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Selecting an Attorney or CPA

How should a church quickly find an attorney or CPA when the need arises?

A church dismisses an employee for violating the church's employment standards. The dismissed employee sues the church for wrongful discharge and discrimination. The church delivers the lawsuit to its insurance company. Several days later, the insurance company issues a letter to the church, informing it that the lawsuit is not covered under the church's insurance policy. The church board is left with the task of quickly locating an attorney to file an answer to the lawsuit and defend the church. How should it do so?

Start by completing the following exercise to test your knowledge. Then read on for a summary of this topic.

  1. A good way for a church to find a CPA to conduct an audit is to contact other churches in the community that have annual audits and obtain references.
    True or False
  2. Churches that are sued should immediately submit the lawsuit to their insurance company to determine if it is covered under the church's insurance policy.
    True or False
  3. If a church is sued, and its insurer determines that the case is covered under the church's insurance policy, then the insurer rather than the church is responsible for retaining an attorney and defending the church.
    True or False
  4. If a church is sued, and its insurance company denies coverage, then the church must select its own attorney and pay all legal fees incurred in the defense of the case.
    True or False
  5. Selecting attorneys to represent a church on the basis of personal acquaintances of individual board members is not always a good idea.
    True or False

There are occasions when a church board must hire an attorney or CPA. Here are some examples:

* A church board hires a CPA firm each year to conduct an audit of the church's financial statements and records.

* A church dismisses an employee who later sues the church for discrimination. The church board discovers that the church insurance policy does not cover employment practices, and so it is forced to hire an attorney to defend the church in the lawsuit.

* A church receives a $100,000 gift in the will of a church member who died recently. The church is immediately contacted by an attorney representing the deceased member's heirs, demanding that the church renounce this gift in favor of the heirs. The church hires an attorney to represent its interests.

* A local tax assessor informs a church that a vacant tract of land that it owns is going to be placed on the tax rolls. The church hires an attorney to establish that the property is exempt from taxation.

* A local zoning board refuses to let a church purchase a tract of land for the construction of a new sanctuary. The church board hires an attorney to represent the church's interests.

* A church would like to prepare an employee handbook. The church board hires an attorney to assist with this project.

* A church member demands to inspect virtually all of a church's records in order to determine if the church is being governed properly. The church board hires an attorney to assist in responding to the member.

Church treasurers often do not know where to begin when faced with the need to hire an attorney or CPA. Here are some tips that may help:

Selecting a CPA

1) If you are looking for a CPA to perform an audit, then a good place to start is by contacting other churches in your community that have annual audits and obtain references. You can learn a lot through such contacts.

2) Ask CPAs how many churches they audit. If they don't audit any, then ask if they audit any nonprofit organizations. Ideally, you will want to stick with a CPA firm with experience auditing churches.

3) If you cannot find a local CPA firm with experience auditing churches, you should consider hiring a CPA firm from out-of-town. There are a few excellent regional and national CPA firms that have experience auditing churches. Their fees may be higher because of the travel that is involved, but the higher cost must be weighed against their expertise.

4) You should identify a few candidates for an auditing job, and then solicit bids from them.

5) Often, one or more members of the church board will be acquainted with a local CPA. This should not necessarily be the basis for hiring that person, especially if he or she lacks experience in working with churches.

6) For hiring someone to help with tax return preparation, be sure to do homework on the preparer’s background. A great place to start is the Internal Revenue Service’s online directory, which provides names and preparer tax identification numbers for the attorneys, CPAs, enrolled agents, and others who meet the IRS’s voluntary annual filing-season program requirements.

Selecting an attorney

1) Be aware that many lawsuits and legal claims will be covered by your church insurance policy. If so, then your insurer will provide your church with an attorney to defend you. You will have little or no role in the selection process. If you are sued, or threatened with a lawsuit by an attorney, you should immediately turn the lawsuit or correspondence over to your insurer to determine if it is a covered claim.

2) If a lawsuit or legal claim is not covered by your insurance policy, then you need to quickly hire an attorney to represent you. An answer to a lawsuit ordinarily must be filed within a very few days after it is served, and so you will not have much time. This is especially critical when your insurer spends several days evaluating coverage and concludes that the claim is not covered under your insurance policy.

3) If you are looking for an attorney to assist with a specific legal issue, contact other churches in your community to see if they have used an attorney for a similar issue, and if so, ask for their evaluation of their attorney.

4) If your legal issue requires a specialized knowledge of church or nonprofit law, then call several local attorneys and see if they represent any churches or nonprofit organizations. Ideally, you will want to stick with an attorney with experience in handling your specific concern.

5) Unfortunately, few attorneys are able to specialize in "church law," and so many church leaders are unable to find an attorney in their community with experience handling church legal issues. In such a case, you should consider retaining an out-of-town attorney. There are a few excellent regional and national law firms that have experience representing churches. In some cases, their fees may be higher, but this is almost always offset by their expertise. Does it make sense to pay a lower hourly fee to a local attorney who has to spend hours educating himself about your issue, or, to pay a higher hourly fee to an specialist who will work significantly fewer hours? In addition, you are much more likely to receive a helpful and accurate response from an attorney who specializes in church law.

6) If possible, identify a few candidates for the job, and then solicit bids from them.

7) Often, a member of the church board will be acquainted with a local attorney, and will want to use this person to represent the church with respect to a particular issue. This should not necessarily be the basis for hiring an attorney, especially if the local attorney lacks experience in working with churches.

Quiz answers : 1) T 2) T 3) T 4) T 5) T

This article appears on ChurchLawToday.com's "Weekly Lessons," Treasurers & Bookkeepers. Learn more by subscribing to ChurchLawandTax.com.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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  • December 18, 2008

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