4 Things Great Ministries Do

By Raul Rivera

With the due date of Form 990 for most ministries quickly approaching, I have recently written several blogs emphasizing the importance of filing a timely Form 990.

The previous articles discussed the associated penalties and consequences of not filing Form 990 on time, and I presented four steps ministries can take to ensure a timely filing of Form 990.

In this blog post, I want to address Form 990 from a different angle, specifically addressing how you operate your ministry throughout the year and why it matters.

For instance, Part VI of Form 990 pertains to the governance and management of your ministry. And your ability or inability to adequately answer these questions can have great implications on your ministry’s tax-exempt status.

As a result, I want to address four areas of governance and management that every ministry should solidify.

4 governing and management areas your ministry should solidify

The Form 990 instructions state that although federal tax law generally does not mandate particular management structures, operational policies, or administrative practices, every organization that is required to file Form 990 must answer every question in Part VI.

After reading through and examining the questions asked in Part VI of Form 990, I have determined that there are four main areas of nonprofit governance and management that every ministry should solidify.

I will discuss those four areas below.

1. Your ministry’s board of directors

Section A of Part VI on Form 990 specifically asks questions pertaining to your ministry’s voting members of the governing body. In other words, it is asking you about your board of directors.

The board of directors is the group of individuals responsible for making and carrying out the decisions of your ministry.

They are the one responsible for the management of activities, affairs, and ministry finances and assets.

Since the board of directors exercise influence over the ministry, the IRS has established some guidelines on the composition of your board.

IRS Publication 4221-PC states, “To guard against insider transactions that could result in misuse of charitable assets, the governing board should include independent members and should not be dominated by employees or others who are not independent because of business or family relationships.”

This is not saying that family members cannot serve on your ministry’s board of directors, but rather, a majority of your board should not consist of family members nor of those who are receiving compensation from your ministry.

Question 2 in Section A of Part VI on Form 990 specifically asks about the composition of your board of directors. If you have any questions pertaining to your board of directors, give us call at 877-494-4655, and we will be glad help.

2. Your ministry’s board meeting minutes

In Section A of Part VI on Form 990, question 8 asks the following question:

"8 Did the organization contemporaneously document the meetings held or written actions undertaken during the year by the following:

a The governing body?

b Each committee with authority to act on behalf of the governing body?"

In short, this question is asking if your ministry has board meeting minutes.

You can think of board meeting minutes as a receipt. Without a receipt, you have little to no proof of purchase, and without board meeting minutes, you have little to no proof of decisions being properly approved in your ministry.

Board meeting minutes, therefore, must be taken at each board meeting and properly formatted.

In addition, board meeting minutes must be read by each board member and approved by vote of the board as official board meeting minutes.

I say it at nearly all our conferences, and I’ll say it here, “A board meeting without board meeting minutes is merely fellowship.”

(Recommended reading: “Do You Know How to Take Board Meeting Minutes?”)

3. Your ministry’s financial record keeping

In general, Form 990 is going to ask you detailed questions about your ministry’s finances and assets.

The predominant reason in doing so is to ensure that your ministry is properly using the donated funds it receives.

This requires that your ministry maintain accurate financial records, and to do so, your ministry should have a solid bookkeeping plan in place.

The fact is that good bookkeeping requires consistent, weekly attention. While it’s easy to initially start strong, staying diligent in maintaining accurate financial records can become tiresome.

To ensure your ministry’s financial records are well maintained over time, you should do the following:

1. Commit to studying which system of bookkeeping will work best for the duration of your ministry and its growth, and
2. Consider outsourcing this vital aspect of your ministry in order to have more time to focus on carrying out your ministry’s purpose.

In fact, one of the reasons we started the StartCHURCH Bookkeeping Service was to give ministry leaders the confidence that their ministry’s financial books are kept in excellent condition.

If you have questions or want to know more about our Bookkeeping Service, give us a call at 877-494-4655.

4. Your ministry’s policies and procedures

The Form 990 instructions state that although the information on policies and procedures requested in Section B of Part VI generally is not required under the tax code, the IRS considers such policies and procedures to generally improve tax compliance.

The fact of the matter is that the absence of appropriate policies and procedures can lead to actions that are inconsistent with your ministry’s tax-exempt purpose and, therefore, result in costly penalties, or worse, the revocation of your ministry’s tax-exempt status.

The important thing to note about adopting policies and procedures is to make sure they fit your ministry’s size, type and culture, and that the policies you adopt help you to assure sound operations and compliance with tax law.

Every ministry that goes through our StartRIGHT® Program receives core and supplemental policies that are integral to establishing a solid legal foundation. In addition, our Policy Suite is an online resource packed with a variety of policies for every type of ministry.

Help is closer than you think

The ability to operate a successful ministry is not for the faint of heart. A lot of time, energy, and effort are required to see the ministry’s mission carried out.

And I’m not even referring to the administrative requirement of the leading a successful ministry.

With the assistance of our highly trained staff, we can help ensure your ministry is established on a solid legal foundation, and we can even help your ministry file an accurate and timely Form 990.

For more information about how we can help you and your ministry, give us a call at 877-494-4655.

Recommended blogs for you:

• "How to Start a Ministry"
• "Tax Reform Implications for Churches and Ministries"
• "How Churches Can Respond to Active Shooters"

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