Finance Staffing Costs

Posted on June 14, 2012 Written by

Every organization spends money on staff who will do the financial accounting for it. These are skilled individuals with a passion for their organization. Frankly, they’re not working there for the money; these people are talented enough that they could get better-paying positions at for-profit companies. But that’s not where their heart is. They want to make a difference in the world, so they work for churches and non-profits.

My experience and knowledge says that there is a formula that can be applied to determine what an organization should pay for its finance staff. This formula is for the staffing functions only; there are additional costs for materials, computers, training, etc.

Here’s the formula: 3% to no more than 4%

That’s it. That simple.

Here’s what I mean by that. Figure out what your gross receipts are for the past year. By gross receipts, I mean all revenues from all streams that came into the organization for the past fiscal year. Take 3% of that figure and you should be able to staff your finance department with that budget figure.

For instance, if your operating budget plus additional gifts totals $600,000, then should expect to pay about $12,000 for someone to manage the entire financial office: contributions, accounts payable, payroll, general ledger (which includes bank reconciliation), and financial reporting. At the most, you should pay $15,000 (which is 2.5%).

If you are paying substantially more than that, I think you’re paying too much (remember, this is my opinion) unless your finances are incredibly complicated (and if they are that complicated, then you need to find ways to simplify them). Check out your financial operations, see how efficient and effective they are, see if they have the right tools to make them work faster and better, and then decide if you are paying too much because you don’t have the right staff. Then, get the right staff people!

Lead On!
Steve

Filed Under: accounting, budget, church finances, church staff Tagged: , , ,

Walt & Roy

Posted on May 9, 2012 Written by

One of my favorite business books is Me, Myself and Bob. This hilarious book is the story of the rise and collapse of Veggie Tales as told by its founder, Phil Vischer. Throughout the book you learn that Phil’s childhood hero was Walt Disney – to the point that Phil wanted to create a Veggie Tales theme park like Walt did. It was not to be and it all fell apart due to some bad business decisions. Toward the end of the book, Phil has a chapter called “Lessons” in which he very openly shares what he learned from the experience and that will help him in the future.

One of his critical lessons was that while Walt was the innovative genius, his brother Roy was a fiscal sage. Orignally it was called Disney Brothers’ Studios before Walt bought out Roy. One of the advantages that Roy had over anyone else was that he was Walt’s brother. As such, he had the ability and power to confront Walt and tell him, as no one else could, whether one of Walt’s ideas was crazy or not. Roy could get in Walt’s face and tell him the honest truth. Walt had to accept it – it was coming from his partner who had as much to lose as he did. Roy’s motives were honest – he wanted success. Roy was responsible for counting the money (Roy’s Boys were the Disney beancounters!) while Walt’s guys were the creative thinkers. It took both of them to come up with the American success story that is the Disney empire. However, none of this could have happened if Walt didn’t have a Roy and if Roy didn’t have a Walt.

Phil continues in this chapter with a personal lesson that he learned the hard way – he was a Walt without a Roy. He never gave anyone the authority to confront him with the cold, hard financial facts. Instead, Phil figured he could “create” his way to financial success. I especially like how Phil ends the chapter. He tells the reader that if you are a Walt, find yourself a Roy and give him the responsibility, authority, and trust to tell you the hard financial picture. And if you are a Roy, then wait for your Walt and don’t sell yourself short. Phil acknowledges that as a Walt or a Roy you may never find your counterpart, but always keep looking.

My take-away from this is to encourage pastors, CEOs, and other visionary leaders to intentionally find a Roy. Leaders absolutely need an equally visionary beancounter (that is not an oxymoron, they do exist!). And what’s more, leaders need to very clearly tell the financial guru that the leader depends on getting good, accurate, and even scary financial figures. The financial status of the organization is not the fault of the CFO/messenger, but that if the CEO does not heed the financial advice, the fiscal failure of the organization will rest on the CEO.

Lead On!
Steve

Filed Under: church staff, leadership, wisdom Tagged: , ,

Employer FICA is Illegal for Ordained Ministers

Posted on September 26, 2011 Written by

 

Last week a colleague at another church and I had an email exchange that might be of value to you. The question was whether ordained ministers should have the employer’s portion FICA paid by their church (NO!). The underlying issue is bigger than that – too many times church leaders tell their staff to do things which are illegal because those leaders are not familiar with tax laws. When the staff attempts to inform the pastor of the laws, the pastor instructs the administrator to do it his (the pastor’s) way regardless of the law. This puts the administrator between a rock (his boss and paycheck) and a hard place (the IRS and the law).
Pastors, please listen to your administrators. That’s why you hired them; that’s what you pay them for. Ask them for information rather than telling them what they should do. You may not like their answer – remember, they are just the messenger. Take your frustration to Congress, please, not on your staff.
I do not know what my colleague will do but this person is in a very difficult position. Unfortunately, I hear about situations like this at least once a month.
Lead On!
Steve
 
 
Question:
It’s been a long time since I consulted you! I have a problem and need your expertise. One of our ordained staff was approved to designate part of her salary as her housing allowance yet wants to continue to be treated as an employee. Does that mean we pay our share of her FICA (Social Security and Medicare)? Any other things we need to know regarding this? How do I prepare the W-4 toward the end of the year when in the first eight months, her whole salary was treated as taxable income but beginning September, we exclude that housing allowance? I need help and guidance from you. Thanks!
Response:
Great question and I got an answer for you – I heard it this past summer at the church administrators’ annual meeting.
If a person is ordained, then that person cannot be treated like an employee for Social Security Administration purposes. That person is self-employed. Thus, the non-profit can never pay any employer FICA and Medicare for that person. The ordained minister bears the burden of both the employee and employer portions of FICA and Medicare.
Housing allowance can still be taken out of the salary. However, the housing allowance portion is only prospective from the time it was approved by the governing body. That means that if the minister was on staff on 1/1/2011 but that the housing allowance was approved by the board on August 1, 2011, the housing allowance is only effective from August 1 through December 12 – it is not retro-active to January 1.
One last thing this attorney said, if you are made to do something that you disagree with, then do not sign the W-3 – get someone higher up to sign it because if the IRS or SSA come to your office, you can direct them to the person who signed it, not you.
Thanks for contacting me and I hope I answered your questions. If not, I’ll try again. Let me know.
Question
Thanks once again for your prompt reply. My concern is that it’s my boss I’m dealing with. He wants me to treat one of our staff with a housing allowance but to continue to withhold and pay the necessary taxes and SS & Med tax for the employee. I’m confused as to what I should do.
Response
You’re in a very difficult place – you need an “outside expert” to explain the legal side to your boss. There are several ways to go about this.
1       * Gather data from reputable sources such as Richard Hammar’s Church & Clergy Tax Guide. It’s published annually and costs $40 – the whole book is over 700 pages long. It is the “Bible” for church administrators on legal and tax matters. If you don’t have it, please get it ASAP.
2       * Get a person to write up an opinion to give to your DOM. This person can be someone like me, a nationally-known expert (see http://nonprofit-tax.com/), or the best scenario is the firm that does your audit.
3       * Get someone to visit with your boss to explain the situation and the consequences – fines, penalties, loss of 501(c)(3) status, and, if it is bad enough, jail time.
What he is asking you to do is clearly illegal. He needs to be educated about this. The laws have been the same since 1984. I don’t know how old your boss is, but he may be thinking of pre-1984 laws or he may have heard of pre-1984 laws from some colleagues.
Let me know if I can help you in this situation.
Response
Thanks for the advice and I will pray which action to take. I’ll study the things you listed.

Lead On!
Steve

Filed Under: church staff Tagged:

The Shadow

Posted on August 4, 2011 Written by

 

Going to conferences is fun – you get to travel, stay in nice hotels (with comfy beds, hopefully), eat out, and meet old and new friends. I like going to conferences – I plan to continue to go to conferences. However, conferences lack something – that personal touch.
Many times a year I’m asked, “Can you tell me in the next few minutes what a church administrator does?” I appreciate their interest so I figure that if they are really interested, they will want to learn. I make them an offer – come spend a day (in whole or part) with me: follow me around, sit in on my meetings, watch me answer email and handle personnel matters, read my financial statements, etc. In short, be my shadow and learn from the inside out what it is like to be an administrator. A few people respond positively, others say, “No thanks.” Those who shadow me leave at the end of the day with eyes wide open and a new appreciation. I’ve even had my finance committee chair shadow me – and come back for a repeat!
Church staff/leaders have a lot to offer and I wish we’d share more of this knowledge with each other. Sharing material in conferences is great but there is nothing like visiting a colleague’s church and shadowing someone for a day and seeing “what it’s really like.”
I’d like to propose that church leaders be intentional about being both a shadow and a shadow-caster:
·        Shadow-casters: these would be leaders who are willing to give a day or two a year to being shadowed. There is no agenda – they just meet the shadow at the agreed upon date and time and then let the person sit in on all that happens. If there is a confidential situation, the shadow can be excused.
·        Shadows: these are leaders, both staff and lay members, who want to shadow other church leaders. These church staff leaders may want to learn the “best practices” at another church. It could be someone interested in this field as a career opportunity and wants to learn about this career from the inside before embarking on it. It may be a lay member who wants (and needs) to learn more about what the professional minister does each day. We can all learn from each other – more than we think we can!
This year I’m taking some conference time and shadowing some counterparts in different cities. As long as I’ve been doing this, I know that I can learn from others especially if I am sitting as close to their shoes as possible. I’m looking forward to being a shadow; I’ve been a shadow-caster almost a dozen times so it’s time for me to be a shadow.
Lead On!
Steve
Filed Under: church staff, leadership Tagged: ,

Training and Conferences

Posted on July 31, 2011 Written by

Training is underrated in most church office venues. I think that most churches don’t want to spend the money on doing the training when it is incredibly beneficial. Every year I attend a national conference of my peers and I learn so much at each one even though I’ve been doing this work for over 15 years. Sometimes what I learn re-enforces what I already know, but that is a good feeling, too.

Ministers and other management staff need to go to at least one training conference a year. If for nothing else, it is good for their morale to get out of the office and to hang around peers. Usually money is budgeted for these positions so the people can go if they’ll only make it a priority. It is up to the supervisor to make the subordinate attend a conference – too many say they can’t fit it into their schedule. Everyone has excuses, just find the time to go!

Administrative Assistants (Admins) are on the low end of the totem pole and rarely are they included in a training budget. That is wrong. I work with about a dozen ladies – all of whom are very committed to their work and to the church. They are consummate professionals – very skilled at what they do and anxious to do it right, the first time.

When I came to my current church, I was told that the church database was insufficient for the church’s needs and that one of my priorities was to get new software. I had used that software for over 10 years so I knew what it could and couldn’t do. What I soon learned is that the Admins were not knowledgeable about the software. I began to remedy that immediately.

First, I brought in an expert to lead all-day classes for the ladies. We set aside time and they brought in questions. It cost me about $1,000 for the consultant and for the lunches. I probably recouped that money within three months – what the Admins learned they implemented immediately and they became more productive and efficient.

The second year, I brought in the same consultant for a half-day training session. After lunch, the consultant spent about 30 minutes in the cubicle of each person addressing her needs and concerns. The third year, I brought the consultant again. By now the ladies were pretty knowledgeable about the software and the complaints from the ministers and managers had diminished but I knew the ladies wanted to know more. This time, the consultant spent 45-60 minutes with each person – there weren’t classes for everyone, just individual sessions. After the consultant left, I met with the Admins and they drafted a series of documents to help new Admins and as “cheat-sheets” for the current Admins.

Finally, for the past several years I’ve sent at least two Admins to a national conference. These two get to spend a week out of the office in a nice hotel with company-paid meals and travel (that is a huge morale booster for them). They hang around other Admins for the week and get to know the software developers and technicians – now when the Admins call for help, they can put a face with the name. It does cost about $3,000 to do this each year but that money is recouped within six months in efficiency, effectiveness, shared knowledge with the other Admins, and morale.

A side benefit to all this is that the turnover of the Admins has been pretty low (less than the ministerial staff turnover). Every year they talk about who is going and they pretty much self-select – I don’t have to make the choices. They are a wonderful group of Admins who can now do just about anything on the software – there are no complaints about what the software can or cannot do. The Admins know it all!

Lead On!
Steve

Filed Under: church administration, church staff Tagged: ,

Church Personnel Committees

Posted on April 26, 2011 Written by

My experience with Personnel Committees is that they don’t know their own job description. Too many times the committee acts more like a “Human Resources Department” than a personnel committee. Let me explain the difference.

A human resources department provides all the forms for new staff and departing staff, ensures those forms are complete, interprets the personnel manual for staff, works with vendors to get the approved benefits at the best possible price, and handles other routine personnel needs. Frankly, those are all functions that in a church should be handled by the staff and not by a committee.

A personnel committee of a church is vastly different. A personnel committee should do the following

  • Develop a personnel manual and review it at least once a year for updates
  • Develop a salary structure and salary range so that all employees are treated according to their “pay grade.” Most churches have no concept of this much less how to go about creating salary ranges. However, it is essential that a church do this to help their staff.
  • Hire the senior pastor and give him an actual, honest job performance evaluation. This may include an annual 360 eval for the pastor; that is a good thing so that he can have a true sense of his leadership and his management.
  • Help the senior pastor with his direct reports. The senior pastor may need counsel on who should report directly to him and who should not. The pastor may need help with the job descriptions of those who report directly to him. Finally, the senior pastor may ask for help in recruiting the people who work most closely with him.
    • For the most part, I disagree with the notion that there should be a search committee for positions in the church below the senior pastor – the leaders should be able to hire those whom he feels will work best with him and not have a committee decide for him (after all, shouldn’t those lay members be doing Kingdom work and not be the HR department?).
    • The senior pastor should have the freedom to select his lieutenants and craft their job descriptions with the advice and counsel of the personnel committee, but not their veto. Those leaders, in turn, should have the freedom to select the second level of leadership without having to jump through hoops of lay people. Some, but not many, lay people are qualified to help in recruitment; it’s just that they could be doing something else for God instead of having meetings.

So, if you’re in a personnel committee, ask the committee chair for a job description of what the committee is responsible for. If that JD needs to be updated because the church has grown and/or changed, then do it! If there is no JD, then help the pastor and committee chair develop an appropriate description of responsibilities for the personnel committee. A good one will save the committee members a lot of time and grief, it will help the pastor and staff know what everyone is charged with doing, and it will ensure that everyone is doing what is expected of them.

Lead On!
Steve

Filed Under: church administration, church staff Tagged: ,

Aptitude and Attitude

Posted on April 25, 2011 Written by

Whenever I hire someone, I look for two things: aptitude and attitude. I tell that to the interviewee pretty soon during the interview, too. That gives them an understanding of what I’m looking for. However, before you get to have a face-to-face with me, I’ve already had at least one phone interview with you – the in-person interview is just to confirm or change what I think I know about you.

Aptitude is the knowledge-base or skill-set that an employee brings with him or her. That is a compilation of that person’s life experiences, education, work knowledge, training, books read, and everything else that this person has learned to this point in life. It is far too much to unpack in an interview but I try to get a glimpse into what the person knows.

Attitude is the mindset the person has about work, life, other people, etc. Attitude is BY FAR the most important of the two items I look for. I can train aptitude if you have the right attitude. Aptitude is easy and knowledge can be taught. Attitude can never be taught – it is who you are and tells me (the prospective employer) more about what kind of employee you’ll be than any résumé ever will. Attitude comes through loud and clear usually within the first 60 seconds of a meeting, even an interview where you’re doing all you can to impress someone.

This approach also works with both volunteers. Get vols who have the right attitude, and whatever program they’re in will have a much better change of success. Having the right attitude to anything in life will infect and affect others around you. So, my suggestion is that when you interview for a staff position or a volunteer (or even when you interview somewhere) have the right attitude regardless of your aptitude. Eventually your attitude (and those whom you interview) will rise to surface – you might as well know it from the outset.

Lead On!
Steve

Filed Under: church staff, leadership, wisdom Tagged: , ,

Q-Tips

Posted on March 23, 2011 Written by

I’ve got two packs of Q-Tips (registered trademark, I’m sure) in my office. I got them a dozen years ago and I use them as illustrations to my staff and colleagues several times a year. I pull them out when someone comes into my office with lots of frustration over what is going on (or not happening). I listen and then, as it is warranted, I have the following conversation:

Me: do you know what Q-Tip means? What is stands for?
Friend: no idea (with a completely bewildered look as in, Where the heck is this headed?)
Me: Quit Taking It Personally – QTIP
Friend: oh, cute.
Me: no, really. You, me, we need to separate the personal from the professional. When junk hits the fan, just step back (out of the way) and not let any of it get to you personally. Keep the professional and the personal separate.

About 25 or 30 years ago I read an article in Fortune from which I remember one line: “Attack the problem, not the person.” Too often in work (especially in church work), we merge our professional and personal lives and it often has bad consequences. Too often in work (especially in church work), we try to fix problems by fixing people – also often with bad consequenses.

Church professionals need to separate our personal lives from our professional lives – our spouses will appreciate it! But also realize that when we attack a problem, ensure the person on the other end fully understands this is not about him/her personally.

Buy a pack of Q-Tips. When things get tense in the office, hand out the Q-Tips and remind people that all this professional angst will go away and they don’t need to let it affect their personal lives. It is not an attack on who they are as individuals; it is just a professional issue and should be dealt with professionally.

Oh, one more thing – I’m sure the inventor of Q-Tips never thought of the slogan but I like it nonetheless!

Lead On!
Steve

Filed Under: church administration, church staff, leadership, wisdom Tagged: , , ,
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