Why Churches May Not Own Their Records
By Raul Rivera
Every pastor, at some point in time, has experienced the nearly impossible task of trying to juggle all (or virtually all) of the church’s administrative and spiritual responsibilities. It can be quite the heavy burden for one person, and I know that many of you out there relate to what I am saying.
To say that it is a huge relief when you find a trustworthy person capable of assisting you with the church’s bookkeeping responsibilities, whether that be a volunteer or CPA, is an understatement. It is one less thing off of your already crammed plate, and it is a relief that you gladly accept. However, the question that many churches end up asking themselves is, “Who owns the church’s accounting records?”
If you have not already, this is a question that you and your church should take time to seriously consider, and this is the very question that I want to address in this post. Therefore, I encourage you, whether you are just starting out on this journey or are a well-seasoned veteran in ministry: take time to read through this post, as I believe you will receive some invaluable information.
Accounting requirements for churches
Every organization should steward its finances wisely. To do this, accounting methods and practices are adopted and implemented by each type of organization. In fact, the nonprofit corporation laws that many churches are incorporated under require that such corporations keep and maintain various types of records. This includes accounting records.
For example, the Model Nonprofit Corporation Act, which has been adopted by most states, provides that “a corporation shall maintain appropriate accounting records.” Since churches are essentially required to “maintain appropriate accounting records”, it is most often assumed that such records would belong to the church. But, as we will see, and perhaps as some of you may have experienced, this is not always the general assumption.
Let us next look at how using either a CPA or volunteer to help you with the church’s accounting requirements can lead to questions over who actually owns the church’s accounting records.
So...who actually owns the accounting records?
When the church is able to use the services of a CPA or when a trustworthy member of the church volunteers to take on the church’s accounting responsibilities, this much needed assistance is welcomed with open arms. As previously stated, it is probably safe to assume that nearly every church believes that church accounting records belong to the church. When you think about it for a moment, the accounting records are electronic information and they are intellectual property. This means that whoever creates them, whether he/she is a paid accountant or a volunteer, may have a legitimate claim to them. Let’s look at how, if not initially established, the ownership of the church’s accounting records can easily come into question.
When using the services of a CPA
When a church outsources its accounting or bookkeeping requirements to a CPA, the CPA usually performs the work at his/her office on his/her time. In general, this means that the data generated is his/her own. Unless the church enters into an agreement with the bookkeeper to specifically make the data the church's intellectual property, he/she could place a claim on it as his/her own.
In 1989, the U.S. Supreme Court held that a work created by a contractor is not subject to the “work for hire” provisions of Section 101 of the Copyright Act of 1976 and that it can only be a “work for hire” if both parties agree in writing in advance.
Just because you pay for the service, it does not make the data yours. It has to be specifically mentioned in the agreement that the work done by the CPA is a “work for hire”. I will discuss this agreement in just a bit.
When using the services of a volunteer staff
Even more so, the work created by a volunteer bookkeeper is not necessarily subject to "work for hire" under Section 101 of the Copyright Act of 1976 because the church is not paying for the work. The Copyright Act of 1976 makes it clear that a work is protected by copyright from the time it is created and it is the property of the author who created the work.
Moreover, none of the state corporation laws adequately address ownership of the data created. What could happen if the church bookkeeper becomes disgruntled and decides to exit? He could leave and decide to keep the electronic records, and the church could find itself in an undesirable position.
How to deal with ownership issues
Like most transactions, the party who is paying for a service holds the most negotiating power before the deal is made. Before you ever enter into any agreement for your accounting service, make sure of the following:
- Never outsource your accounting without a written agreement.
- Make sure that the agreement signed between the church and the bookkeeper makes the records and the electronic accounting file a work for hire.
- If you use a volunteer bookkeeper, make sure that he/she signs a statement that all work generated, files, and electronic data are church property. It will also be advantageous for all accounting work to be done on a church computer (laptop) rather than on one’s personal computer.
Create an agreement
Before you have a CPA or volunteer help you with your church’s bookkeeping responsibilities, you will want to create an Intellectual Property Agreement that pertains to the church’s accounting records.
Below is a sample of the wording you may want to consider including in the agreement:
“All work performed by Insert Name of CPA or Name of Volunteer constitutes a ‘work for hire’ as defined under Title 17 of the United States Code and all other relevant copyright laws. To the fullest extent permitted, Insert Name of Church shall own all copyrights in and to such work. To the extent that any of the work performed by Insert name of CPA or Name of Volunteer is not considered a ‘work for hire’, Insert name of CPA or Name of Volunteer hereby irrevocably assigns, transfers, and conveys to the Insert Name of Church and its successors and assigns all right, title, and interest in and to the work, including all copyrights, patents, trade secrets, and other intellectual property rights therein.”If implemented, this simple, yet powerful, agreement between your church and CPA or volunteer assisting you with your church’s bookkeeping responsibilities can help prevent unwanted worry or stress.
What you did not know
My years of experience working with thousands of churches and pastors have revealed that there is a lot of information that churches do not know, but desperately need. Perhaps you are sitting there thinking to yourself, "I have never thought of this." It is common for many pastors who attend our conferences to say the same thing.
This is precisely why attending an upcoming conference may be one of the wisest decisions you could make this year for the well being of your ministry. I know that you will not be disappointed!