HELPING LEADERS BECOME BETTER STEWARDS
AUGUST 2012
SPeCiAL SeCtion:
ONLINE LEARNING FLexiBLe, enGAGinG | 22 rADiCAL
TUrnaroUnDs reQuire CLeAr viSion | 18
FUNDING TIPS FroM nonProFitS | 34
Joe Champion ChUrCh is liKe an airporT
| 10
aUGUsT 2012 FE ATU RES WHY YOUR CHURCH’S REVENUE ISN’T OVER THE TOP 14 By John B. Savage
Some churches don’t have a clear vision and others don’t teach biblical stewardship.
DEBUNKING THE MYTH OF INTEREST RATE SWAPS 16 By Dan Mikes
the product is not the esoteric mystical instrument that some paint it to be.
10
the Ce interv ieW
By Rez Gopez-Sindac
Senior pastor Joe Champion says Celebration Church is a place where people can discover their calling and are equipped and empowered to fulfill their ministry. Joe and Lori Champion
FUNDING TACTICS CHURCHES CAN LEARN FROM NONPROFITS 34 By Ben Stroup
14 RADICAL TURNAROUNDS ARE MADE OF THESE 18 By Mark Rutland
trust, confidence, leadership – but the greatest is vision.
COMMON BUT COSTLY COMPENSATION ERRORS 32 By Elaine L. Sommerville
rethink your approach to financing ministry needs and change the conversation of money in your church.
SPECIAL SECTION: ONLINE EDUCATION EARN A DEGREE WHILE WORKING FULL-TIME 22 By Ronald E. Keener
university ensures its programs align with high-demand, high-growth industries.
GRADUATE EDUCATION EMPOWERS PASTORS 26 By Jeffery Fulks
Knowledge gained boosts confidence, creativity and ability to think strategically.
22
the issues surrounding compensation for key employees have grown more complex.
DE PARTM ENTS 8 ron Keener
Church Executive (Copyright 2012), Volume 11, Issue 8. Church Executive is published monthly by Power Trade Media LLC, a subsidiary of Friendship Publications Inc., 4742 N. 24th Street, Ste. 340, Phoenix, AZ 85016. ™
9 news update
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36 tax issues
By Dave Moja
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38 Marketplace
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Copyright 2012 by Power Trade Media, LLC. No advertisement or description or reference to a product or service will be Deemed as an endorsement, and no warranty is made or implied by Power Trade Media, LLC. Information is obtained from sources the editors believe reliable, accurate and timely, but no warranty is made or implied, and Power Trade Media, LLC is not responsible for errors or omissions. helping Leaders Become Better Stewards.
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4742 north 24th Street, Suite 340 Phoenix, AZ 85016 | 602.265.7600
Publisher/Editor in Chief Steve Kane, ext. 205 steve@churchexecutive.com Editor ronald e. Keener, ext. 204 ron@churchexecutive.com Executive Editor rez Gopez-Sindac Phone: 512.904.9007
rgopez-sindac@churchexecutive.com Director of Sales Jennifer owens ext. 202 jowens@churchexecutive.com Account Executives Julius tiritilli ext. 221 jtiritilli@churchexecutive.com Maria Galioto ext. 201 mgalioto@churchexecutive.com Production Director valerie valtierra, ext. 203 valerie@churchexecutive.com Art Director renée hawkins, ext. 207 rhawkins@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
Ceo Building Better Churches | Colorado Springs, Co
Sam S. rainer iii
Senior Pastor First Baptist Church | Murray, KY
Mark Simmons
Business Manager Christ Community Church | Milpitas, CA
eric Spacek
Senior Manager Guideone insurance | West Des Moines, iA
volume 11, no. 8
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4742 north 24th Street, Suite 340 Phoenix, AZ 85016 | 602.265.7600
Vice President Operations valerie valtierra Accountant Fred valdez
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RON KEENER
speaKinG KinDness When did you last say a kind word about your pastor and church? Historic First Baptist Charleston leads in building unity in the body i have given my share of “suggestions” to the pastors of churches i have attended as a board member and as just a guy in the pew. they weren’t always taken well. Possibly because most of the churches were content to be about maintenance than mission. At one church in particular, after suggesting changes toward growing the church, the pastor said to me, “i’m no Bill hybels.” Well, Bill hybels’ Willow Creek church was just 50 miles away. So i began driving there on Sundays – and it confirmed my suspicion that “there was a better way to do church.” i still love that famous quote of Bill’s, “there’s nothing like the local church when the local church is working right.” What is there about churches that can bring out the “critic” in us? Well, for the First Baptist Church of Charleston, SC, June 3 was a different sort of day – it was the Sixth Annual Say Something nice Sunday. Mitch Carnell, a member of that congregation who originated the idea, says
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“as bullying has escalated in all walks of life, including some churches, the imperative to be more Christ-like in our speech takes on even greater significance.” First Baptist Charleston passed a resolution in 2006 calling for at least one day when Christians would not say anything derogatory toward other Christians or Christian body, but instead would say only nice things. the Charleston Baptist Association passed the same resolution, and getting on board were other Baptist units as well. the movement took an ecumenical turn when in 2009 the Catholic Diocese of Charleston joined. Catholic Archbishop of new York timothy Dolan endorsed the program. one might think this is all just what we might expect from Southernstyle courtesy. But Marshall Blalock, pastor of First Baptist Charleston, notes that “our words express what is in our hearts.” the Charleston congregation also has produced materials that encourage people to say something nice in the workplace with the theme “Be a Lifter @ Work.” “A lifter,” says the brochure, “is someone who always finds something positive to say to every person she or he meets. the lifter is
not artificial or gushy, but sincerely looks for ways to boost the spirits of those with whom he or she meets during every waking hour. Greet people. Smile at them. Acknowledge others and make their day brighter by saying something encouraging.” Banish the put-downs, build up people, lift their spirits, pass on a compliment. or as the 1940s song says “accentuate the positive, eliminate the negative.” now, wouldn’t that be a great church?
Got a question or comment? email ron@Churchexecutive.com
NEWS UPDATE
BUSBY: CHURCH FRAUD COUNTERED BY NEW INITIATIVE As part of its mission to help church congregations be more financially accountable, Evangelical Council for Financial Accountability announces its new Church Initiative, making accreditation, services and resources accessible to more churches. The Church Initiative also makes it simpler for existing ECFA-accredited churches to access exclusive governance, financial and stewardship resources, and to take advantage of the organization’s “5/50/500” member-referral program. “ECFA’s new Church Initiative is essential for leading churches to faithfully demonstrate their commitment to
established standards in financial accountability, fundraising and board governance,” says Dan
Busby, ECFA president. “Fraud is on the increase in churches, and a lack of accountability continues to be a black eye to the Gospel.” “A commitment to excellence in church administration that comes through obtaining ECFA
accreditation will further the cause of Christ both within and outside the church,” he says. Under the Church Initiative, modification to the prior fee schedule makes it more affordable for local congregations to earn ECFA accreditation. Smaller congregations unable to take advantage of accreditation services can subscribe to ChurchWise, a threetiered subscription service that provides access to church-related governance, financial, and stewardship documents and webinar training. Through the Church Initiative, ECFA’s website has been revamped to make it simpler for
churches to access the information they need to be accountable to their members and the public. ECFA accreditation reflects biblical doctrinal mandates that govern board policies and makeup, financial oversight, use of resources and legal compliance, transparency at all levels and faithful stewardship. ECFA, in Winchester, VA, provides accreditation to leading Christian nonprofit organizations that faithfully demonstrate compliance with the ECFA standards pertaining to financial accountability, fundraising and board governance. [www.ecfa.org]
CAR SHOW DRAWS MEN AND FAMILIES TO CHURCH How to reach more men for Christ has been a challenge for us at Vineyard Church of North Phoenix, AZ. The question we asked was, “What kind of an event will not only attract men to our campus, but allow them to bring their families?” We decided to host a family fun day and car show. We hired a local car show promoter to help with car registration and to supply dash plaques, T-shirts, a DJ and live band. The promoter also helped us get local small businesses who could rent 10x10 spots for the duration of the show. The car show was free, but we asked everyone to bring a nonperish-
able food item to support our food bank and help people in need. We also had a contest among our car owners: whoever brought in the most food donations won $100. The best part about this was that the car owner who won donated the $100 back to our food bank. The third goal was to give families in our neighborhood a safe place to enjoy a day together. We rented a few inflatable bouncy houses, set up carnival games, and offered face painting and balloon animals. We also showed the Disney movie “Cars” in our church auditorium. Finally, we wanted to make the event pay for itself. We asked some
local food truck owners to sell food during the event for a small fee. Every car that entered also paid a registration fee. A local water company donated 40 cases of water to keep our volunteers and vendors hydrated in exchange for a 10x10 spot. Sponsors donated raffle prizes, including a $400 gift certificate towards a set of tires from a local tire shop. The cars show featured 200 cars and attracted an estimated 3,000 people. We collected 2,471 pounds of food for the food bank. We are a church of 4,000 people and we have noticed a slight increase in our
Classic cars and sports cars on display at the family event hosted by vineyard Church of north Phoenix.
weekend attendance since the event. — Jim Hummel, director of operations for Vineyard Church of North Phoenix, Glendale, AZ. [www.vcfnp.com]
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THE CE INTERVIEW
JOE CHAMPION Senior Pastor | Celebration Church | Austin, tx
Joe Champion leads Celebration Church in Austin, TX, with his wife, Lori. In October 2000, they held their first church gathering in a public library – after more than a year of praying that God would put them in a great city where they didn’t know anybody and where they could start a church from scratch.
BY reZ GoPeZ-SinDAC
on the church’s first Sunday, there were 54 people in attendance, 50 of those were friends from new orleans, LA, who came to support the launch. today, Celebration Church is a thriving congregation of more than 7,000 people, with three campuses and a regional site in Mozambique, Africa. the first few years were tough, Champion admits. “We did it the hard way – not the ArC way. i didn’t have a core of leaders. So much of what we did was by me, my wife and our kids. We broke all the child labor laws. We wouldn’t recommend it to anybody.” ArC, or the Association of related Churches, where Champion serves on the lead team, helps pastors successfully plan, launch and grow life-giving churches. While on a layover at the houston international Airport, Champion shared with Church Executive his thoughts on what Celebration is all about and what he makes of the media frenzy over football quarterback tim tebow’s visit. Describe the early years of Celebration Church. it was slow. every week we had fewer and fewer people. At the end of our first year, we had 78 people; at the end of year two, we had 180 people; then at year three, we had 350 people. But going into our fourth year, things began to take off. To what do you attribute the turnaround? We made some adjustments in our services – the length, the style. We began to have a good core of leaders. We were able to get a respectful meeting place that made it look like we were going to
ChUrCh planTinG in a foreiGn CUlTUre When Celebration Church was looking for a pastor for their church plant in xai-xai (Mozambique, Africa), the person who was tasked to find the right fit was Mel Stauber, missions pastor at the time.
Mel and Diane Stauber
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But, as it turned out, Mel and his wife, Diane, were the right people for the job. in June 2010, the couple and their two kids left texas – into a land where they didn’t know anyone, didn’t know the language, didn’t have transportation or a house. “We just landed with the sense that God was pleased with our obedi-
ence,” says Mel Stauber. Mel shares some of the joys and challenges of leading an outreach in Africa: How church planting is different in Mozambique. though we want to make people comfortable, our building requirements are much less than those in the u.S. People are more
relational and when they commit to the church, they are really committed. the pool of potential leaders is small. Many people lack strategic thinking skills and find it difficult to learn and try new things. everyday living takes much more time, leaving less time to spend with church development. Banking systems are
be a real church. Your wife is your co-pastor. Is this role by design from the get-go or did it happen gradually? it was by design, but she has taken an even greater role in the church’s direction, vision and administration. She’s a fifth-generation preacher’s kid and has the gifts and calling to help lead our church. She leads a lot of staff meetings and ladies’ events, and she tag-teams with me to teach sometimes. in fact, we’re starting a brand-new ministry this fall called “two Strong,” which will help gather pastors and their wives who are interested in knowing how to function together as a team. Celebration Church not only has multiple locations in the greater Austin area, you also have a church plant in Mozambique, Africa. that’s correct. We planted a church in xai-xai two years ago and now we have several locations in the xai-xai region. We have incredible leaders there – Mel and Diane Stauber. they’ve done a fantastic job assimilating into the community and culture. they absolutely love and understand Africa. We have seen other churches come and feed and then they leave, but we’ve set people to stay and live there. We feed almost 1,000 kids a day, and through the feeding outreach we establish the church. How important is it to have a global presence? We do not want to be a church that’s just reaching one neighborhood. We want to reach the nations. You start in your own Jerusalem but then you go to the ends of the earth. We feel like xai-xai is at the “ends of the earth.” having an international church allows our >>
cumbersome, often requiring long hours to handle the business side of church. We don’t rely so much on media and hi-tech devices. On meeting the needs of the people in Xai-Xai. We serve the community with projects such as road repair, house restorations and distribution of clothes, shoes, blankets and mosquito nets. our partnership with
Children’s Cup and Mission of Mercy allow us to care for 500+ orphaned and abandoned kids. We provide preschool, Bible training, martial arts training, leadership training, music, and we are about to launch a program to teach kids how to sew and make souvenir artifacts to sell. We also have college funds for kids who will graduate from our program. in the
more rural area of Mavohane, we have a church campus and have recently started a school. this is the first school within four hours of walking distance for the people in that community. in about 12 years, we will see a child from Mavohane be the first to graduate from high school in that community’s entire history. On the future of the church campuses in
Mozambique. i feel our assignment is to start 20 church campuses supporting 5,000 or more kids. in about 10 years, i hope to see the results of our work. When i see godly leaders emerge from all the church campuses and that those campuses are self-sustained and don’t need our continual support, i’ll know we have fulfilled our mission.
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people in the u.S. to develop relationships with the people of xai-xai. it allows our people to go on trips to adopt children, do feeding programs and partner with families. What are the most common challenges of leading a multisite church? Finding the right leaders, duplicating the same DnA, getting people accustomed to video worship, and changing the mindset of the people. having facilities that people t) welcomes football (righ on mpi know it’s not the mothCha Joe tor Senior pas Celebration Church. ership but it’s good quarterback tim tebow to enough. having the same level of worship is a major challenge. How do people at Celebration stay relational in such a big environment? We have a monthly membership gathering; we emphasize assimilation in small groups; we hire relational pastors. imparted into our DnA is the love for every person who walks
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through our doors. in that we are very intentional and part of our DnA is we would never become big in our own eyes. How do you recruit and keep great leaders? We have a growth track through membership. We have classes set up to help people discover their giftings and callings and find their place to serve. We find what people are passionate about and release them into ministry even if it’s outside the church. We talk a lot about how the church is like an airport. the airport is where you go to go to your destiny. Figuratively speaking, the local church screens you for weapons of mass destruction, knives, guns or liquids – anything that would bring your life down on a travel. the local church is also a place that validates, just as you get a ticket at the airport validating you as a traveler. i believe God’s call on the church is to help people discover where they want to go and how can they get there. Some people have long layovers, some have short layovers. That sounds counterproductive – releasing good people instead of keeping them. Jesus said you lose if you try to keep, and you keep it if you’re willing to lose. We find that the more we try to get people away, the more they want to stay. We’re aware that we’re recruiting leaders in our messages – i’m always casting vision, creating opportunities for people to serve, and releasing people to birth their own ministries so they can walk in their God-given calling. Do you hire from within or from the outside? there are times where an expertise or experience is needed from someone who might have had a large-church experience. But as a rule we try to hire from within, or at least from our own DnA, our own family of churches and through other relationships. Do you have a succession plan in place? We have a plan in the event of an emergency, but i don’t have my successor designated. We’re creating a culture to birth the next generation of leaders. i agree, there is no success without a successor. it is our job to make sure we’re creating a healthy pipeline of leadership. Celebration Church attracted the media spotlight when Tim Tebow came to your Easter service. What were the immediate results of that event? on that day hundreds came to know the Lord. We also had quite an impact in the city. the organization of 1,200 volunteers that served on that day. the energy that our church received from knowing that what we were doing was being watched around the world. it allowed our church to see in the future that our property would be filled with a lot of people on a regular basis. the testimony that went out into the various media markets, even with the comedians the likes of Jay Leno, Jon Stewart and Stephen Colbert. it was a lot of fun to see how God just used that. But what i loved the most was the impact on our city and what it did for the volunteers in our church family.
Why your church’s revenue isn’t over the By John B. Savage
Some churches don’t have a clear vision and others don’t teach biblical stewardship. Steve Walker, pastor of Canyon Hills Community Church in Bothell, WA, walked up to the pulpit one Sunday and announced that the church wouldn’t be taking an offering. “All our needs are met,” he said. “You all know the blessing of giving. God will give you direction so that whatever you planned to give today can be given to someone else in need.” While this isn’t always the opening message every Sunday, the revenue needed to fund the $4.8 million budget for the 2,600-strong church often had been more than sufficient. In the past three years, Canyon Hills has experienced per capita giving of more than three times the national average, double-digit growth and record giving.
Why churches are doing well How are large and growing churches raising the income they need to keep pace with the needs of their members and communities? And, why do some fall short and trend further away from their historical high-revenue points? As George Barna referenced in his book, How to Increase Giving in Your Church: A Practical Guide to the Sensitive Task of Raising Money For Your Church or Ministry, many pastors still ask, “Is there really enough money available today to complete the tasks given to us in Scripture?” According to Kregg Hood of AG Financial, there is a pattern that correlates to churches that experience good giving results. “Actually, we are seeing numerous churches
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doing well in the current recession,” he says. Hood notes five distinct characteristics of these churches: “In every case, the leadership is solidly progenerosity, and the pastor is leading the charge. There is a proper blend of faith in God to provide, and frequent but not an overly abundant biblical teaching about finances (tithing, getting out of debt.) There is also an emphasis on practical discipleship and creative marketing. Yes, communication does matter.”
Why churches fall short In my work with churches over the years, I have found common denominators in congregations that fall short of their giving revenue: Church members can’t identify what their church is about. Revenue is strong where the members can specifically articulate the unique characteristics of their church. If members cannot describe what it means to belong to their church, they are disconnected and less inclined to give. The church has no clear vision. People will give and invest if they understand where you are taking them and they resonate with that value and experience. When people can clearly identify with the church’s mission and vision, they are quick to become supporters. The pastor was not taught biblical stewardship, and so it isn’t taught to the flock. Again, in Barna’s How to Increase Giving in Your Church, he explains that as he
Members who are earning far below their potential are “ … studied the best fund-raising churches in the nation, it left to fend for themselves. in his book, Generous Living, was obvious that the practical, no-holds barred preaching ron Blue references “financial problems” as the second and teaching of the biblical principles of stewardship, and of seven inhibitors to giving (the first being the spiritual relentlessly holding the Body of believers accountable to foundation and knowledge of the believer). if the church those truths in appropriate ways, were cherished distinctives is intent on discipleship, of these families of Christians it seems appropriate devoted to growing … ” that churches equip their For Canyon hills’ Walker, “if members cannot describe what members to be free of it’s just part of the church’s it means to belong to their church, debt and discover their DnA. “We’ve always been realthey are disconnected and less income potential. Finanly committed to teaching stewinclined to give.” cial management and ardship regularly throughout career coaching are key to helping church members stewthe year. People who love to give, love to hear sermons and ard their talents and resources. messages on giving. People who are generous know the the focus of the church continues to be that of making tremendous blessing of giving, and want to do more. For disciples, but that is not something that a church does “to” people who don’t give, we don’t mind upsetting them. We its people, but rather “with” its people. the more engaged want them to rethink why they are fearful of trusting God and stewardship-equipped congregants are, the stronger with their finances. We simply try to confront that confusion the financial picture. CE and unbiblical way of thinking. if we convert a few more each year, that’s our goal. We’re going after their heart, and John Savage is a partner in OneAccord Partners, where their treasure is, is where their heart is.” Bellevue, WA. [www.OneAccordPartenrs.com] it’s amazing that some churches do not teach about stewardship or giving, nor do they even take an offering, and somehow they expect that people know what to do.
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Debunking the myth of
interest rate swaps The product is not the esoteric mystical instrument that some paint it to be. Over the last couple of years a few articles have been written on the subject of interest rate swaps. Some have been authored by individuals purporting expertise on the topic, yet never referencing any direct role in or experience with the execution of an interest rate swap. Often their commentary includes references to churches who were upset with their lenders after being surprised to learn that the potential benefit of refinancing in the current low interest rate environment was reduced by virtue of a prepayment penalty owing on their current interest rate swap. Understandably, no one likes surprises in a business relationship, certainly not of such a nature. While borrowers should always understand the contracts they sign, many lenders may have understated the risk of a prepayment penalty when selling swaps.
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By Dan Mikes
I have made more than $3 billion in church loans and have been a direct party to the execution of hundreds of millions of dollars in interest rate swaps for church loans. When the upfront disclosure is comprehensive, informed decisions can be made to use swaps in conjunction with other loan products to achieve a certain level of insulation against future interest rate volatility while also retaining the flexibility to prepay some of the debt without penalty. Anyone encountering a swap for the first time will admittedly need some educating. However, the product is not the esoteric mystical instrument that some paint it to be. In fact, on June 7, 2012, during his testimony before Congress, Federal Reserve Board Chairman Ben Bernanke was asked about interest rate swaps. He stated: “ ‌ interest rates swaps are typically among the most straightfor-
however, this is a two-way street. if rates increase sufficiently in the months or years following the execution of your swap, prepayments will generate a cash gain back to What is a swap? the borrower. Given that interest rates are currently at or Swaps essentially convert a variable rate loan to a near historic lows, one might argue that now is not a bad fixed rate loan. While clients want to lock in historically low time to consider interest rate swaps. interest rates for as long as possible, lenders prefer variable A church seeking to borrow in the current environment rate loans. if a bank were to commit to a low fixed income should attempt to forecast stream for the next five years their best- and worst-case or 10 years, and if the econorepayment capacity. now my later gathers steam, then While borrowers should always is an ideal time to insulate three or four years from now understand the contracts they sign, the church from the near the bank may be paying more many lenders may have understated certainty of substantially to their depositors on CDs the risk of a prepayment penalty higher interest rates several than they are receiving from when selling swaps. years from now. therefore, the church loan. Church loans place a substantial portion are specialty credits. Conseof the debt on a long-term fixed interest rate. quently, the bank cannot readily securitize and sell off the Some lenders offer a 10-year fixed interest rates via church loan – or get out from under the fixed income stream a swap. in order to retain some flexibility to prepay withas they commonly do with more standardized credits such out a penalty, place the balance of the debt under a 1- to as single family residence mortgages. 5-year adjustable rate as such may be available without a in essence, the swap can be thought of as a three-parswap or risk of a prepayment penalty. ty agreement. While the bank may not be willing to commit For example, perhaps the church has some limited to a fixed income stream in a historically low interest rate near-term prepayment capability via some outstanding environment, another institution (the counterparty) may be pledges from an existing capital pledge campaign. A porwilling to do so. the other institution then commits to pay tion of the debt can be placed on a low variable interest the lender bank the variable income stream that they prerate. the note will likely be paid off before interest rates fer. the two financial institutions effectively exchange the increase very much. the benefit of the lower variable rate interest income streams – thus the term swap. outweighs the risk of the interest rate increasing on this the church gets what they want – a fixed rate loan, and small portion of the debt. Further, if a subsequent capital the bank gets what they want – a variable income stream. pledge campaign is contemplated, it may make sense to the counterparty also gets what they want: as long as future put a portion of the debt on a 5-year fixed rate. the portion variable rates do not rise above the fixed rate, the counterof the debt, which the church does not anticipate prepayparty receives the benefit of the difference between the ing, may be placed on a 10-year fixed rate. variable and fixed interest rates without putting any capital the interest rate swap can be a very beneficial instruat risk (they don’t fund the loan, the lender bank does). ment in the current interest rate environment, particularly Per the lender bank’s credit rating, the counterparty when the lender is willing and able to offer other supplealso benefits from limited credit risk because should the mental products. Structure your debt to achieve a measure borrower default and disappear at a time when a penalty is of insulation against longer-term rate volatility while also due on the swap, the counterparty will look to the lending retaining the flexibility to prepay a portion of your debt bank to make them whole. the two financial institutions without risk of incurring a penalty. reach a comfort level with each other based on their credit Don’t let a fear of the unknown cause you to shy away ratings (Standard & Poor’s, Moody’s, etc.). from an instrument that can provide a 10-year fixed rate at a time when rates are at or near historic lows. if you pass Why consider a swap now? by this opportunity now you may find yourself renewing your A good lender will provide a comprehensive disclosure debt at much higher interest rates five years from now. Look upfront so that the borrower can select the appropriate prodfor a good financial partner that can work with you to achieve uct, or mix of products, based on their repayment plans. For a level of understanding that will enable you to make the best debt with a fixed interest rate via an interest rate swap, the possible decision for your church. CE risk of incurring a prepayment penalty can and should be understood. While it is hard to illustrate the math in an article such as this, suffice to say when prepaying against a swap Dan Mikes is executive vice president and national (or attempting to refinance) at a time when interest rates are manager of the religious institution division of Bank lower, a prepayment penalty will be incurred. of the West, San Ramon, CA. [www.bankofthewest.com] ward and simple to understand of derivatives.”
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Radical turnarounds are made of these Trust, confidence, leadership – but the greatest is vision.
By Mark Rutland
I have been the leader/CEO through three institutional turnarounds over the last 25 years. One was a megachurch and two were universities. While each one was unique in some of its challenges, there were issues as well as leadership and management tools that were common and applicable to all three. Calvary Church in Orlando, FL, had been a beacon of spectacular growth in the 1970s. High-octane worship, cutting-edge innovation and unbridled hubris were the volatile cocktail that first fueled Calvary – then blew it to pieces. Scandal rocked it like a bomb before steady decline dragged it into debt, diminished attendance and finally, bankruptcy. When I became the pastor in 1990, its cash reserves were gone; its debt was $14.7 million and Sunday morn-
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ing attendance was down from more than 4,000 to less than 1,200. For the first six months I served there, the church was unable to pay my salary. We were 120 days behind to our vendors the day I first walked in my office. Worst of all, the survivors in the pews were angry, hurt and disillusioned. In 1999, I became the president of Southeastern College in Lakeland, FL. No scandal had rocked Southeastern. No financial collapse. It had simply lapsed into a coma. The deferred maintenance was horrific. The buildings were in shambles. The grounds were untended, the enrollment of 910 students was in annual decline, and the faculty was demoralized. When I became the president of Oral Roberts University in 2009, it was an institution that was closer in many
Transformational leadership
ways to what I found at Calvary than the sleepy academic village I inherited at Southeastern. ORU had been hit hard by faculty lawsuits and scandal and endured the forced resignation of a president who left behind $50 million in debt and at least that much in deferred maintenance. Each of these three institutions experienced radical turnarounds. The dysfunction was different in each place to an extent, and the practical tactical steps needed for turnaround were not exactly the same. But there were essential steps that had to be taken in each place. Restoration of trust. Broken trust has to do with betrayed relationships. When trust is broken it is because of ethical disappointment. Scandal and misappropriation of funds shreds trust. So does manipulative and abusive style of leadership. The only way to restore trust is to lead ethically long enough and firmly enough to rebuild the emotional bridge that has been burnt. The problem is that the more wounded the trust factor, the more painful the process of restoration. Even as the new leadership attempts to make ethical decisions, disappointed followers are slow to believe and will be suspicious and even accusational. I remember in one difficult board meeting at Calvary, an attorney said, “Give us time, Pastor, we’re just not used to ethical leadership and it’s taking us time to adjust.” Restoration of confidence. Restoring confidence is not so much about ethics as ability. When a new coach takes over a perennially losing team, his hardest task is not to get them to believe in him, but to believe in themselves. Southeastern had lost hope for itself. New confidence was needed badly. We leveraged to build a new building, hired new staff, replaced resistant, demoralized faculty with new and energetic professors, and changed the name of the school. After four years a re-energized professor said, “For the first time I feel like a college professor and not a counselor at a church camp.” Southeastern needed confidence. We needed to win. We celebrated every tiny percentage of enrollment growth like we had grown by multiplied thousands. In the long run we actually did grow by several thousand (from 900 to 3,100 in 10 years), but at first we celebrated incremental growth. Southeastern had to win in the little things to believe in itself as a winner capable of big things. Renewal. A trusted mentor told me, “What was damaged at ORU was not the institution; it was the dream.” We had to dust off the vision. That which had become dull and lackluster had to shine again. Before I took over at ORU, a patron family of phenomenal generosity paid off the huge debt. Then later gave millions more. We used it on the campus. You can get a pretty mighty shoe shine for $50 million bucks!
Let me tell you about a year of study in transformational leadership – the 2013 National Institute of Christian Leadership. The first of four sessions in 2013 is Feb. 4-6 at Strang Center in Lake Mary (Orlando), FL. In the past 40 years, I’ve been involved in non-profit leadership in small churches, megachurches, missions organizations and two universities. In that period of time, I’ve learned some things. I decided I needed to take my experience and break it down into manageable pieces that are helpful and teachable for people at any point in their career or ministry. At the National Institute you can learn how to lead with quality and toward quality, how to get the right people in the right position, and how to guide an organization in a transformation shift. This leadership training is intense, personal, practical, relevant and full of real-world applications. This is not just a two-day event. It’s a life-expanding and leadership-expanding process over the span of a year to transform your life and leadership and encourage you to get back into the flow of higher education. I know this leadership training will not only help you lead your church, business or ministry in the direction you want to go, but will positively impact your congregation and community. One man told me after the first day, “If I never came back, this one day has been worth all the money.” I pray for you to feel that after each session. I truly believe that your decision to join in this intense year of study will be a moment you look back on with great satisfaction. — Dr. Mark Rutland
I cranked up chapel. I talked joy and modeled joy until joy saturated the atmosphere. ORU needed to laugh again. To live and rejoice and shine again. A billionaire on board didn’t hurt anything. The New ORU had to build again. We raised $11.3 million from our alumni and built the first new building on ORU’s campus in 30 years. Semantics experts may argue that I am splitting hairs in making a difference between restoration and renewal. I see restoration as two-fold – to restore trust and restore confidence. Renewal is to make it shine again, to make it dream again. The realities of a church turnaround, especially in a large church, are distinct in some aspects from a business or a university. In many other ways, however, the similarities outnumber the differences. The principal leadership roles of a large church pastor are strikingly similar to those of a Christian university president. In making the turn in a substantial church, the whole network of systems must be attacked with a comprehensive passion to help the institution believe in its dream. A turnaround, no matter what its unique challenges, is based on these: • Our leadership is trustworthy. • We are capable and good at what we do. • The vision is still wonderful. And the greatest of these is vision. CE Dr. Mark Rutland is the third president of Oral Roberts University in Tulsa, OK. He is a distinguished educator, charismatic leader, businessman and a nationally recognized figure in Christian higher education. [www.globalservants.org]
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Online Education
By Ronald E. Keener
Earn a degree while working full-time
University ensures its programs align with high-demand, high-growth industries.
The church administrator wanting to expand his or her business credentials and secure an advanced degree will want to look carefully at online education. Online programs offer adults the opportunity to increase their skill sets and advance their career options all while thriving in their current full-time position. One such school is Grand Canyon University, a private Christian university that offers bachelor’s, master’s and doctoral degree programs both to working professionals online as well as for traditional students “on the ground” in the heart of Phoenix, AZ. GCU has been regarded as principally an online institution, but that perception is changing as the university
expects 7,000 students on campus this fall and plans to grow to 15,000 students over the next few years. “Many online students want to attend a university with a strong traditional campus,” says Meghan Walbert, public relations manager, “that encourages school pride and fosters relationships among alumni.” She notes too that many online students like the connection they feel to the university’s Christian heritage and appreciate the values and spirituality woven into the curriculum. Still, GCU serves nearly 40,000 students online and employs 2,200 adjunct online instructors and more than 100 full-time online instructors, making the online component of the
school’s offerings an important part of the student body. The full-time online faculty are seen as having a dramatic impact on the success and retention of the school’s online students. “Most of GCU’s online students have full-time jobs and many have families and other social responsibilities,” Walbert says. “We know that a large percentage of our students study at night after the kids go to bed and the house is quiet. “They take their laptops with them everywhere so they can read and work on assignments whenever they get a few moments. “We had a military student who did the entire class from his laptop Continued on page 24
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Online Education
Continued from page 22
on board an aircraft carrier, as well as students who work on their classes while they are on the train for their commutes to and from work,” she says. The university attempts to make the one-on-one learning and engagement with their professors and classmates as traditional, on-campus students. Walbert says online professors make themselves available throughout the day to answer student questions or discuss the material. “Students are also able to connect with each other online through classroom discussion boards, which replicate traditional classroom interaction in a virtual way,” she says. There is an attempt to make the faculty-student interaction as personal as possible. “Full-time online faculty members call each student at the beginning of class to introduce themselves and continue to make proactive phone calls to students throughout the course,” she explains. “Professors also hold optional, instructional teleconferences when
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ChrisTian sTUDies amonG offerinGs GCU offers master’s degree programs in Christian Studies (with emphases in Christian Leadership, Pastoral Ministry, Urban Ministry and Youth Ministry) and a variety of master’s programs within the Ken Blanchard College of Business that focuses on business administration, public administration and leadership. GCU also offers a range of doctoral degree programs, including business administration, organizational leadership and philosophy.
appropriate or necessary,” Walbert says. other means of personalizing the relationship comes through posting bios, participating in discussion topics, and responding to students’ personal experiences. the university likes to pride itself on its ability to change direction quickly in its offerings in response to the marketplace and job needs. “We regularly evaluate our programs and how they align with high-demand, high-growth industries. Where there are gaps, leaders look to refocus and develop curricula
that would prepare students to successfully enter these growing career fields,” she says. “Current emphases in criminal justice, sports business and youth ministry are examples of this foresight and alignment.” What should a church administrator be thinking about when deciding to get a degree online? Walbert says a student should consider whether the flexibility of an online class schedule is the more beneficial for their particular circumstance. A student needs to utilize strong time management skills and to regularly communicate with professors and classmates to ensure they make the most of their online educational experience, says Walbert. And while online students are not required to travel to the campus for commencement ceremonies, many do so. CE
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Online Education
empowers
Graduate education pastors
Knowledge gained boosts confidence, creativity and ability to think strategically.
By Jeffery Fulks Over the last three years, Brad Wicks, pastor of Marysville Christian Fellowship, Marysville, KS, and a graduate of Evangel University in Springfield, MO, has been a man on the move. His first position as an adult ministries leader at a large church in Missouri led to his next position as executive pastor at a newly developed church in a diverse Pennsylvania community. Currently, he serves as lead pastor in a rural Kansas church.
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Wicks says a critical component for a successful transition was the confidence he developed as a result of earning a Master of Organizational Leadership (MOL) degree from Evangel. “Graduate education goes beyond acquiring knowledge in a classroom or textbook,” says Wicks. He believes that pursuing an advanced degree can help pastors become empowered, both personally and professionally, by providing a framework for envisioning greater opportunities. Tom Van Kempen, lead pastor of the Champion Center Church in Las Vegas, NV, also credits his online MOL degree from Evangel with helping him become more intentional in accomplishing organizational goals. “My education provided fresh perspectives and insights regarding my current church that allowed me to channel my energy and develop a vision for what can be accomplished,” says Van Kempen. In fact, he used the skills learned in the program to develop a new marketing plan for the church school that resulted in a 25 percent increase in Continued on page 30
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Online Education
Continued from page 27
enrollment. Van Kempen also believes that his graduate education increased his credibility in the professional community. Wicks, who chose the online-hybrid MOL format, says the knowledge he gained contributed greatly to his ability to see what worked and what didn’t work within the overall church system. As executive pastor, he says the program allowed him to develop strategic goals that addressed critical needs of both members and the larger community. Both pastors agree that graduate education often allows students to view themselves in a different light.
Van Kempen says that now that he has finished his degree, he has much more time available to “work on fulfilling dreams that I never would have envisioned in the past.” Wicks says that going through the program “allowed me to have greater confidence in my giftings and ability to lead others, challenged me to think more deeply about leadership, and helped me understand the options that were available in choosing how to respond to ministry issues.” Looking back, Wicks believes God used his education to help him more clearly identify and enhance
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his talents and abilities. Says Wicks, “The MOL program taught me how to integrate faith and leadership and how to build relationships both within and outside the church. The knowledge I gained empowered me to become more intentional in creating an effective ministry.� CE Dr. Jeffery Fulks is director of Graduate & Professional Studies, Evangel University, Springfield, MO. [www.evangel.edu/mol]
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Common but costly
compensation errors The issues surrounding compensation for key employees have grown more complex.
By Elaine L. Sommerville
Errors in compensation planning can be costly to both churches and to the employees. Churches and all organizations exempt under the Internal Revenue Code Section 501(c)(3) are prohibited from allowing the assets or profits of the organization to inure to the benefit of an insider or a control party. If a key employee is paid unreasonable compensation or uses other assets for personal benefit without fair consideration, a church’s exempt status may be threatened. IRC Section 4958 provides for monetary penalties (intermediate sanctions) to be assessed to people who receive unreasonable compensation or improperly use the assets of the organization (excess benefit transactions). Penalties may reach 225 percent of the value of the unreasonable compensation or the assets misused. Additionally, assets improperly used or diverted must be returned to the organization. In cases of extreme abuse where the improper reporting of compensation or use of church assets results in a significant understatement of an employee’s income, the employee may face charges of 32 | Church executive | 08/2012
criminal tax evasion. IRC Section 4958 provides guidance on the actions to be taken to avoid the above defined risks. Internal Revenue Reg. 53.4958-6 provides a rebuttable presumption for reasonable compensation. Compensation must be determined by people independent to the recipient, be based on outside comparable data and be documented in writing. Error No. 1 The single most costly error arises from a lack of understanding of tax law. The basis of U.S. tax law is that everything that benefits an employee is a form of compensation for services. Additionally, all benefits are taxable until IRC provides an exclusion from tax. Many churches tend to consider only cash benefits as compensation and not include noncash benefits or items that are paid directly by the church. Common elements of compensation improperly handled include retirement benefits, autos, clothing allowances, payment of personal expenses via the church credit cards, free tuition at the church-sponsored school, life insurance, spousal and family travel, and the use of church
assets to create privately owned intellectual property. Failure to consider these additional elements of compensation creates the following adverse consequences: • The compensation package is not properly documented in writing; • The taxable income of the key employee can be understated; and • The actual total compensation package may exceed reasonable compensation. Error No. 2: Decision makers must be independent to the employee being compensated. However, many times decision makers may either be relatives of the employee or may work under the employee. This error may appear even where there is an appearance of independence. For example, a church places its attorney on the compensation committee handling the approval of the senior pastor’s compensation. If the senior pastor has the ability to hire or fire the outside legal counsel for the church, then the attorney is not independent to the pastor. Error No. 3: Obtaining reliable outside comparable data is challenging. Common errors arise in (a) the source
of the data, (b) the age of the data and (c) the interpretation of the data. Source of the data – The Internal Revenue Regulations under IRC Section 4958 require outside comparable data be used in determining reasonable compensation, but there is little guidance given as to what outside data may be used. There are several reliable salary surveys available to churches, but larger churches do not generally find these surveys helpful and may use outside compensation consultants. The IRS has not defined the criteria for who is to be considered a qualified compensation consultant. However, it has stated that attorneys and CPAs that do not work as compensation experts on a full-time basis and have not been specifically trained in the area of compensation analysis are not qualified consultants for this requirement. This includes attorneys and CPAs who work extensively with churches. A consultant should have strong credentials and experience in the field of compensation and human resources. An unqualified consultant can negate the validity of the outside data and place both the church and the employee at great risk. Age of the data – There is a misconception that once data is obtained, it never needs to be updated. There is no clear definition of how long a church may rely on outside date, but the IRS has stated that data five years old was too old to be relied on for purposes of meeting the requirements for IRS Section 4958. Salary data should be updated every few years as well as when there is a change in the facts and circumstances on which the data is based. Example: The size of the church has significantly changed. Interpretation of the data – Any data obtained has to be interpreted within the context of the church’s operations. The decision makers must understand the data provided and view it in the proper context of other pertinent data, that is, the employee/ minister’s qualifications; the nature and scope of the employment; the
size and complexity of the church; the prevailing economic conditions of the area; the church’s overall salary philosophy; and the financial condition of the church. These areas need to be considered in order to make the data more relevant With issues involving compensation, churches should seek advice from professionals trained in the
unique rules that surround churches. While this may be an increased cost to the church, preventative costs are always less than the costs incurred when the IRS or a state’s attorney general comes calling. CE Elaine L. Sommerville is a partner in the law firm Sommerville & Associates, PC, in Arlington, TX. [www.nonprofit-tax.com]
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Funding tactics churches can learn from nonprofits
Rethink your approach to financing ministry needs and change the conversation of money in your church. By Ben Stroup The average person in the pew no longer holds the position that the tithe is solely reserved for their local church. Giving USA reports that the percentage of giving for the average American is about 2.5 percent of disposable income. Barna reports that on average, 5 to 7 percent of evangelical Christians tithe regularly to their local church. And Passing the Plate cites that 20 percent of American Christians don’t give anything at all. Pastors can no longer assume that tithing is a shared value among church members. This paradigm shift has put churches on equal footing with other organizations when it comes to where and how church people give their money. While some church leaders believe they are justified in their
expectation, the number of people allocating their tithe to the local church is getting smaller and smaller. Nonprofits have had to overcome some obstacles that are intrinsically built into the church life. Nonprofits typically don’t gather their supporters for weekly meetings. Instead, they must utilize technology and direct mail to replicate personal interaction. Nonprofits typically don’t tie the giving habits of their support base to any religious conviction. Instead, nonprofits must continually prove their ability to create impact. Nonprofits typically don’t shy away from talking about money. Instead, they must make “the ask” strategically and systematically. These obstacles have made many nonprofits lean and
STUDY SHOWS DIRECT MAIL STILL WORKS Donors are more than three times likely to give online in response to a directmail appeal than an e-appeal, according to a new national Dunham+Company study. The study, conducted by research firm Campbell Rinker, found that 17 percent of donors who gave on a charity website in 2011 said that a direct-mail letter prompted their online gift versus only 5 percent who said they gave online because of an email. “We conducted this survey because we wanted to see if direct mail was diminishing as a source for online donations and, if so,
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what was driving the increase in online giving that we were seeing,” says Rick Dunham, president and CEO of Dunham+Company. “Finding that direct mail has actually grown as a driver to online donations and that online efforts were not really moving the needle was a bit of a shock.” In addition, 50 percent of donors surveyed in 2012 said they prefer to give online when they receive a letter in the mail from a charity. In 2010, 38 percent of donors said they preferred to give online after getting a letter in the mail.
The proportion of donors ages 40 to 59 who reported giving a gift online in response to a direct-mail appeal rose to 47 percent in 2012, from 34 percent in 2010. Among donors age 60 or older, online giving prompted by a direct-mail appeal rose from 18 percent in 2010 to 24 percent in 2012. Interestingly, websites lost ground in driving online giving: Only 11 percent of donors said what they saw on a charity’s website motivated a gift, which is down from 15 percent in 2010. In addition, email may be driving fewer donors to give online: Only
5 percent of respondents now say they gave an online gift as the result of an email, compared to 6 percent in 2010. Social media shows no real improvement in motivating an online gift among donors 40 years old or older (10 percent in this survey versus 8 percent in 2010). However, social media giving continues to grow among donors under age 40, as a full 30 percent now say they have given online because of social media compared to 24 percent in 2010. [www.dunhamandcompany.com]
mean. They’ve had to learn how to pull together funding for their cause without the benefit of a built-in “annuity system.” Nothing makes people and organizations work harder than when they understand their survival depends upon their success in funding their operations. That being said, churches still have the best shot at funding the work of the kingdom. However, churches need to adapt to a new giving climate. The good news is that many of these strategies have been well-researched and documented in philanthropic circles. The challenge is translating those proven techniques into the language and practice of the church. Here are five suggestions – borrowed from nonprofits – that will improve giving in your church: Focus your communication about money within the context of measurable outcomes. People are more intentional about their giving today because they have access to more data. Givers want assurance that their dollar is making a difference. Just saying “it is” doesn’t make it so. When you talk about money, make sure you connect the investment of the person in the pew with eternal dividends. Regularly analyze giving data and trends as validation of your strategic decisions. When a church decides not to monitor giving trends and habits, it is literally operating on “a hope and a prayer.” Nonprofits understand that data do not lie, even when we lie to ourselves. Deal with “what is” and your decisions will yield greater results.
Encourage regular givers to incrementally increase their gifts over time. Each time you get a direct-mail piece from a nonprofit, the suggested gift amount increases. Why? Because nonprofits understand that incrementally moving a large base of small givers to make minor increases over time has an exponential effect on the funding levels of the entire organization. Put in place a major gifts strategy. Some people have the ability to dramatically impact the trajectory of your church through a sizable gift today and some in the future through their estate. Be responsible with the giving capacity of the people that God has entrusted to you. Not cultivating these gifts hurts the church and forfeits the chance to help someone release God’s blessing to the kingdom. Place giving expectations on staff and key lay leadership. Nonprofits take no issue with expecting their staff and senior volunteer leaders to give generously and help with cultivating gifts from others. If your staff or key lay leaders aren’t giving, then they aren’t invested in the success of your church. Build this expectation into your culture and watch the number of your givers multiply. CE Ben Stroup is a freelance writer, blogger and consultant in Greenbrier, TN, who writes on technology, fundraising, communications and leadership. [www.thecontentmatrix.com]
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TAX ISSUES from a parking lot, cell phone tower and office rentals, bookstores, rental of equipment in conjunction with events, and advertising in event programs or sports venues. In many cases these activities are specifically excluded because they are conducted for the convenience of members, meet the “corporate sponsorship” exclusion, or are substantially staffed by volunteers. The governing principle for UBIT is that it’s not how the funds are spent, but how they are generated. Just because a church uses the “profits” from an unrelated business activity to fund its exempt purpose activities does not mean that those “profits” will not be subject to UBIT.
Employee classification
‘Tax-exempt’ doesn’t erase all tax issues By Dave Moja Churches are automatically considered tax-exempt organizations by the Internal Revenue Code, and also exempted from the requirement to file the annual Form 990 (Return of Organization Exempt From Income Tax). But while churches are tax-exempt organizations by law, local congregations are still affected by many tax issues. These include unrelated business income tax (UBIT), the correct classification of independent contractors, ministerial compensation and other common tax concerns.
Unrelated business income tax Although churches are exempted from filing Form 990 annually, they may be required to file Form 990-T (Exempt Organization Business Income Tax Return) if their activities generate gross unrelated business income of more than $1,000. “Gross income” is defined as “gross receipts minus cost of goods sold.” Churches may generate unrelated business income
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Recently, the IRS has been conducting a “compliance project” on employment tax issues. One of the focuses of this compliance project has been whether organizations are correctly classifying workers. The delineation between employee and independent contractor is important to the IRS. Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) provides a good framework for helping churches discern the proper classification. I would caution against filing Form SS-8 without conferring with your tax advisor, but the form and its instructions can provide good guidance in this area. If a church finds that it has improperly classified employees as outside contractors, there are several remedies. The IRS is currently conducting a “voluntary classification settlement program” where organizations may seek to reclassify misclassified workers. The program may dramatically reduce penalties that would normally be imposed in a reclassification of this nature. The application is made on Form 8952, and you should seek the advice of your tax advisor before proceeding. In many cases, the “Section 530” relief described in IRS Publication 1976 may be a better option than the voluntary program.
Ministerial housing allowance A minister may generally exclude a designated housing allowance from income. The allowance must be the lesser of: • Amount approved in advance by the church, • Actual expenses incurred, or • Fair rental value of the house. Finally, although churches are currently exempt from filing Form 990, this may not continue to be the case for all churches. There’s much discussion in Washington about which types of organizations may have to file in the future. Church financial leaders, especially those at larger churches, should familiarize themselves with Form 990 – just in case. Dave Moja is a partner with CapinCrouse LLP, in Melbourne, FL, and national director of notfor-profit tax services. [www.capincrouse.com]
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