Church Executive Magazine Jan - Feb 2017 digital edition

JAN \ FEB • 2017

JASON HAYES: Creating a culture of generosity in a church plant

PLUS Financial wellness: an added benefit for your staff p10

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The financial pros & cons of facility repurposing p20 Good governance = good giving p22

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FROM THE EDITOR

Focus on: finance

churchexecutive.com Volume 16, No.1 4742 N. 24th St., Ste. 340 Phoenix, AZ 85016 • 800.541.2670

As 2017 kicks off, laying a solid financial foundation is top-ofmind for church leaders.

RaeAnn Slaybaugh Editor in Chief rslaybaugh@churchexecutive.com Stephen Gamble Art Director sgamble@churchexecutive.com

After all, it’s essential for effective ministry and church operations — from ensuring employees feel financially ‘well,’ personally; to ensuring good governance of finances (and, in turn, driving generosity); to the financial ins and outs of starting a Christian school.

All these considerations are vetted at length in several new though leader series offerings debuting in this issue of Church Executive.

Church financial wellness: an added benefit for your staff: ‘Financial wellness’ is one of the new buzzwords used to describe the range of financial services that some companies are making available to their employees — but what is it, exactly? On page 10, Louis P. Barbarin, CPA – Chief Executive Officer at MMBB Financial Services – explains.

“Employer-based financial wellness is often seen as a supplemental benefit, but the financial health of employees should be viewed in the same way as other health and wellness programs that employers offer,” Barbarin writes.

“These services don’t just take care of employees when they’re sick; they also lead to increased productivity as employees feel more confident about their financial circumstances.”

Good governance = good giving: On pages 22-23, an informative Q&A with John Regan, Partner and Chief Investment Officer at New York-based Permanens Capital, maps out how a clear financial plan — including a sound investment policy — protects a church, its ministries and its people from a potentially devastating financial misstep.

Worth noting: It can also drive better giving.

Regan explains how good governance and responsible investing can make the revenue stream more predictable; why an Investment Policy Statement (or written spend policy) is so critical; how a written spend policy can generate new funds; and more.

Financial management for Christian schools: If you’re considering launching a school at your church, check out this helpful new series from America’s Christian Credit Union, available in our January / February 2017 digital issue (churchexecutive.com/ digital-editions).

The first installment offers real-world advice from Robert “Bo” Gutzwiller, who has spent his life investing in private Christian schools and has served as an International Executive Board Member for the Association of Christian Schools, International (ACSI) and Western Association of Schools and Colleges. churchexecutive.com

Judi Victor CEO & Publisher / Director of Sales jvfly@churchexecutive.com

Gutzwiller discusses where to start (answer: with prayer), plus next steps: internal and external assessments.

Church trends & statistics: New for 2017, this new offering showcases studies and trend information near and dear to church leaders’ hearts. Curated by Assistant Editor Joyce Guzowski, in this issue we examine what Americans look for in a new church; findings from a recent Barna study on church planters’ finances; what’s behind a rise in volunteer use in churches and nonprofits; findings on teenagers’ perceptions of the Bible; and more.

You’ll also find a great article on page 20 which examines the financial pros and cons of facility repurposing. “Church Financial Planning” Series author Kari Boyce — who leads Business Development at Thrivent Financial for Church & Institution Financing (Church Loans) — acknowledges a major trends across American churches: taking advantage of vacant, non-traditional space for worship.

Big-box retail spaces. Drug stores.

Even corner bars and repair shops. All represent financial risks (but just as many opportunities!) for church leaders; the key is to be aware of them before you start down the path.

We hope these new offerings help you and your team start the new year off right!

Mitch Larson Business Manager mlarson@churchexecutive.com Blair McCarty Senior Sales & Marketing Coordinator bmccarty@churchexecutive.com Joyce Guzowski Assistant Editor jguzowski@churchexecutive.com Hollie Broadbent Marketing & Sales Associate hbroadbent@churchexecutive.com

EDITORIAL ADVISORY PANEL Stephen Briggs Associate Pastor of Administration First Baptist Church | Hendersonville, NC Denise Craig Chief Financial Officer Abba’s House | Hixson, TN Mike Klockenbrink Chief of Staff Lakeside Church | Folsom, CA Dan Mikes Executive Vice President Bank of the West | San Ramon, CA John C. Mrazek III Executive Pastor Pathways Church | Denver, CO Sam S. Rainer III Senior Pastor West Bradenton Baptist Church | Bradenton, FL Mark Simmons Business Manager Christ Community Church | Milpitas, CA

All the best,

Eric Spacek Senior Manager GuideOne Insurance | West Des Moines, IA

CLA LET’S CHAT: Email: rslaybaugh@churchexecutive.com Facebook: ChurchExecutiveMagazine Twitter: @churchexecutive.com

A publication of:

Church Executive™ Magazine is published bi-monthly by Power Trade Media, a division of The Producers, Inc., 4742 N. 24th Street, Ste. 340, Phoenix, AZ 85016. Subscription rates for non-qualified subscribers, single issue prices and pricing for reprints of 100 or more are available from: info@churchexecutive.com. All articles in Church Executive™ Magazine are copyrighted and may not be reproduced in whole or in part without the express written permission of the publisher.

Copyright 2016 by Power Trade Media. No advertisement, sponsorship or description or reference to a product or service will be deemed an endorsement by Power Trade Media, and no warranty is made or implied. Information is obtained from sources the editors believe reliable, accurate and timely, but is not guaranteed, and Power Trade Media is not responsible for errors or omissions. Opinions expressed in Church Executive™ Magazine are not necessarily those of the publisher or sponsors or advertisers. Content addressing legal, tax and other technical issues is not intended as professional advice and cannot be relied on as such; readers should consult with their own professional advisors.

January / February 2017 • CHURCH EXECUTIVE

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January / February 2017

CONTENTS

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NEW! CHURCH INVESTMENT SOLUTIONS

22

LIFETIME LEARNING

24

Q&A: Good governance = good giving A clear financial plan — including a sound investment policy — protects a church, its ministries and its people from a potentially devastating financial misstep. It can also drive better giving.

By RaeAnn Slaybaugh with John Regan

Management skills for more effective ministry

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How the Villanova University Master of Science in Church Management Degree is building capacity for leadership

26

NEVER AGAIN: BEYOND INSURANCE

Passing the ‘hot potato’: Contractual Risk Transfer In this issue, the focus is on Contractual Risk Transfer — used whenever your church employs a needed service provided by an outside entity or decides to build or lease some property to expand ministries.

By Michael J. Bemi

DEPARTMENTS From the Editor

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NEW! CHURCH TRENDS & STATISTICS

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• What Americans look for in a new church • Clergy possess different positive mental health factors • Barna releases study on financial factors of church planters • Use of volunteers on the rise • Findings on teenagers’ perceptions of the Bible • Due date extension for ACA Reporting

MISSION: ACCOMPLISHED JASON HAYES / LEAD PASTOR / SHORELINE CHURCH / KNOXVILLE, TENN.

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CREATING A CULTURE OF GENEROSITY IN A CHURCH PLANT

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While many church plants are simply trying to make it week to week, Shoreline Church in Knoxville, Tenn., leveraged new ways of thinking to eliminate the guesswork for funding ministry.

CM

MY

Through data & analytics, Shoreline developed a plan that resulted in a $653,000 one-day offering.

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CMY

It also laid the foundation for a culture of generosity.

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By RaeAnn Slaybaugh

SERIES

NEW! CHURCH FINANCIAL WELLNESS

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An added benefit for your staff ‘Financial wellness’ is one of the new buzzwords used to describe the range of financial services that some companies are making available to their employees —but what is it, exactly?

By Louis P. Barbarin, CPA

METRICS THAT DRIVE SUSTAINABILITY

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Understanding metrics that quantify leveraged assets The overarching question to leadership is: How much of your accumulated earnings should (or can) be used to maintain long-term assets?

By Rebecca M. DaVee, CPA

NEW! FINANCIAL MANAGEMENT FOR CHRISTIAN SCHOOLS

13

Thinking of starting a Christian school?

How to bridge the gap between what a lender will might want to see and the issues you’re likely to encounter

By Darren Thompson & Richard Koon with Robert “Bo” Gutzwiller

CHURCH FINANCIAL PLANNING

20

Facility repurposing: financial pros & cons If your church (like so many!) is thinking of repurposing a big-box space, a drug store, the corner bar, or even a car repair shop, it pays to be aware of the financial risks — and opportunities.

By Kari Boyce

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CHURCH EXECUTIVE • January / February 2017

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MISSION: ACCOMPLISHED

JASON HAYES / LEAD PASTOR / SHORELINE CHURCH / KNOXVILLE, TENN.

Creating a culture of generosity in a church plant While many church plants are simply trying to make it week to week, Shoreline Church in Knoxville, Tenn., leveraged new ways of thinking to eliminate the guesswork for funding ministry.

Through data & analytics, Shoreline developed a plan that resulted in a $653,000 one-day offering. It also laid the foundation for a culture of generosity.

By RaeAnn Slaybaugh

Rapid growth created unique challenges for Shoreline The church’s story begins with the leadership journey of Lead Pastor Jason Hayes.

Hayes was on staff at sending church Long Hollow Baptist in Hendersonville, Tenn., a suburb of Nashville, when he joined LifeWay Christian Resources as a national ministry specialist. In this new role, he spoke at many churches and conferences and provided training and consultation to churches; however, he remained involved in leadership at Long Hollow.

For Hayes, these two experiences bred a passion for the Gospel and the community — and, in turn, for planting a church. He and his wife, Carrie, reached out to the lead pastor at Long Hollow to discuss transitioning away from Nashville to plant a new church in Knoxville.

In 2011, Shoreline was born. It started small, with members meeting in various facilities — Hayes’ home, a marina clubhouse, a dentist’s office.

Within five months, the church hosted its first Sunday morning gathering in a leased space located within one mile of the families and college students it hoped to reach.

Today, Shoreline owns that facility, and has sent 70 of its people to the other side of town to plant another church. It is working towards a $1.5-million budget for 2017.

Overcoming the challenges of church planting required a new way of thinking Hayes had a vision for Shoreline — a hospital for (and by) the hurting.

By all accounts, this vision and the growth of Shoreline were enormous; but, like many church plants, it was initially understaffed. Fortunately, the core group was eager and committed — though not necessarily experienced in ministry development.

“We weren’t interested in ‘swapping sheep,’” Hayes explains. Despite a number of contacts in the Knoxville area who would happily have come onboard, Hayes urged them to stay and serve their churches.

“Candidly, I remember one early morning when I said, ‘Lord, You’ve answered our prayers, but I could probably use a few more doctors if you’re going to keep bringing all these patients,’” he laughs.

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CHURCH EXECUTIVE • January / February 2017

“They came, and they ended up being remarkable people being raised up through discipleship, transitioning into a new season.”

For the first half of Shoreline’s life, the Church relied heavily on highly streamlined groups of volunteers. Today, it has a staff of six, many of whom have joined in recent days.

With his focus set solidly on caring for the people they already had, owning a facility wasn’t an immediate priority. “In fact, in our earliest days, not owning a facility was very healthy,” Hayes says. “People were committing to a mission and a vision. They were buying into our relational community as opposed to a building, a location, or the conveniences that come with a certain address.” churchexecutive.com

MISSION: ACCOMPLISHED So, he and his team waited until the time felt right for their next step — purchasing a facility..

It’s worth noting that the building in which Shoreline was meeting (and now looking to buy) was originally built by a church plant that dissolved several years ago. For some pastors, this might have been a physical reminder that many church plants don’t, in fact, make it.

But Hayes was intent on looking at — and doing — things differently at Shoreline.

The dissolved church plant’s sending church had taken ownership of the property and “they looked at this as an opportunity to bless us,” Hayes says. “And we knew that [purchasing the building] could also provide them with funds that could be used towards their ministries. It was a win-win.”

It certainly was … but not immediately.

A multipurpose space would need to be transformed into the worship center, its basketball hoops and flooring panels removed and significant wear-and-tear fixed. In the parking lot, traffic flow needed to be modified to send everyone to a few different entrances (including a kids’ entrance) instead of just one point of entry. The lobby needed to be opened up to accommodate a larger — and growing — volume of people.

Of course, all of these renovations (not to mention ongoing maintenance) came with a price tag.

As Hayes looked for ways to lead his church through the changes, challenges and opportunities they faced, he knew he needed to think differently about finances. In a word, the focus turned to generosity — how to build it into the church culture and implement strategies and processes that would sustain it.

In Spring 2015, he called upon Derek Hazelet, Senior Vice President at Dallas-based RSI, a long-time friend and colleague from Long Hollow, to help him navigate the challenges and opportunities Shoreline was facing, using RSI’s approach to analytics & modeling. Together, they began to streamline processes and organize data in a way that painted a clear, complete picture for where the church stood at the time and how it could create a culture of generosity to reach the vision God had given Jason and the team at Shoreline.

The initial work led to a successful one-day offering that raised more than $650,000.

Getting from there to here required an ambitious goal When all factors were considered, a $650,000 one-day giving goal was set — actually $1 million, but the church was fortunate enough to have set aside $350,000 in savings, thanks to the generosity of the congregation and effective stewardship by the staff.

“That was the amount we felt comfortable with,” Hayes says. “It would allow us to close on the facility, put some money back into our savings, and accomplish some of the renovations we talked about.”

Though it was an ambitious amount, Hazelet wasn’t worried. Based on Shoreline’s lean operations and strong lay leadership, he knew that whatever vision the Lord had for the church would be fulfilled. This strong shared vision, a body of believers willing to share their resources to fulfill that vision, and a somewhat immediate need to have funds in hand to start moving toward it, were what made a one-day offering the best option for Shoreline.

The results were nothing short of amazing: Shoreline exceeded its goal with a total one-day collection of $653,000 in cash and checks, on hand and ready for deposit.

While this massively successful single-day offering is certainly worth examining, it’s equally important to look at the relationships that drove those results — between the church and its leaders, and between Shoreline and RSI. “What I’ve loved is that it hasn’t been about a number,” Hayes says of the church’s partnership with RSI. “It’s been about the mission of Shoreline.”

Hazelet agrees and add: “We’ve needed to be fluid and flexible enough to move as the spirit moved.” churchexecutive.com

With like minds, Hayes and Hazelet then sat down to think hard about the mission, and then craft next steps that aligned with it.

How data & analytics eliminated the guesswork for reaching the goal According to Hayes, Shoreline’s people supported the offering in a big way because it was immediate and compelling. “It was a ‘fish-or-cut bait’ situation regarding the building we were in,” he says. “Either we were going to be able to purchase the facility and make it our permanent home, or we would fail. In the midst of all the growth that was happening, we didn’t want to spend 12 months figuring out the next steps.”

For his part, Hazelet cites another absolutely critical driver of growth and generosity at Shoreline: Hayes himself.

“Jason can’t and wouldn’t say it, but he really has an incredible leadership gift,” Hazelet says. “He’s able to channel God’s vision for the church in a compelling way — that’s the word he used. And it’s exactly right.”

With most important piece of the puzzle in place — spiritual leadership — Hayes and Hazelet had turned once again to data & analytics to develop the strategy leading up to the hugely successful one-day offering.

SmartDATA uncovered three main areas of opportunity that were likely to (and did) drive a successful outcome, while continuing to sustain a culture of generosity at Shoreline. #1: Developing an initial focus on financial leaders. Like many senior pastors, Hayes chooses not to apprise himself of how much individual members or families give to the church. Even so, SmartDATA enables his resource team, along with support from Hazelet — who has experience and insight into details about raising up financial leaders — to assemble strategic gatherings in support of the vision. While Hayes doesn’t know who the largest donors in the room are, by virtue of those individuals being present, he does know they’ve been faithful givers.

This approach lets Hayes not only see (and celebrate) those individuals who have bought into the mission, but cast that vision more clearly and shepherd those people better in support of it.

January / February 2017 • CHURCH EXECUTIVE

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MISSION: ACCOMPLISHED Today, a better, more holistic ministry is in place at Shoreline, driven by comprehensive and cohesive data & analytics.

“Our goal is to know and care for our people,” Hayes explains. “That includes giving them easy opportunities to engage the mission of the church, financially. By building into the church’s culture a constant seeding of God’s vision, it doesn’t feel like it requires a constant ask; instead, it’s establishing a constant motivation.”

This same data can help the resource team identify people with greater capacity and potential for generosity, and prioritize those conversations for Hayes. “This means Jason can allow himself to not know some specifics and keep the integrity of this commitment,” Hazelet explains. “But, it also allows us to cultivate the major gifts which, frankly, every church relies on.” #2: Examining giving through the lens of assimilation.” Often, churches let a giving relationship happen organically. Even so, it’s worth examining that relationship from — to use non-profit nomenclature — invitation to acquisition as part of the discipleship process.

“One thing we wholeheartedly believe at RSI is that giving is spiritual before it’s financial,” Hazelet says. “Being generous is part of discipleship growth. Based on the insights uncovered through SmartDATA, we were able to evaluate the relationship between the areas of assimilation and generosity and ask, Are we making the right connections for people? Are we helping them through the discipleship journey? How can we improve to help them make the connection between generosity and discipleship?”

This ability to measure against performance is essential, he adds.

“There’s an expectation of creating a culture of generosity beyond a oneday offering, capital campaign, specific funding or a specific project. It really is about engagement.” #3: Digging beyond the surface to identify the gaps. “Most church leaders pay attention to metrics like how much people give or how many people are giving. But when you start to dig in to how often people are giving, it gives you a picture of how the process is performing,” Hazelet explains. “We might be casting vision, but are we connecting vision with the resources it takes to fulfill that vision in the giver’s mind?”

Hayes agrees, noting that SmartDATA also enables the church to think critically about its communication efforts around giving options: “We can ask, How many of our givers are giving online? Are we / should we be giving as much attention to online options as passing the bucket on Sunday?”

Such data enables him and his team to be more efficient and better serve Shoreline’s people.

This streamlined, holistic approach to ministry and creating a culture of generosity has fundamentally changed the way Hayes thinks about funding ministry and making ministry decisions.

Prior to SmartDATA integration, Shoreline had 21 independent systems in place to manage member data, communications, finances and more — not uncommon for any church, as Hazelet points out. “But you wake up one day and say, ‘These systems aren’t communicating.’

Hayes agrees: “What Derek and his team have helped us do is bring them all into relationship with one another. That has enabled us to know our people better.”

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CHURCH EXECUTIVE • January / February 2017

Looking to 2017 … and beyond Hayes is often asked if he expected Shoreline to grow so rapidly.

“Of course, we’re not responsible for the Lord’s blessings; they’re not based on our merit or our achievement,” he points out. “That said, we do have confidence, and that’s based on the Lord’s continued provision for us every step along the way.”

Moving into the New Year, Hayes and his team have an ambitious vision for their ministry. They are training up leaders to plant more churches.

They’re adding staff. They’re developing new ministries. They’re reaching people they haven’t reached before and growing ministries on the verge of remarkable steps in evangelism.

With RSI’s partnership, they’re continuing to build a culture of generosity to fuel this growth. They are continuing to leverage SmartDATA to discover areas in which they can enhance the discipleship process, grow their culture of generosity, and better connect people to the tangible impact that is being made through their gifts.

This represents a microcosm of a larger posture Shoreline is embracing as it moves into 2017: People are giving, but they’re giving because they know their gifts are being used for the glory of God and for the expansion of the kingdom of God. “We continue to lean on RSI and to lean into whatever the Lord is leading us to accomplish in the year ahead,” Hayes says. “Our people have been motivated, but we’re continuing to equip them better. We’re believing in and preparing for the harvests in the year ahead. We need resources to do that — and we believe that the insights discovered through the analytics we have at our disposal provide a clearer line of sight for reaching that vision.”

QUICK FACTS ABOUT SHORELINE CHURCH Year Established: 2012 Location: Knoxville, Tenn.

Number of staff (full- and part-time): 6, plus 2 others in a residency program Combined weekend attendance: 600-700 2016 budget: $1.25 million churchexecutive.com

Financial wellness: an added benefit for your staff

By Louis P. Barbarin, CPA Perhaps you have heard of or read about ‘financial wellness’ in the workplace. It’s one of the new buzzwords used to describe the range of financial services that some companies are making available to their employees.

• A strong fi nancial foundation defi ned as little or no debt, an emergency savings fund, and living below one’s means; and • An ongoing plan that leads the participant on a path to meet future fi nancial goals.

So, just what is financial wellness?

Essentially, fi nancial wellness is a state in which you practice wise planning, spending and saving with regards to the fi nancial resources that God puts at your disposal. As many of us have learned from church Bible study and sermons we have heard from the pulpit, this is the foundation of good stewardship. Even though we all have different amounts of fi nancial resources available to us, living with a sense of fi nancial wellness means that you have an honest understanding of your fi nancial circumstances and you manage them so you can be prepared for the inevitable fi nancial adjustments that arise.

The concept of financial wellness might be a relatively new idea, but the church has been offering financial advice since the Bible was written. The Bible teaches about money and managing finances

According to Tom Rath and Jim Harter, leaders of workplace wellbeing research for Gallup, fi nancial wellness is defi ned as “effectively managing your economic life.”

Financial wellness can also be defi ned as “a complex balance of the psychological, spiritual, and physical aspects of money management that results in a fi nancially healthy life.”1 Those who achieve fi nancial wellness are able to live a life characterized by: • Minimal fi nancial stress; • An understanding of where their money is coming from and where it’s going; 10

CHURCH EXECUTIVE • January / February 2017

churchexecutive.com

often, and offers fi nancial wisdom as critical to a godly life. “Through wisdom a house is built, and by understanding it is established; by knowledge the rooms are fi lled with all precious and pleasant riches.” Proverbs 24:3-4 (NKJV) As fi nancial service providers recognize the specific economic challenges of the clergy and church workers — especially issues concerning debt that often cause considerable stress — they are taking a more integrated approach that addresses the totality of fi nancial priorities.

The underlying concept of fi nancial wellness is fi nancial preparedness, one of the most common goals of employees today. However, few report having access to the kinds of fi nancial services and benefits that they feel would be most helpful. What’s missing is a more comprehensive approach to fi nancial wellness, one that helps employees address the day-to-day fi nancial responsibilities and deal with unexpected fi nancial concerns while build lasting fi nancial strength and stability.

Employer-based fi nancial wellness is often seen as a supplemental benefit, but the fi nancial health of employees should be viewed in the same way as other health and wellness programs that employers offer. These services don’t just take care of employees when they’re sick; they also lead to increased productivity as employees feel more confident about their fi nancial circumstances. Who can better understand the connection between the mind, body and spirit than the church? Financial wellness programs should work in the same way, offering support and advice to employees so they can meet shortterm needs while working toward long-range goals.

Each employee has different fi nancial priorities and obligations, so a successful fi nancial wellness program requires solutions tailored to each employee’s unique circumstances, whether the concerns are with paying off debt, establishing an emergency fund, saving for education, or retirement planning. Understanding the concepts of good fi nancial health and having the right tools to act on that knowledge is key.

Therefore, employees not only need education, but also the opportunity to take action as a result of receiving new information. For some, this simply means using software or an app to track fi nancial goals. For others, having a fi nancial consultant to review their fi nances and offer guidance helps with accountability and engagement with their goals.

When fi nancial wellness is achieved, employees have the ability to make better, more informed decisions and manage a successful, long-term fi nancial strategy. You might be familiar with the saying, “knowledge is power.” When people increase their understanding and acquire tools that allow them to gain a fi rm fi nancial footing, it empowers them to take the steps that create fi nancial health.

1

Financial Finesse Think Tank, 2014, Financial Finesse, Inc.

Louis P. Barbarin, CPA is Chief Executive Officer of MMBB Financial Services [ www.mmbb.org]. Prior to assuming that role, he served as treasurer, CFO and deputy executive director. Prior to joining MMBB, Barbarin served as deputy executive director and treasurer of American Baptist Board of Education and Publication.

churchexecutive.com

January / February 2017 • CHURCH EXECUTIVE

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Understanding metrics that quantify leveraged assets

4 key debt-related key performance indicators (KPIs) Our first set of debt-related KPIs helps churches measure the cost of debt to the annual operating budget (cash expenses), and to total equity. How much of your annual budget is consumed by interest and debt payments?

What is the average interest rate for your debt, and what is your debt-toequity ratio?

By Rebecca M. DaVee, CPA In 1856, 16 individuals formed First Presbyterian Church of Dallas.

For 15 years, the congregation met in various locations, including the Dallas County Courthouse.

Formula: 1) Interest expense divided by total cash expenses = % of total costs paid to finance debt 2) Debt retirement (principal and interest) divided by cash expenses = % of budget dedicated to retiring debt 3) Interest expense divided by total debt = average rate of financing 4) Total debt divided by total net assets (i.e., equity) = % of resources dedicated to financing long-term assets Our second set of KPIs focuses on the cost of maintaining your facility and equipment. These “fixed” assets represent resources invested in the physical “brick and mortar” of the church. Our metrics calculate the percentage of PP&E to total assets, utility cost per square foot, repair and maintenance cost per square foot and the prospective replacement reserves for PP&E.

Fast forward to 1872 — the Dallas Presbyterians had found a new church home, located on Elm and Ervay. With the arrival of the railroads, downtown Dallas grew, as did the Presbyterian Church. The congregation secured land and a loan for $2,500 for a new building located on the corner of Harwood and Main. In 1893, the building was enlarged and remodeled to accommodate a growing congregation. By 1909, church leadership elected to sell the property for $100,000 and relocate to the southwest corner of Wood and Harwood Streets. The land and construction cost of the new facility was $150,000. The building still stands today, and has retained its historical architectural design. It continues to be used by First Presbyterian for ministry and worship.

Healthy and sustained growth has certain criteria, represented by ministerial support, in the form of both people and funds. We can look to the pattern developed by First Presbyterian as an example of sustained growth. People gather to worship and serve a community. Over time, attendance and membership increase, providing additional funds for ministry and an expanding footprint. Funds for First Presbyterian were raised and leveraged, land was purchased, and buildings were constructed and eventually sold, with the proceeds going towards investing in a new facility. This is the funding cycle.

Leveraging a church’s short-term assets (cash / liquid investments) to expand long-term assets (property, plant, equipment or marketable / private investments) should provide facilities and investment earnings for ministry.

Servicing debt (principal and interest) uses operating funds, and maintaining land and buildings requires maintenance; these assets depreciate over time. Buying publicly-traded stocks, bonds, mutual funds or other investments can provide earnings that are used for ministry activities.

The following three metrics help us evaluate the cost of financing debt; assets held for property, plant and equipment; and funds invested in public and private financial markets.

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CHURCH EXECUTIVE • January / February 2017

Formula: 1) Total costs of fixed assets used in operations divided by total assets = resources invested in brick and mortar 2) Total utility costs (or total of any other occupancy cost) divided by total square feet of your buildings 3)Annual depreciation expense (amortized cost of the asset) may be used to set aside earnings (net assets) to replace PP&E. (This helps churches create a repair and replacement fund.)

The previous KPIs measured the long-term assets that serve in ministry operations. Our last set of KPIs measures ministry resources that generate investment earnings for churches. When churches effectively use excess reserves to generate income, to support its mission then funds are “regenerating” earnings for the church. The formula below is an example on how to effectively monitor those funds: 1) Total investments divided by total assets = % of assets invested in public/ private markets 2) Investment earnings divided by total investments = % of return from public investment pools The life cycle of a church indicates that as membership / attendance grows, larger or more facilities are needed for activities. Churches that can successfully save and create reserves for future plant expansion have a significant advantage in managing debt retirement.

The costs of maintaining your physical assets are also a significant component of your annual budget. The overarching question to leadership remains — how much of your accumulated earnings should or can be used to maintain long-term assets? The answer to this question changes over time and circumstances; however, long-term sustainability with long-term goals are key.

Rebecca M. DaVee, CPA, is a partner with Salmon Sims Thomas & Associates [ www.sstcpa.com ]. She has been working with churches, ministries, televangelists and other tax-exempt organizations for more than 30 years, helping church leaders create metrics for sustainability.

churchexecutive.com

Financial Management for Christian Schools

Starting a Christian school: best practices

By Darren Thompson & Richard Koon with Robert “Bo” Gutzwiller

You might be successfully pastoring a church and thinking the “next step” for your ministry is starting a school.

CAUTION: Your skill and experience with operating a church might or might not translate into the unique challenges that schools present.

Who wouldn’t be interested in finding new ways to reach the local community while impacting the lives of children, youth and families?

Seems like a no-brainer, right?

If you’ve been thinking about these questions, it’s likely that you and your church are considering starting a daycare or school operation.

Establishing childcare and / or education can be an excellent way for your church to create cultural impact and offer families a viable alternative to public or private (non-Christian) education. However, before launching into this new venture, there are several things to consider.

In an effort to arm your team with some real-world “boots on the ground” advice on this topic, we’ve enlisted the expertise of Robert “Bo” Gutzwiller. He has spent his life investing in private Christian schools as the superintendent of Foothill Christian School and serving on various boards. Most notably, Gutzwiller serves as an international executive board member for the Association of Christian Schools, International (ACSI) and Western Association of Schools and Colleges. ACSI is a Christian education organization that serves 3,000 member schools and more than 5.5 million students.

Here, Gutzwiller helps bridge the gap between what a lender will want to see and some of the issues a church can encounter. churchexecutive.com

Where to start: prayer Like any new ministry, starting a daycare or school must begin with prayer and a process of seeking God’s vision for the church and its development. This new ministry will require a tremendous amount of research, planning, financial consideration, staffing adjustments, and possible capital / building improvements. This will certainly have an impact on the culture of the church.

According to Gutzwiller, successfully launching a daycare or school operation requires a pastor-led and fully supportive board to commit to the vision that has been cast.

He also advises that just because you can, doesn’t mean you should. The new ministry can be incredibly impactful, but this requires staying true to its vision through the ups and downs.

Additionally, Gutzwiller advises churches to listen to the specific call on the church and to be open to the opportunities in your local community. Not every church is called to start a kindergarten-thru-high school ministry, so a daycare might be a good starting point, depending on the vision of the leadership team.

Next steps: internal & external assessments If the senior pastor and board are aligned and want to explore this opportunity, the next step is to complete an assessment of your local community and identify a need that your ministry can meet. An afterschool program or daycare might fit this need.

Your path could be slightly different than others, as was the case for Gutzwiller and Foothill Christian. In 1964, they felt their calling and had the opportunity to start a K-6 grade school. They began with 64 kids and have grown each year.

Although a K-6 school is not the easiest way to enter the market — due to the high staffing cost, regulation, and possible accreditation demands — the church has remained committed to its vision and has found significance and success in its ministry.

Next, an internal skills assessment is critical to determining if the church currently has competent staff with the leadership, as well as the organizational and administrative skills, needed to operate a school.

Staffing requirements and costs will increase in accordance to the level of education, which is why most churches begin with a daycare; these costs are generally low and do not require advanced degrees or accreditation.

Similar to the internal staff assessment, you should complete an internal facilities assessment. Ideally, your church campus should have adequate classroom space that can be used during the week by a school or daycare operation. Using your existing campus provides far greater use of your facilities and also exposes new young families to your church. If you don’t have available space, your team will need to plan for adding modular facilities, leasing space, or possibly starting a building project.

As you can see, there are a lot of issues to think about when starting a school in your ministry. This series will help you unpack several key questions before taking the next step.

In our next article, we will incorporate more of Gutzweiller’s thoughts and advice, while discussing what to do if your church does feel called to start a new ministry — but lacks staff.

Darren Thompson is VP / Credit Services for America’s Christian Credit Union (ACCU) [ www.americaschristiancu.com ] in Glendora, Calif.

Richard Koon is VP / Ministry Lending for ACCU.

January / February 2017 • CHURCH EXECUTIVE

13

Church Trends & Statistics What Americans look for in a new church

A study conducted by Pew Research Center examines what Americans identify when choosing a new congregation — something that about half of adults do over the course of their lives.

About one-third of adults identified relocation as their reason for looking for a new place to worship. Few stated disagreements with members or clergy (11%) or marriage or divorce (11%) as their reasons for searching, with 15% stating other reasons such as changes in belief, practicality and/or social reasons.

Among those who have picked a new congregation, the biggest factor was the quality of sermons, at 83%. Meanwhile, 79% say they looked for a good welcome from the church’s leaders, and 74% say the style of services influenced their decision-making. Other factors include location, children’s programs, friends or family within the same congregation, and availability of volunteering opportunities.

In order to help them make a final decision, 85% of those looking for a new place of worship attended a service where they were interested in possibly joining. Sixty-nine percent connected with members of the congregation beforehand, while 68% talked to friends and colleagues about the congregation. This reiterated a common theme of in-person experiences as being central to the decision-making process.

Seven out of 10 say that finding a new congregation was an easy experience, with 27% saying it was difficult. Those who responded with a positive experience searching for a new place of worship say it was easy and convenient to get to, at 43% — which goes along with the finding that relocation remains the top reason for seeking out a new congregation.

Those who found the experience difficult expressed disagreements about theology (26%); little accessibility to churches in their area (24%); or a lack of a feeling of fellowship (23%) as their reasons.

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Overall findings about church attendance show that 51% of adults in the U.S. attend church regularly (which is categorized as once or twice a month), while 49% attend a few times per year, rarely or never. Those who report an increase in attendance attribute it to a change in beliefs — namely, that they felt an increased need for religion or for God to be a part of their life. Reasons for a decrease in attendance showed that those who do not attend are often busy or can’t get to their place of worship, for various practical reasons.

Around half of adults in the U.S. have never looked for another congregation, for various reasons. They might not go to church, or go very rarely, while others might be members of the same church their whole lives.

This particular study is the fourth based on Pew Research Center’s “U.S. Religious Landscape Study,” which is made possible by Pew Charitable Trusts.

Clergy possess different positive mental health factors

A recent study of 936 United Methodist clergy revealed unique findings concerning positive mental health.

In an initial study, Rae Jean Proeschold-Bell, an associate research professor of global health at Duke University, and her team, discovered that there was a difference between factors that promote positive mental health (PMH) and factors that decrease the likelihood of mental health problems, such as anxiety or depression. PMH is identified as possessing the moods typical of a healthy mental state, and what contributes to them — for example, a sense of satisfaction or personal meaning, or a feeling of belonging and purpose.

One factor related to clergy includes having a congregation that is positively engaged in the larger community and open to new ideas. Other factors presented are: a positive congregation, congregational support of the pastor as a person, and the pastor’s satisfaction with his or her most recent church appointment — an assignment that is typically made by the pastor’s supervisor, such as a bishop.

A general overview of clergy shows high rates of depression, possibly linked to dealing with stressful situations within their career. The study aimed to pinpoint factors that could decrease depression, anxiety or emotional exhaustion, and / or improve PMH. The clergy’s unique factors are not directly associated with mental health problems, unlike general population findings; many factors that are related to both PMH and mental health problems had to do with financial stress and either social support or isolation. No factors were related to mental health problems alone. This shows that it is important to identify both the positive and negative factors affecting mental health, in order to create potential solutions.

Proeschold-Bell offered a tip for clergy — to create a network of seminary peers, and maintain these relationships. This will offer continued support — something that might be hard to find for clergy, beyond a spouse or partner. churchexecutive.com

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January / February 2017 • CHURCH EXECUTIVE

15

Barna releases study on financial factors of church planters

A study conducted by Barna (along with Thrivent Financial) of 769 planters from across the nation (“Church Startups and Money: The Myths and Realities of Church Planters and Finances”) addresses the financial backgrounds of church planters. The main component of the survey is what Thrivent Financial refers to as the “5s question,” which sheds a light on what the respondent thinks of his or her own current financial situation. Without being a direct indicator of the actuality of the situation, this question provides a gauge of their feelings towards finances.

The question asks those being surveyed to categorize their current financial situation in to one of the five groups : 1) Surviving: I require financial assistance to get by.

2) Struggling: I am struggling to keep up with day-today expenses.

3) Stable: I am fairly stable, but just making ends meet.

4) Secure: I am fairly secure, able to make ends meet and have some left over.

5) I have more than I need for myself and my family.

Findings showed that compared to 20% of U.S. adults who say they are “surviving” or “struggling,” 32% of planters place themselves in these categories.

Planters’ answers also generally align with their financial reality — 39% have a household income of $35,000 to $50,000 per year. This financial situation is reflected by the finding that 33% of startup leaders have considered leaving ministry due to financial strain, and 35% have reported difficulty in their marriage because of the strain.

Location also impacts the finances of planters. For the planters based in cities or inner suburbs, there are higher operational and facility costs, along with a higher cost of living and varying economic needs of congregants. Currently, 28% of planters are in inner suburbs, with 16% in large cities and 26% in medium cities.

Use of volunteers on the rise

Organizations are relying heavily on unpaid workers, according to research from Verified Volunteers’ “Volunteer Screening Trends and Best Practices Report: 2017.”

The percentage of organizations that are using 50 or more volunteers is 76%, up from the previous year’s 55%. The number of volunteers who are considered casual or one-time volunteers has also grown. This contributes to the finding that more volunteers are participating, but fewer are committing to donating long periods of time.

“Unfortunately, you may not know your volunteers as well as you used to. Yet you are responsible for their actions,” says Katie Zwetzig, executive director of Verified Volunteers. “If an injury or damage occurs, even if it was caused by a one-time volunteer, you can still be considered negligent in the eyes of the law.”

Consequently, 61% of organizations that were surveyed expect to do more background checks in 2017, with youth organizations topping the list as seeing the biggest increase. The amount of money being spent on these checks is also expected to increase, with organizations currently spending double the amount spent in the previous year.

The Verified Volunteers’ survey of 785 non-profit workers was conducted in May 2016, and includes those who run background checks on their volunteers. Although funding and staffing remain top concerns for managers, participants listed various other specific challenges. These include: recruiting volunteers in a saturated market; a supply of ablebodied, work week volunteers; an aging volunteer population; recruiting and retaining new long-term and frequent volunteers for high-skill projects; finding volunteers older than 21 and younger than 65; and having enough volunteers to keep up with program growth.

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Burnout. Laziness. Not wanting to cast suspicion on the people we love. An It can’t happen here mentality. These examples weaken systems designed to protect youth.

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Date: Thursday, April 6, 2017 Time: 11 a.m. EST Speakers: Deacon Marques Silva, Director of the Office of Child Protection and Safety in the Catholic Diocese of Arlington, and a Deacon at St. Leo the Great Church Ms. Maryjane W. Fuller, PHR, Director of Human Resources and Safe Environment, Catholic Diocese of Richmond Ms. Crispin Ketelhut Montelione, Associate Director of the VIRTUS Programs, NCS Risk Services, LLC Register now: http://tinyurl.com/ProtectChurchChildren

January / February 2017 • CHURCH EXECUTIVE

17

Findings on teenagers’ perceptions of the Bible

A recent study conducted by Barna — that contributed to the 2016 Teen State of the Bible research and The Bible in America studies — examines teens’ engagement with the Bible.

One finding identifies that 69% of teenagers personally own a Bible, with 44% reading it at least three or four times a year, and one-quarter of teenagers reading it at least once a week.

Fifty-four percent of teenagers decide to read the Bible because they feel it brings them closer to God. In a related question regarding perceptions of reading the Bible in public, 37% of teens responded that they were encouraged and happy to see other Christians around, while, similarly, 36% are grateful that the Bible still remains important to others.

When asked what they thought when someone referred to holy books or sacred literature, 86% of teens thought of the Bible. Consequently, 47% of teens strongly agree that the Bible acts as a source of hope.

Although the introduction of digital forms of literature has become more prevalent in the past few years, many teens still prefer a hard copy of the Bible. Eighty-seven percent read a print version of the Bible during a service, and 70% of teens read on their own using a personal hard copy.

Fifty percent use a print version of the Bible during a Bible study group.

Time spent on reading the Bible averages about 15 minutes per sitting. Thirty-six percent read for 15 to 29 minutes, while 22% spend 30 to 44 minutes.

When it comes to how teens perceive the Bible in their environments, 40% believe that the Bible has too little influence on society, with one18

CHURCH EXECUTIVE • January / February 2017

quarter believing that it has just the right amount. Seventeen percent say that the Bible has too much influence on society, with the remaining percentage unsure of their answer.

During the election, 33% said that Bible influenced their opinion of candidates; overall, 15% of teens followed the election closely, and 50% followed it somewhat closely. Fifty-three percent of teens think the civility of politics would have been positively impacted by Bible reading; however, in 2015, this number was 62%.

The study is a random sampling conducted of teens ages 13-17 from all states. It includes 1,013 surveys.

Due date extension for ACA Reporting

The previous due date for 2016 information reporting requirements under the Affordable Care Act is being extended from its original date of January 31, 2017 to March 2, 2017.

The extension applies to “insurers, self-insuring employers and certain other providers of minimum essential coverage under 6055 of the Internal Revenue Code and for applicable large employers under section 6056 of the Code,” according to the IRS government website.

This will allow those who fall under this category more time to gather the necessary information.

However, the due date for fi ling the forms is not being extended. It will remain February 28, 2017 for paper forms or March 31, 2017 for electronic fi ling. Forms included in this deadline are: 1094-B; 1095-B; 1094-C; and 1095-C.

churchexecutive.com

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Date: Wednesday, April 19, 2017 Time: 11 a.m. EST Speakers: Curt Swindoll, Executive Vice President, Pursuant Ben Stroup, Senior Vice President, Fundraising Communications, Pursuant Derek Hazelet, Senior Vice President, RSI Joel Mikell, President, RSI John Dickerson, author of “The Great Evangelical Recession: 6 Factors That Will Crash the American Church ... and How to Prepare”

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January / February 2017 • CHURCH EXECUTIVE

19

Facility repurposing Financial pros & cons

By Kari Boyce

Whether you’re a new church looking for a first home, a growing congregation needing a larger space to worship, or searching for a space for your exploding youth group to meet, there’s no denying one major trend for churches: facility repurposing.

Churches across the country are taking advantage of vacant space that would not be traditionally used for worship. In your neighborhood, you might have noticed a big-box store that now houses a church. Or maybe it was a drug store, the corner bar, or even a car repair shop. Many church bodies are finding creative and interesting places where they can worship, gather and serve their communities.

So, what are the financial risks and opportunities of thinking outside the proverbial “box”?

Be realistic in assessing the risks If you’ve ever done a remodeling project on a home, you know that as soon as you open the walls, you’re bound to find some surprises — even if you’ve lived there for many years. Imagine what those surprises could be if you’re just purchasing the property!

If purchasing a mechanic’s shop, it seems logical to look for oil storage; but what if you’re looking at a former Kmart or Best Buy? Here are some questions to consider before talking to lenders or drafting a purchase agreement.

• Regardless of the use(s) you know about, ask for or research the property history yourself. You might need to do more than a cursory environmental evaluation, which can get costly. Don’t forget to check into the history of adjacent properties, as well.

• Are there any zoning restrictions or concerns that could impede planned use of the property (i.e., adequate parking to meet zoning requirements or traffic control upgrades in the area)?

• Location, location, location — We’ve all heard this real estate adage.

Remember not to become enamored with the price or the “cool factor”; instead, ask yourselves: Is this location the best / good / sufficient location for the intended ministry, and also a good value?

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• Keep renovation costs in mind. Construction experts will confirm that until the project starts, some things can’t be known or anticipated. I’ve encountered a project where a building had a long-term, slow water leak that had caused dangerous levels of mold to grow within the walls. While this is an extreme example, even a small hiccup can create additional project costs or delays.

• Perhaps the biggest risk of all is whether or not the space will ultimately meet the needs of the intended ministry use. It might be advisable to perform some level of feasibility review or study before making the commitment and investing time and money.

Seize the opportunities With all these unknowns and potential challenges, why would you consider repurposing an existing facility? There are some excellent reasons!

• Good stewardship. Vacant buildings can be a bargain to purchase, even considering the costs of renovation or repurposing.

• Less “runway time.” Repurposing an existing structure might enable your ministry to get up and running in less time.

• Resale value. If the building had a previous life not as a church, it might be easier to sell down the road, to serve another new purpose. Let’s say the congregation continues to grow quickly and several years later, you’re looking to move to a larger site. You might have a larger pool of potential buyers than just other churches.

• Serving the community. This is another common benefit of repurposing property. For example, if your church meets in a local school on the weekend and now wants space it can use all week, vacant space in the strip mall up the street can be very appealing. You’re staying in the neighborhood and creating a visual presence, with the added benefit of activating vacant space. Ultimately, this provides multiple benefits to your community.

• Creative ministry. This is another reason we hear when churches are considering repurposing existing real estate. Perhaps the corner bar that’s currently vacant becomes a new food pantry or coffee shop sponsored by your congregation.

Given the number of congregations repurposing facilities, this trend is likely to continue to grow. A sage piece of advice one church offered to another church is: Don’t be in a hurry. Take time to fully evaluate your options, risks and rewards. Jumping in because it’s a great deal that won’t be on the market long could turn into the church version of “The Money Pit.” Kari Boyce leads Business Development at Thrivent Financial for Church & Institution Financing (Church Loans) [https://www.thriventchurchloans. com] in Minneapolis, MN. Church Loans currently serves more than 1,400 Christian churches across the United States. churchexecutive.com

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Good governance good giving A clear financial plan — including a sound investment policy — protects a church, its ministries and its people from a potentially devastating financial misstep. But, did you know this same plan can actually drive better giving, too?

John Regan, Partner and Chief Investment Officer at New York-based Permanens Capital — which counts among its clients several large churches and the largest Christian university in America — explains.

Q: A church’s revenue stream is largely outside its control.

How can good governance and responsible investing make the revenue stream more predictable?

Regan: Churches’ revenue streams are primarily derived from parishioner contributions. As there are many unknown variables — the economy, attendance drop-offs and so on — churches may not know when they’re going to be cash rich or cash poor. It’s difficult to gauge, especially for the future. A church leader might know that giving around Christmastime will often increase and that it may decrease during the summer; but in between, he / she may have a more difficult time predicting church cashflows.

So, how does a church protect itself against that unpredictability?

One thing the church can do to smooth a “bumpy ride” is to have a cash spend policy in place, whereby the church never moves forward with a new project unless a certain dollar amount / percentage of that dollar amount is available in cash on hand. Additionally, if the church is fortunate enough to have saved money along the way, excess cash could be wisely invested to earn interest. The church could use some of that interest income, without touching the principal, to help smooth out those uncertain revenue flows. As an example, many independent schools do this; it’s called a ‘draw rate,’ or ‘draw policy.’ Based on tuition, the school knows how much it’s going to earn in the fall and spring, and what the overhead and operational expenses will be. Then, to the extent the school is going to spend more than it brings in in revenue, it draws off its endowment (without touching the principal) in order to fund the excess operating expenses.

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Q: In what ways does investing those funds represent good stewardship?

Regan: I think it’s important to acknowledge a prevailing mind-set, here: that money donated to the church is ‘required to be spent.’ Regarding funds given to support a specific mission, this might very well be the case.

However, the Church has an opportunity to employ good stewardship over general donations by retaining a portion of those donations to protects itself against future downturns and unforeseen financial circumstances.

Good governance can drive the church’s spend policy, and how the church spends gifts and donations.

Q: Understood. To that end, why is an Investment Policy Statement (or written spend policy) so critical? And, what elements or mandates might it include?

Regan: An Investment Policy Statement, or written spend policy, provides guidelines for authorizing investments and, among other things, maps out the internal investments committee — how many members it should have, their term limits, who leads it, how many are parishioners versus staff, whether or not it includes the pastor, and more. It dictates whether investment authorities and responsibility are managed in-house or outsourced and, in the latter case, who at the church can sign off — the church treasurer, pastor, or someone else. It gets very detailed and often occupies multiple pages.

It’s important to note that no two Investment Policy Statements are the same. They should be written based on the specific needs of each individual Church. churchexecutive.com

“If you’re able to express to donors (especially financial leaders) that your church has these governing documents / guidelines / principles in place, it conveys to them a familiar, more business-minded approach to finances. This makes donors feel confident that their generosity will be appropriately handled. These documents are something a church leader can point to and say, “Look, this is what we do, and this is how we handle your gifts. It’s a very systematic approach. Don’t worry; no one will run away with those funds.” That drives good giving. ” That said, an Investment Policy Statement is well worth the effort, as it alleviates inconsistencies in the way a church handles its funds. It’s so important that parishioners know the church’s money is being protected, vested, and where applicable invested. Let me explain.

A long-time pastor might be notoriously financially conservative.

When a new pastor takes over, a lot more spending might start taking place for high-priority ministries. If the new pastor believes the children’s ministry is the most important initiative to focus on, he might decide to spend a lot of money on a new playground.

Meanwhile, another member of the leadership team might believe adult Bible study is more critical. These differences can cause a lot of conflict and uncertainty.

Having a written spend policy in place governs how the church will be operated and ensures the church’s funds will last longer by providing consistent, unemotional guidance surrounding spending procedures. If, for example, a church or staff member is pressuring the pastor to invest in a new bus, that pastor can consult the written spend policy, which might (depending on the church) dictate that the church can’t spend more than $15,000 per quarter on capital expenditures.

Q: Beyond better management of the funds a church already has, can a written spend policy also drive ‘good giving’ to generate new funds?

Regan: Absolutely! If you’re able to express to donors (especially financial leaders) that your church has these governing documents / guidelines / principles in place, it conveys to them a familiar, more business-minded approach to finances. This makes donors feel confident that their generosity will be appropriately handled. These documents are something a church leader can point to and say, “Look, this is what we do, and this is how we handle your gifts. It’s a very systematic approach. Don’t worry; no one will run away with those funds.” That drives good giving.

Having said that, governance can be updated. If a new pastor disagrees with the governing documents as they’re written — depending on how a church sets them up — he can adjust them himself or work with the appointed committee to update and amend them.

In fact, we recommend that governing documents be revisited every year and updated every three years.

Q: How might a church’s investment options differ depending on its need to access those funds?

Regan: Liquidity is a word that’s often used in the investment world. To elaborate: If your church needs money in a week — whether it’s $10,000 or $10 — then you can’t afford for your investments to dip to $8,000 or $8, mid-week, because you might not have time to get it back up to the original amount before you need it.

The point is: liquidity needs are a major driver in the type of investments a church can sustain.

But, keep in mind that this isn’t an either / or proposition. For example, if your church has $50,000 in a savings account, and you know you’ll need $5,000 in two weeks for a mission trip, you could split that money into two churchexecutive.com

different investment pools. Maybe $10,000 could be invested in a very safe, liquid, low-risk way, while the other $40,000 — which you know you won’t need for a while — lends itself to a longer-term, higher-risk approach.

Q: Who should a church choose to manage its investments, and why?

Regan: It’s very important that whoever is in charge of the church’s investments is unaffiliated and unconflicted. Both are equally critical.

If, for example, you enlist your largest donor’s brother as your broker, but then you disagree with something he’s doing, you might decide not to cut ties with him for fear of upsetting that financial leader in the congregation.

Also, this could give the donor — who likely already has tremendous influence — even more influence … and make him ‘responsible’ (in the congregation’s eyes) if an investment doesn’t perform as hoped.

The better approach is to choose an investment manager with experience in the faith-based and non-profit worlds. If you hire a local broker (one without this experience) and tell them the church has $10,000 in an account, they’re likely to invest that $10,000 and try to make as much money as possible so that they look good. That might sound like a good plan, but a broker with experience in the non-profit and faith-based realms will know to be more prudent with a church client’s funds.

They will know to ask more questions. “OK, you have $10,000 — but what’s your church’s year-over-year revenue? What is your operational overhead? Do you have any debt? Are there any upcoming capital expenditure items?”

Asking (and answering) such questions identifies what that $10,000 really means to the church.

Q: Members expect a certain degree of financial transparency from their churches. When a church outsources its investments management, how can the firm handling that process help the church ensure the appropriate degree of transparency for givers?

Regan: A church should think really carefully about transparency in this context. I would form a committee of four to five individuals who receive the requested transparency from the investment manager, and who are involved in the stewardship of cash investments. Whether or not that committee chooses to share all the investment details with every parishioner is up to them; however, I would caution that if shared with the entire congregation, many people will have many different ideas about those investments.

Another area where transparency comes into play is socially responsible investing. Churches, for example, may not want investments in fossil fuels, pornography, casinos, firearms and so on. If a mandate is in place with the proper level of transparency, the ethical committee can ensure the church’s investment criteria are being met by their investment manager.

— Reporting by RaeAnn Slaybaugh

January / February 2017 • CHURCH EXECUTIVE

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LIFETIME

LEARNING

Management skills for more effective ministry How the Villanova University Master of Science in Church Management Degree is building capacity for leadership The popular myth says that leaders are born, not made. Not so, according to the Very Reverend John P. Bambrick, V.F., pastor of St. Aloysius Church in Jackson, NJ, and a graduate of Villanova School of Business’ Master of Science in Church Management (MSCM) program.

“The MSCM program quickly dispels this notion effectively making leaders for the Church of the 21st Century,” Bambrick says.

For the past nine years, the Villanova School of Business has been offering a Charles Zech, PhD Master of Science in Church Management to church leaders, both clergy and laity.

This unique program aims to build leadership capacity and practical management skills for the leaders of the church of the future. While classes might focus largely on practical subjects — such as pastoral planning, financial reporting and human resources — each course is imbued with the theology necessary for the proper stewardship of the church.

According to Charles Zech, PhD, professor of Economics — the program’s founder and faculty director — the MSCM program provides clergy with practical skills to lead the church, as well as engage the laity in a form of management that’s beneficial to church leaders. The goal, according to Zech, is to remove some of the temporal burden of the church from the clergy, while being mindful of their role as leaders in the church, and to empower the laity to take more of a leadership role within their congregations.

Zech also mentions that some people are surprised that a church management program would be housed in a business school; however, he asserts, it’s important that church leaders receive the practical management skills similar to an MBA program while grounding those skills in theology and ethics.

“In an MBA course, you learn about Wall Street,” Zech explains. “That’s not helpful to a church leader, but some of the practical lessons you would learn in a business program are important for church leaders to learn.”

Of course, it can be difficult for busy church leaders to take time out of their schedules to attend classes. Villanova’s MSCM program helps accommodate this by offering its program almost completely online.

With the exception of a one-week residency on the beautiful and scenic Villanova campus, the classes are taken online. Students are able to log in and communicate with their classmates during live, synchronous class sessions. However, they’re also able to access the class at their convenience to catch up on course materials, pre-recorded lectures and archived live sessions. The program is built — with flexibility in mind — for busy church leaders.

The first course focuses specifically on leadership for religious organizations, and is team-taught by professors in business, ethics and 24

CHURCH EXECUTIVE • January / February 2017

theology. It is designed to be clear from the very start that this unique program teaches practical business management skills with a strong foundation of theology and ethics.

Other courses in the MSCM curriculum also aim to build capacity in church leaders. Throughout the program — which is typically completed in two years — students will study human resources, civil law, financial reporting, church technology, stewardship and development, and strategic planning.

“The MSCM program provides church workers with a ‘tool box’ filled with leadership techniques and tools to navigate the increasingly complex realities of emerging church work,” says Bambrick.

“The church is not a business,” Zech points out. “But it does have a responsibility to be a good steward of its resources.” The MSCM program hopes to develop church leaders of the future, grounded in theology and possessing the tools necessary to strengthen the church in a changing world.

This article is provided by the Center for Church Management & Business Ethics at the Villanova School of Business in Villanova, PA.

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NEVER AGAIN: BEYOND INSURANCE

PASSING THE ‘HOT POTATO’ CONTRACTUAL RISK TRANSFER — HOW TO PROTECT YOUR CHURCH WHEN ENLISTING OUTSIDE SERVICES

By Michael J. Bemi

Most recently in our series on moving “beyond insurance,” we examined Claims Management.

Now, we undertake the next step in our journey: Contractual Risk Transfer.

First, we acknowledge that since this series of articles moves us “beyond insurance,” this mandates some level of Risk Retention — a self-assumed level of loss absorption that we must continually work to control if we are to derive maximal benefits from the Risk Retention process. We achieve that control via: occasional Risk Avoidance; loss prevention and mitigation through Risk Control; loss mitigation through Claims Management; and, for examination here …

Loss prevention and mitigation through Contractual Risk Transfer Contractual Risk Transfer is used whenever our Church entity undertakes to employ some needed service provided by an outside entity (examples: cafeteria management, student transportation, grounds keeping and so on), or decides to build or lease some property to expand ministries.

The process begins by assessing which party to the undertaking is best positioned to prevent or mitigate loss, because that party has exclusive or primary control of the related process / undertaking, and also because it possesses experience, expertise and special equipment necessary to most safely provide the service or undertaking. Typically, using our examples, it will be the food service company, the bus transportation company, the landscaping company and the contractor that should assume primary responsibility via the contract of service — not the Church entity.

The process continues via use of a ‘hold harmless’ or indemnification clause in the contract.

Broad Form Indemnification clause: This clause requires the indemnitor (transferee of the risk) to assume all liability associated with the subject matter of the agreement regardless of which party was actually at fault, including, potentially, assumption of the indemnitee’s (transferor of the risk) sole negligence.

26

CHURCH EXECUTIVE • January / February 2017

Intermediate Form Indemnification clause: This clause requires the indemnitor (transferee of the risk) to assume all liability associated with the subject matter of the agreement except for injury or damage caused by the indemnitee’s sole negligence. Note that this could result in a situation where the indemnitor is obligated for 100 percent of damages from a loss for which it actually was only 15 percent at fault, while the indemnitee was 85 percent at fault.

Limited Form Indemnification clause: Sometimes referred to as a ‘mutual and reciprocal’ or ‘comparative fault’ clause, this clause obligates the indemnitor only to the extent of its own fault. A Church entity should never allow itself to become the indemnitor / transferee where a Broad Form or Intermediate Form Indemnification clause is being required of it, by the contracting counter party.

We next need to recognize that every Hold Harmless / Indemnification agreement provided to a Church entity by a contracting party is only as good and reliable as is the ability of the contracting party to fulfill any protective obligation to the Church entity, which it has assumed under the contract. This is why you should employ a ‘belt and suspenders’ strategy by requiring that your Church entity be named as an Additional Insured (AI).

However, the process doesn’t stop simply with the assurance that your entity will be named as an Additional Insured. Your attorney, risk manager and broker will all require contractual language stipulating the type, quality of (example: minimum Best’s rating of A8) and limits of insurance coverage, plus a valid certificate of insurance verifying currently in-force coverage that meets the aforementioned requirements.

If the service or undertaking will continue beyond the term of the current coverage, the agreement should require renewal coverage “equivalent to” — or “at least as broad as” — the expiring coverage, as well as provision of a new certificate of insurance.

Finally, you should know that many states now have “anti-indemnity” statutes and / or related case precedents which could affect not only your desired contractual transference result, but also the efficacy of your Additional Insured status. Consequently, always use an attorney experienced in these contractual matters, who is also familiar with relevant state statutes and case law.

Michael J. Bemi is president & CEO of The National Catholic Risk Retention Group, Inc. (Lisle, IL) — a recognized leader in risk management. To learn more about available coverage — and to get valuable tools, facts and statistics — visit www.tncrrg.org. churchexecutive.com

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