for the sake of internal controls, but also from a procedural standpoint. Many of your employees will not be able to wait long if the person who normally processes payroll is unable to complete the task. Make sure that passwords, while still secured, are available to more than one person, and that others are cross-trained to perform these functions should the need arise.
General ledger activity
The process for recording journal entries, preparing month-end reconciliations, and generating monthly financial reports should all be thoroughly documented to include specifics related to your software. This is an area where efficiency will be most evident. Someone will eventually figure out how to perform these tasks, but having adequate information in a procedures manual will make it much easier.
Next steps
After you have considered the items above, the next steps are to:
Review corporate policies and make sure all needed documents are in place.
Update the personnel manual as well as the accounting policies and procedures manual.
Verify that you have a record-retention policy and that you are in compliance with it.
The lists above are not meant to be exhaustive; rather, they should encourage you to think about the operations in your own organization and what may be necessary. You may also want to retain an expert to help you, such as an attorney, accountant, or human resources specialist. It is better to be proactive, and paying a small amount now may save you a lot of staff time or a larger bill later.
Once you have documented the policies you understand to be important, make sure you have a routine process for updating them. Overall, it takes less effort to keep documentation up to date than it does to start over from scratch every few years. This is not an exercise in which you can check something off a list and never revisit it.
This process is for yourself, your staff, and anyone who may follow after you. Trust me, you will be appreciated for your efforts!
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.
Image: AdobeStock/Nawarit
Protecting Your Church From an Active Shooter Scenario
A police officer’s advice on how to prevent and react to a gunman at church.
Andrew G. Mills
Churches are notorious for minimal security. And while acts of violence at church are rare, recent shootings at churches and schools beg the question: What can leaders do to protect their people? Based on experience in the pulpit and on the police force, here are four steps you can take to reduce risk—and possibly save lives—at your church.
Step 1: Work with local police
Most police agencies have adopted an “active shooter” philosophy.
Designate one of your church leaders to meet with the police and review their strategy for responding to a shooting in your building.
Educate your congregation on your church’s policies for responding to an emergency, perhaps through a brochure or a segment of your new member’s class.
Step 2: Create a survey of your facility for police
Include in your overview:
Blueprints and photos (digital and hard-copy) of every room in the church to guide officers as they secure the church building
Emergency contact information for the church pastor, property manager, medical personnel, and members of the church’s crisis-response team
Keys to outside and classroom doors
Shut off points for gas, water, and electricity
Designated rally points for families and medical triage
Any knowledge of existing threats, including anyone against whom the church or a member has a restraining order
Step 3: Create a lockdown policy
If your local police department has an active shooter policy, a lockdown may be the best way to protect the segment of your congregation that is in the building during a shooting but outside the immediate vicinity of the shooter. During a lockdown, certain areas of the church are required to shut, lock, and barricade their doors until police arrive. Those inside during a lockdown should stay away from windows and leave room lights on to ease the police team’s search. Before instituting such a policy:
Determine which church leaders can order a lockdown and under what circumstances.
Identify who can enter protected areas (such as the nursery), and how or if parents can retrieve children during a lockdown.
Provide telephones or intercoms that allow each lockdown area to communicate outside the building.
Step 4: Prevent an incident
Increase effort. If a shooter plans an attack on your church, he will likely arrive after the service begins. Make it difficult for an intruder to enter your church unnoticed and take a seat wherever he wants. A simple step involves closing sanctuary doors once a service begins and training ushers to meet latecomers and guide them to designated seating areas.
Reduce risk. Create visual or lighting obstructions, isolating threats from the body of believers.
Plan in advance. Every church should be prepared by appointing a crisis response team consisting of several people with police, military, or medical training.
Reduce provocation. Set guidelines for denying access to people who are unstable, agitated, angry, or intoxicated. Train ushers to identify the warning signs of such a person, and coach them to deny access firmly, but respectfully.
If a Shooter Gets In…
It is critical for leaders to be decisive. If the gunman targets a pastor or some other leader, those most visible should draw attention away from the congregation. If the shooter targets the congregation, direct confrontation is essential. This is dangerous, but you can improve your chances by distracting the shooter. Weaken his shooting ability by throwing hymnals, yelling from multiple directions, and tackling him from behind.
If the shooter does not penetrate deep into the sanctuary and is shooting randomly, take cover behind a pew, pillar, or balcony. Most shooters will be well armed and intend to inflict maximum damage. Recognizing the grave danger, church leaders and members of a crisis team can save lives by closing the gap between themselves and the shooter and overwhelming him.
Once a shooting begins, establish communication with the police as soon as possible. Avoid chaos by assigning only people on your crisis response team to call 911. Police will want to know the number of shooters, location of suspects, types of weapons, possible traps or explosives, immediacy of threat, and location of sensitive areas such as Sunday schools or nurseries. The emergency dispatcher will instruct the caller to stay on the line in order to provide real-time information to police on the scene.
When police arrive, stay on the ground until you are told to move. But movement creates confusion and complicates the situation for police. When you do get up, avoid sudden movements or any object in your hand that could be construed as a threat.
Andrew G. Mills is Chief of Police; Eureka, California.
Q: I’m trying to put the numbers together for next year’s budget, but I’m getting little cooperation from the church’s ministry leaders. Information isn’t submitted on time—or at all—and the board doesn’t mandate compliance. What should I do?
It is difficult if you don’t have the cooperation of ministry leaders or the board. Without cooperation from these principal parties, you are certainly fighting an uphill battle.
The best way to get ministry leaders to participate in a meaningful way is to include an element of accountability. Talk to your senior pastor about including budget results in the annual evaluation for ministry leaders. That means effort needs to be placed on tying the budget to ministry objectives and measuring results on a consistent basis.
To get the board more engaged, consider some practical training that includes information on historical trends (without overwhelming them). Information and education are power! If they clearly understand how financial results drive or restrain ministry, they will likely begin to take more interest in the process.
So, do what you can to help them realize the budget is there not to keep them from doing ministry but to make sure funds are available for the ministry they see as critical. When both ministry leaders and the board see the budget process as a tool to focus the efforts of the church, and not just a constraint, you will hopefully gain greater cooperation.
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.
Image: AdobeStock/lashkhidzetim
How to Ensure Effective Board Training
Ideas for maximizing the work of your church board.
Board members volunteer their time, talent, and treasure for the sake of your ministry. They are often well-intentioned, but they are not always well-equipped. Fortunately, there are ways you can help your board members become more effective in their roles and therefore better at providing both oversight and insight for your church.
The role of a board member comes with significant responsibilities. Board members must exercise the duty of care and the duty of loyalty, meaning they must act in the best interests of the organization and set aside any personal opinions or agendas. They are held to the standard of doing what a reasonable person would do in the same situation.
At the same time, board members may wear several “hats” within the church. They might put on the volunteer “hat,” for example, when they lead a small group or help with the parking ministry. They may wear the parent “hat” when considering the impact of a ministry decision on their children in the nursery or the high school youth group. The donor “hat” is worn when they determine how they will tithe and what additional ministries or church needs they will support.
However, it is imperative that board members not put on the wrong “hat” when they act on behalf of the church, and that their role as board members is clear to them and to those with whom they speak. When wearing a board “hat,” someone speaks as a voice of the whole board and acts only as directed by the board.
Training Your Board
Churches have opportunities to improve the skill set of board members beginning with the start of their tenure and continuing throughout their term. An intentional focus on board development will yield significant results: not only will it be helpful to the ministry, but it will invest in those individuals and make the board an attractive place to serve.
Starting Off Right
When new members join the governing board or a committee, make sure they have the information necessary to start well. Provide them with organizational documents, such as bylaws and the constitution, as well as meeting minutes from the last couple of years. In this way, they can better understand the inner workings of the ministry. They may have been involved or participated in the church for a long time, but the average churchgoer doesn’t typically understand the church’s corporate activity or the information that was considered before decisions were made.
New members need to understand the board’s type of governance. Does it follow a policy governance model or is it more of a decision-making or operational board? Help individuals know what that means for them specifically and what their roles are. They should also be made aware of the overall organizational chart of the ministry, their primary contact for questions, and information about various committees and terms of service.
Keeping Up the Momentum
Ongoing training should be considered as part of each agenda or at least at regular intervals (e.g., quarterly). The topics can vary, but they should eventually cover all areas of key oversight. Encourage ministry leaders to bring information regarding their involvement in different programs and the effect of those programs.
Be sure there is specific training provided for committees such as finance and personnel. Information can change rapidly in these areas, and the effect can be significant; you can’t risk being out-of-date. A broader perspective with updates should be provided to the overall board, so that they are aware of the risks and have the necessary knowledge to make decisions.
Potential topics for board member training include:
Risk management
Understanding financial statements
Human resource compliance
Housing allowance and tax matters
Internal control structure
How to build reserves
Budgeting for ministry
Legal exposure
Bringing in Outsiders
An outside perspective for some of the training may be beneficial. Qualified individuals in your church can provide great context and invaluable history, and sometimes it’s appropriate to tap into the expertise of a specialist, whether that specialist is an attorney, HR consultant, or CPA. A specialist could also be a facility expert, a banker, or someone from within the denomination. Any outside resource, though, must understand what you are seeking to accomplish, and they must be well-versed in how ministries operate. As there are many unique areas in a church, the trainer must clearly understand them.
Board training needs to be a joint effort between the board and leadership. Colossians 3:23 reminds us that whatever we do should be done with excellence, and serving as a board member (along with assisting those who do) should be no exception. Any training plan you create will certainly be adjusted over time, but the important first step is to start with an idea of what constitutes effective training and how it can be accomplished.
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.
Image: Adobe/Song_about_summer
Lessons Learned During Our Church’s Capital Campaign
Six key insights from a church capital campaign, from planning to maintaining unity and donor engagement.
We’re in the middle of the “public phase” of a capital campaign at my church, and during the whole process I’ve learned:
1. You’ll repeat yourself … a lot!
Our teaching pastor repeated the core message of our campaign 19 times before it was finally released in the last public message. We worked on the core messaging for months and then talked with leaders and core donors multiple times. We were prepared to repeat ourselves.
Campaigns like this require leaders to communicate the same thing over and over in a number of different ways. Choose your campaign focus wisely because you’ll be living with this content for an extended amount of time. (The public phase is just the beginning. You’ll be talking about these areas for years as you keep people excited for the mission!)
2. The strategy isn’t magical. It’s a lot of work.
We’ve been planning for our campaign over the last two years. We talked with multiple firms that help with this sort of thing. We interviewed other churches who have been through it. I wanted to make sure we understood the dynamics at play that make campaigns “successful.”
I found that most churches and campaign companies follow a similar pattern or strategy in communicating a campaign like this. It generally falls into this sort of timeline:
Leadership: Church leaders sort out the core elements of the campaign.
Core Donors: A small percentage of donors that represent a disproportionate amount of the church’s revenues will be invited to a series of meetings to get them in on the ground floor
Volunteers and Other Donors: Church leaders talk with all the other donors and people who donate time to the church to get them fired up for the mission.
Public: A series of Sunday services will be aimed at everyone else to bring them along.
Pledge Weekend: Everyone is asked to let the church know how they will respond to the vision
Follow Up: An extended time is given to vision casting and following up with everyone who has pledged to give to the campaign
It’s actually not that complex but each of those steps is a tremendous amount of work. Doing them well is an all-consuming process. It requires an “all hands on deck” approach to ensure everyone is pointing in the right direction.
3. Many churches don’t meet their pledges.
Go talk with a bunch of churches who have completed their campaigns, and you’ll see an unsettling trend: Many churches have great initial pledges come in but they don’t collect on all those good intentions. It seems like people are fired up to be part of a campaign on the front end but then lose steam over time.
The problem is many churches make financial commitments on the back of these campaigns and end up taking on debt to make their plans come through. Ensure your campaign consultant is on the hook to help you through the follow-up process. Make sure there is a clear plan of attack for how you are going to keep people interested in the vision long after the pledge weekend.
4. It’ll take longer and cost more.
You can’t do this overnight, and it’s going to cost you a bunch of money to do well. The “public phase” of our campaign is six weeks long. We spent six months—hundreds (maybe thousands) of team hours in preparation. There was a budget for all the support materials and events. Most of that money was gone before we were a third of the way through. We needed to reassess what it was really going to take and increase our spending. It costs a lot of money to communicate clearly and raise these sorts of resources.
5. It’ll strain your team unity.
At the beginning of our campaign, our coach, George, met with our staff and charged us to protect our unity through this process, and I’ve valued that input many times.
During the capital campaign, a lot of money will be focused on a few areas at your church, and that imbalance may make some leaders feel left out.
Your team members will also have extra events to run, people to meet with, materials to produce, videos to edit—on top of their normal work. People will be stressed and might be tempted to get short with one another. Intentionally work hard to pull everyone back together and work toward unity.
6. Weekend attendance will take a hit.
Before we launched the campaign, a number of churches that have completed campaigns told us that weekend attendance will take a hit, and it’s happening to us. We put the “public phase” in a time when we normally see increasing attendance growth in our campuses, but we’re seeing the opposite trend during this campaign. It’s a part of the cost of launching this sort of initiative. Some people will simply opt-out of all this “vision” talk and simply not come. Make sure to plan a strong “recall” campaign after the “public phase” to encourage people to come back.
Rich Birch serves as part of a four-member Lead Team at Liquid Church in the Manhattan facing communities of New Jersey.
