Church's Records Get Pastor in Hot Water

By Raul Rivera

Late one afternoon, a distraught Pastor Chris called our office fearing that he may lose his church. He proceeded to recount the events of the past week that led to his frantic call. 

A lawyer came to his church office early one morning demanding to see the church’s financial and administrative records and threatened legal action if the records were not provided. 

Pastor Chris had been the lead pastor for only a year, and the administrative side of running a church was something new to him. He did not have any staff yet. He only had volunteers helping him to keep track of finances, membership records, and board meeting minutes, which were sparse and not organized. 

Without question, the young pastor provided all of the requested information. The last thing he wanted was to be sued or to get into any legal trouble. What Pastor Chris did not know was that the lawyer had intentions of instigating trouble among the congregants within the church. The lawyer took the sensitive information and shared it with various church members, creating division and quarreling amongst the church.

By the end of the week, Pastor Chris had received several phone calls from concerned members. In addition, another group in the church was calling for a church-wide meeting to confront the pastor and his leadership team. Pastor Chris felt blindsided by the events, and he knew that he needed to do a lot of damage control amongst his congregants.

However, he was not entirely sure where or how to begin.

Know your church’s responsibility and member rights

Unfortunately, the scenario with Pastor Chris is all too common. 

Like the young pastor, many ministers do not fully understand their responsibility to maintain records, nor do they understand how to protect the rights of church members. Not only do most ministers unknowingly jeopardize the trust of their congregants, but they also put themselves at risk of a lawsuit.

According to the Sarbanes-Oxley Act of 2002, churches and other nonprofits have a responsibility to maintain appropriate records pertaining to their operations.

These documents may include, but are not limited to, the following: 

• financial records, 
• significant contracts, 
• real estate and other major transactions, and
• employment files. 

The period for which an organization must keep these records depends on the nature of the information.

(Recommended reading: "How to Solve Your Church's Financial Crisis")

Who can review church records?

In short, nonmembers and outside agencies have no right to view church records, unless they obtain a court-issued subpoena. 

Even the IRS must provide a written inquiry notice to the church, as outlined in section 7611 of the Internal Revenue Code, before being able to begin an audit of church financial records and activities. This notice simply gives a church time to prepare for the audit.

In addition, church members generally have no right to review church records, unless the state nonprofit corporation law or the church’s bylaws state otherwise. Although state law may not require open records, some churches choose to allow members to review their records in order to ensure the trust of the members and to also ensure that a public interest is being served.

(Recommended reading: "What Should a Church Do When the Pastor Leaves")

3 provisions to have in your church’s bylaws

Every church's bylaws should contain a clause setting forth guidelines for when members request to see the church’s finances (which can reveal personal giving records or expose certain sensitive information). It is important to have a clause that limits what a member can see or request.

When it comes to how records can be obtained from your church, we recommend that your church’s bylaws include the following:

1. A provision that controls the method by which a member can review church records.
2. A requirement that the requester list specifically what he/she wishes to look at and that he/she state a reason for the request. We recommend that the requester also sign a statement declaring that the information will be kept in the strictest of confidence.
3. A clause allowing the church the right to decide if the request is frivolous or if the person requesting is doing so in order to create division within the church.

Making the best out of a messy situation

Pastor Chris was relieved when I told him that there are legal provisions to protect him from these types of situations. With a little bit of help and guidance, Pastor Chris was able to update his church’s bylaws with the necessary language to protect the privacy of his members.

By the end of our conversation that day, Pastor Chris understood that he does not need to disclose corporate records to anyone outside of the church without a subpoena or written inquiry notice from the IRS. Also, he now has a procedure documented for when members request records. Pastor Chris called a congregational meeting, and to the relief of the church members, he outlined the new guidelines being implemented to protect their privacy.

(Recommended reading: "3 Ways Your Can Grow in Your Calling")

What is at the heart of your ministry?

It is our passion here, at StartCHURCH, to empower pastors with the legal knowledge to protect their churches and ministries. One of the ways we do this is through our StartRIGHT® Program. In this service, we work with you to create strong, foundational documents that establish a solid legal foundation while also reflecting the heart of your ministry.

So, what are you waiting for? Give us a call today at 877-494-4655, or click on the link below to learn more about which steps you need to take.

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• "Do You Really Know What is in Your Bylaws?"
• "What Ministers Need to Know About Their Taxes"

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