Designated Funds and UPMIFA (part 2)

Posted on March 17, 2015 Written by

Every church I’ve worked with has designated funds which are dormant. The long-standing rule of thumb was that to re-purpose the money in these funds was that each donor needed to be contacted to request permission to alter the use of their gifts. That is a good rule to use but in many cases, this is not practical or even possible. Fortunately, there is a legal alternative.  It is called UPMIFA: Uniform Prudent Management of Institutional Funds Act.

 

UPMIFA has been passed by almost every state legislature (there are a couple of holdouts) and it is virtually the same in each state. Look at your state’s legal code for the specific language – I’ll use the one from Virginia (where I live) for this post. In all instances the church must consult with a court or the attorney general. If the request is reasonable, they courts will agree to the church’s desires.

 

Below is the actual law from the Code of Virginia. Here are the salient points:

  1. Donors can change the purpose of their gift but it still must be used for a charitable purpose
  2. Judges and Attorneys General can change the purpose of a fund but it still must be used for a charitable purpose
  3. An institution can change the purpose of a fund by working with the Attorney General if the fund is less than $250,000
  4. An institution can change the purpose of a fund by notifying the Attorney General if the fund is less than $50,000, is over 20 years old, and it will be used for a similar purpose

 

  • 55-268.16. Release or modification of restrictions on management, investment, or purpose.
  1. If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
  2. The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard. To the extent practicable, any modification shall be made in accordance with the donor’s probable intention.
  3. If a particular charitable purpose or restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard.
  4. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, without application to the court but with the consent of the Attorney General, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument if the fund subject to the restriction has a total value of less than $250,000.
  5. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, 60 days after notification to the Attorney General, may release or modify the restriction, in whole or part, if:
    1. The institutional fund subject to the restriction has a total value of less than $50,000;
    2. More than 20 years have elapsed since the fund was established; and
    3. The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

 

Lead On!

Steve

Filed Under: accounting, church administration, church finances, church financial statements, strategy Tagged: , , , ,

Designated Funds and UPMIFA (part 1)

Posted on March 10, 2015 Written by

Churches are the beneficiaries of designated gifts – people who give to specific causes that touch their heart. This can be scholarships for students to go on mission trips or to college, to pay for children’s supplies and events, and scores of other ministries. Used wisely, designated funds can enhance a church’s mission by adding extra dollars to a church’s budget.

 

Every designated fund must have a specific purpose (why it was established and what it is to be used for) and a sunset clause (a determination of when the fund will cease to exist). However, many churches have funds that don’t have either a purpose or a timeline.

 

I challenge each church to go through all of it designated funds and write down its purpose and when it will cease to exist. The good news is that most church accounting software has a section in the chart of accounts where a memo can be written about each fund. Use that memo tab to write in this info so that this knowledge can be passed from one person to another and not lost.

 

Then, use you designated funds to supplement your budget needs. Use them as much as you can and encourage people to give to them – over and above what they give to the church’s operating budget.

 

However, even doing all that, churches are going to have funds whose purpose ceased to exist long ago. There is legal help for that and I’ll describe it in the next post.

 

Lead On!

Steve

Filed Under: accounting, church administration, church finances, church financial statements, strategy Tagged: , , , ,

Outreach

Posted on January 27, 2015 Written by

Churches are struggling to attract young people. I’ve seen dozens of churches look at this and most of them throw up their hands and do nothing because they don’t know what to do. There are two sides to this, kind of a “chicken and egg” scenario.

First: you need to find the people who you are targeting. I can’t emphasize enough that the target audience for every church should be young families, aged 20s, 30s, and 40s. Those families have young children and teenagers. Those families become the future of the church, especially if they are brought into leadership of the church. Now, where to find them? Frankly, everywhere. These families are millennials and reports I’ve seen say that they do not respond at all to door knocks (like Mormons and Jehovah’s Witnesses) – in fact, they are very much turned off by them. However, it is easy to find them because every Saturday they are at a ball field with their kids. What if your church had a pop-up tent/canopy that went to these events and had a table with free water and snacks for the families and kids. That would say that “we’re here and we’re a family-oriented church.” It gives the volunteers the opportunity to speak to the moms and dads in a relaxed atmosphere. The same could be done at a local farmers’ markets or other community activities – some type of presence where your name is visible to a younger crowd.

Second: this is much, much, much harder. Once you attract families and they actually show up at church, do you have programming that is excellent and of such great quality that the kids AND parents want to come back. You need to have programming that is so outstanding that you get a reputation for being excellent. Excellence will attract people, especially a younger generation.

Here is the conundrum: you need an excellent program (that implies substantial number of kids and young people) so that when you go out to solicit, they’ll have already heard about it and be eager to come. The answer: work on both sides of the opportunity – recruiting people to come and developing an excellent program – so that they support each other and you develop synergy.

 

Lead On!

Steve

Filed Under: budget, generosity, strategy, young adults Tagged: , , ,

Church Cuts

Posted on January 20, 2015 Written by

Churches spend money on three things

  • Staffing: church personnel form the heart and brains in leading the work of the church
    • If you cut staff, you may need to replace with untrained volunteers
  • Buildings are the skin and skeleton of the church that holds everything in place and in its place
    • If you cut buildings, you save on infrastructure but it is expensive to tear down and re-build
  • Programming is the blood and muscle of a church; this is what gives the church energy and motion and dynamism
    • If you cut programming, you end up with staff sitting in their offices and nothing to attract people and give the church a mission

 

Where does a church cut its budget when it desperately needs to cut?

 

My first answer is, nowhere. Instead of cutting, the very first thing you do is to raise income. Do all you can to encourage generosity among your members, show them the results of what they’ve done in the past, help them experience the joy of giving, and let them see the people who have been helped by their tithes and offerings.

 

My second answer is, everywhere. IF you absolutely must cut AND you have really tried to raise funds, then you are at a critical point in your church’s future.

  • It may be time to close the church down. Seriously – if people are not willing to give more to help the ministry of the church, then perhaps it is time for the church to close its doors. Think about it – actually, you probably already have thought about closing down the church.
  • The other option in the “everywhere category” is to cut a staff person, and the programs overseen by that person, and shutter the rooms used by that ministry area (lights, AC, heat, cleaning, etc.). This is an “All of the above” strategy.

 

Often churches cut everything by 10% or 20%. That won’t resolve the crisis because you keep doing the same ministry and programs with the same staff in the same rooms but now you’re trying to do it on the cheap. Ministry on the cheap results in cheap ministry. That is no way to do ministry. Death by inches is what people do when they are afraid to lead.

 

When gangrene sets in and antibiotics don’t stop it, sometimes the only option is amputation. It is dramatic, traumatic, painful, and requires learning a new set of skills. But you can get a prosthetic limb. It won’t be as good as the original but it will give you much (not all) of the same functionality you had before. Churches need to be willing to sever some staff & programs (and close down building wings). Cutting one or two of the three isn’t enough. Decide what is the main focus of the church and provide staffing, buildings, and programming money for that. Anything that isn’t a part of the Main Thing is removed. It might be replaced later but if it is not needed now, it is done away with.

 

Before you cut, raise money. But if you cut, cut strategically and not indiscriminately.

 

Lead On!

Steve

Filed Under: budget, church finances, church staff, leadership, strategy Tagged: , , , ,

Church Business Meetings (part 3 of 3)

Posted on October 14, 2014 Written by

This the third part on church business meetings. In the first section I talked about how to make the membership reports more engaging; the second post was about church programs and reporting how they use their resources, both financial and people, to carry out the church’s vision. This post will be on church decision-making and voting.

Decisions: most decisions should be made at committee levels, since they have more time and information to get into the nuts and bolts of why a decision is necessary. For instance, financial decisions are the realm of the Finance Committee, decisions affecting the church’s staff are the responsibility of the Personnel Committee, etc. It is the duty of each committee to bring to the church a report (see part 2 in this blog series) detailing the actions and reasons. The committee can be asked questions, but the responsibility lies with the committee. If the church body at large disagrees with the committee, then the church body can vote to either replace the committee and/or overturn the committee’s action.

Decisions which affect the entire church body are the ones that should be intentionally brought before the entire church. This requires a lot of education of church members ahead of time. It usually means that information is shared at one meeting, time is built in for members to think about the decision and gain more knowledge, and then everyone comes back to a subsequent meeting for a vote. Asking members to show up at a meeting, get up to speed in 15 to 20 minutes and then vote is not reasonable. If a decision is important enough to be brought before the congregation, then it should be a deliberate decision and not a hasty one. Give people time and you’ll see the “wisdom of the crowds.”

Implementing all or parts of these recommendations will make church business meetings flow more smoothly, be more enjoyable, and lead to better actions by the church. Try to do one of these at a time and incorporate these ideas over a period of months, if not years, and then gauge the attitude toward business meetings.

 

Lead On!

Steve

 

 

Filed Under: church administration, future, leadership, planning, strategy Tagged: , , , ,

Church Business Meetings (part 2 of 3)

Posted on October 7, 2014 Written by

This the second part on church business meetings and how they should change. The reason for the change is so the members and guests see the church as dynamic, not as static and boring. I believe that business must be engaging and not merely a recitation of fact and figures. Business meetings should consist of stories of people and how the church is helping them. My first post focused on the membership report. This post will focus on the programming reports.

Reports: the church is about the business of helping people see how much God loves them. The most common way churches do this is through their programming and activities. But if you’re not involved in one of those areas, you probably don’t know what is going on. Why not use the church business meeting to share with the entire church all of the successes (and failures) of the past and the exciting things that are planned for the future?

When the church’s financial report is given, the treasurer interviews ministry leaders saying, “The church has given you X dollars; can you tell us how you’ve used that money?” Then, the ministry leader talks about what they did with the money using pictures, music, children and youth, other adults, and any resource he or she has. The treasurer presents financial information about each ministry area and uses that a lead-in to ask what is going on with that money.

By the end of the business meeting, attendees have seen and heard what their church is doing, who is involved, how much money has been spent and for what, and what is going to happen in the next few weeks and months. Everyone leaves the meetings having been informed about events outside their areas of interest.

At every meeting, the reports from the main ministry areas are a must: missions, age-level programming (adults, young adults, youth, and children), pastoral care, administration, fellowship, and worship (the five purposes of the church). Then, reports can be given by other ministry areas as there is need and time.

One caveat: all reports must be engaging and the treasurer/interviewer must be energetic in asking questions and encouraging the presenter to be enthusiastic. Reading dry reports should not be permitted; the church must be an exciting place to be and the reports must reflect that.

Next post: decision-making!

 

Lead On!

Steve

Filed Under: budget, church administration, church finances, church financial statements, leadership, strategy Tagged: , , , , ,

Protectiveness

Posted on September 23, 2014 Written by

One aspect of the life-cycle of churches has to do with their possessions.

  • Early on the church has almost nothing. The church is typically pretty open about sharing its resources (loaning chairs and tables for instance) with others.
  • When the church gets buildings and even more possessions, the church develops policies which guide when and how the building can be rented and items loaned. The ultimate goal is to protect the church from litigation, but these procedures usually evolve to protect the church from outside groups or non-members who might damage the building or items.
  • Finally, a church shrinks so that eventually everything it has is given away in its last act of generosity. Its possessions and buildings are sold or handed to another church.

All churches struggle with providing a balance between being generous with what it has to help its own members, its community, and other churches—being cautious so that what it has accrued over the years is not lost or damaged. That is a fine line to walk, and it requires a lot of active decisions.

I can’t offer an easy answer to this. I can ask churches to share as much as possible with others just as others shared with them when they were a young church. Don’t give everything away, but don’t be stingy either. Develop a balance by asking one question: What is the motive or reason someone wants to borrow or use something your church owns?

If it is meant to help one person have personal profit and it isn’t church related, then the church should walk away from that. But if the goal is to help the community or another church, then the church should seriously consider (but not rubber stamp) that opportunity. Be generous, but don’t give away everything. Don’t be greedy, but seek times when you can genuinely help others and other organizations.

Lead On!

Steve

 

Filed Under: generosity, strategy, wisdom Tagged: , ,

Unnecessarily Complicated

Posted on July 29, 2014 Written by

Relationships get complicated mostly because people can be complicated. However, work product should be as simple as possible. Over the years I’ve seen things at work made complicated because people (it always boils down to people being involved!) make things complicated so they can be the ultimate problem solvers, since they are the only ones who know how it was all put together.

I’ve seen “unnecessarily complicated” in

  • Accounting – where financial statements and chart of accounts were so complex that even CPAs couldn’t follow the figures.
  • Governance – where the decision-making process was perceived to be democratic but when analyzed, ultimate authority was in the hands of a few people.
  • Technology – where hardware and software where installed to “protect the church” but it was so much that it meant the staff could be spied on and that slowed down the computing power causing inefficiency
  • Banking – where bank accounts were created for individual funds (instead of using the accounting system) which resulted in additional bank fees and nightmares in transfers between accounts
  • Staffing – where a church won’t terminate an unproductive staff person so that person’s work ethic implodes staff morale resulting in even more personnel problems

And there are more, lots more – but you’ve got your own list.

Keep it simple and not complicated. When there is a problem, confront the problem. Gather some people who are good in this field or bring in a consultant/auditor who can cut through the personalities and get to the heart of the matter. Then, deal with the real problem – and that might involve letting some staff go or changing vendors – and then clean up the mess.

Get rid of what is unnecessarily complicated. It does nothing for the church or the Kingdom. It serves only to make some people feel good and/or support their egos. That has nothing to do with the goals and purposes of the church. Keep it simple and keep it aimed at God.

 

Lead On!

Steve

Filed Under: strategy, wisdom Tagged: ,
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