Pension Reform Act not all bad for Charities

The bulk of the Pension Protection Act is intended to compel employers to shore up their pension plans. In addition, it will in many ways encourage more non-defined pension plans including 401K’s and 403B’s in lieu of defined plans. Presently, many pensions are under funded, which means that promised pension benefits would exceed the funds available, leaving pensions short of money. The Pension Protection Act of 2006 "requires most pension plans to become fully funded over a seven-year period" starting in 2008, according to a CCH tax briefing.

According to a press release by Sen. Grassley, the pension bill includes a “good package of charitable giving incentives and loophole closers.” Grassley commented, “It makes sense to tighten areas of abuse while increasing incentives for charitable giving. Americans are very generous with their donations. They deserve to know that their money helps the needy, not the greedy.” Grassley thanked Sen. Santorum, Republican of Pennsylvania who he said was especially helpful in developing the giving incentives, and the Panel on the Nonprofit Sector, who Grassley said, “represented many of the nation’s charities in a comprehensive effort to study ways to improve the non-profit sector”.

To achieve full pension funding, the new law allows employers to deduct the cost of making additional contributions to fund the pension, provides strict funding guidelines, and imposes a 10% excise tax on companies that fail to correct their funding deficiencies.

Charitable IRA Donations

The good news for charities is that The Pension Protection Act allows taxpayers to donate money to charity directly from their IRA account. The distributions will be tax-free and avoid the penalty on early withdrawals. Taxpayers are allowed to donate up to $100,000 per year from their IRA. Since the distribution will not be included in taxable income, individuals will not be able to claim a tax deduction for the charitable contribution.

Individuals won't get a tax deduction for the contribution. So why should they do it?

At age 70 ½ individuals must start taking a minimum amount of money out of their IRA each year. The Money taken out is added to your adjusted gross income, and is subject to federal and state taxes.

If the same amount is donated to charity, the amount qualifies for a tax deduction but it doesn’t negate the full amount of the tax. That is because the amount of the IRA withdrawn is still in adjusted gross income, which may affect a number of things. The amount many have been enough to place the individual into a higher tax bracket; an increase in adjusted gross income would also reduce the deduction for medical and other expenses and personal exemptions. Likely, the higher adjusted gross income would increase income tax on Social Security benefits.

With the new allowable Charitable IRA donation, a donation of money directly from the IRA to a charity would never show up in the adjusted gross income, eliminating the possibility of higher taxes. Charitable IRA donations also fully qualify as a portion or the entire minimum amount of money required to be withdrawn from IRA’s belonging to individuals age 70 ½ and older.

Stricter Rules on Charitable Donations

The Pension Protection Act toughens the tax laws for charitable donations. Effective in 2007, to qualify as a deductible expense, taxpayers must now keep records of all cash donations. Individuals must show a receipt from the charity, a canceled check, or credit card statement to prove their donation. No tax deduction will be allowed if the taxpayer cannot provide any supporting documentation. Previously, receipts were required if an individual monetary gift was $250 or more.

Taxpayers will not need to mail in the receipts with their tax return. Instead, taxpayers will need to keep receipts and other documentation with their copy of the return in the event of an IRS audit.

The new law also toughens the rules for non-cash donations. Donated items, such as clothing and household goods, must be in good used condition. While the new law does not define “good condition” the law does specify that no tax deduction will be allowed for items in less than good condition. In addition, for non-cash donations in excess of $500, taxpayers will be required to file a qualified appraisal for the donated property.

Future legislation

The “Panel on the Nonprofits” which included ECFA participation along with nineteen other national organizations, reviewed and commented on a number of other charitable provisions of which some are still likely to ultimately become law. Sen. Charles Grassley, mentioned above and the sponsor of the Pension Reform act commented, “I look forward to working with the same individuals to put together more legislative proposals to increase governance, transparency, and accountability in the non-profit sector."

Becoming an Advocate

Being so close to the Washington D.C. area, I’m starting to develop a new and different perspective on how the non-evangelical world looks at evangelicals. For years, I’ve been so involved in my church and ministry, it was easy to not understand how completely different some of our elected officials and others look at not only what we do, but who we are.

One of the first telephone calls I received from the media when I took this position was regarding relief efforts still going on in the hurricane ravaged gulf area and the fact that evangelicals were still there, helping and sharing.

“They are proselytizing you know….trying to get people to become Christians”, was his comment as well as his obvious, but unasked, question.

I tried to help our friend from the press understand that sharing the good news of Jesus Christ is what we do. We are to be motivated by both the Great Commandment ---to love God and neighbor, and the Great Commission -- to share our faith in Jesus Christ.

One of the other things that I’m starting to understand being close to Washington DC, is the increasingly loud call for transparency in our finances; both with respect to our typically donated income as well as our expenses.

ECFA standards of responsible stewardship advocate full financial disclosure (Standard 5 – providing a copy of current audited financial statements when requested) as well as specific communication and truthfulness in communicating with the donors regarding fund-raising. ECFA Accredited Members have taken the lead and not only comply with standards related to financial disclosure but also have agreed to an independent board, to having audited financial statements, to avoiding conflicts of interest, etc.

If you pay attention to what some of our political leaders are saying, the Charitable Community (including our evangelical organizations) are not doing what they should be doing with regard to providing comprehensive and accurate information about their financial activity (typically, income and expenses). While the 1,200+ accredited members of the ECFA lead the way in accountability, it is time that we become advocates for the rest of our evangelical friends including the churches that we attend.

Churches are largely exempt from government regulation because of historical understandings of the First Amendment. However, donor trust as well as government wonder, has much to do with the willingness of our organizations to freely provide financial information and become transparent with regarding to our fund-raising purposes and results.

It’s really time for all of us to become advocates for financial accountability and transparency. Providing simple financial statements and balance sheets on a regular basis to our donors and/or positing financial information on our websites helps answer many questions before they are even asked.

Over the past twenty-seven years, ECFA accredited members have taken the lead on financial accountability and transparency. We now need to become advocates as well for the rest of our evangelical friends in order to maintain the publics’ trust and to clearly show that we have a “higher standard and a higher purpose”

Charitable Tax Incentives included in Senate Pension Bill

WASHINGTON – Sen. Chuck Grassley today won final Senate approval of his bill that broadly reforms pension plans and, like many other House and Senate Bills, contains other legislation that may or not be related to the original intent of the Bill. Included in the Senate Pension Bill are provisions that provide additional tax incentives that should help charities.

Chief among the charitable tax incentives included in the pension reform bill (H.R. 4) is an IRA rollover provision that allows individuals age 70 ½ and older to make charitable donations up to $100,000 from an IRA without having to count the donation as taxable income. This provision, while highly contested, has broad applicablity for two years, allowing the charitable community to demonstrate its value as an incentive for increased giving that could be either eliminated or expanded in the future. The bill also provides expanded tax deductions for contributions of book and food inventory and qualified conservation contributions. The bill does not include a charitable deduction for taxpayers who do not itemize.

The IRA rollover provision, as well as other recommendations were identified by work accomplished in part by ECFA involvement in the "Panel on the Nonprofit Sector". The Panel was an independent effort by charities and foundations that included twenty top executives and national leaders including ECFA President Emeritus, Paul Nelson.

The work of the Panel was welcomed and encouraged by Sen. Chuck Grassley, Republican of Iowa and the Chairman of the influential Senate Finance Committee. The reforms were part of comprehensive legislation Grassley also helped to draft that will shore up the nation’s pension funding for workers nationwide.

The bill is considered by many to be the most comprehensive reform of pension funding laws since 1974. Developed in large part through the Senate Finance Committee, which Grassley chairs, it contains a number of reforms to shore up pension funding. A major change includes changing the formula companies must use to contribute to their pension plans. The bill also increases the amount of fees companies must pay to the Pension Benefit Guaranty Corporation, which guarantees pension funding if companies can no longer afford their contributions.

The Senate passed the bill by a 93 to 5 vote. It now goes to President Bush for his signature.

America's Fastest Growing Churches

Outreach Magazine has published an annual report on America’s fastest growing churches the past few years and are now known as the provider of the "Top 100 Largest and Fastest-Growing Churches in America". The data is self-provided and all the reports are provided by Dr. John N. Vaughan, president and founder of Church Growth Today, who specializes in research related to megachurches both domestically and globally.

Click on the link for the entire list but here is a sampling of just the top 10

1. Lakewood Church (Houston, TX) +12,000
2. Park Cities Presbyterian (Dallas, TX) +5,108
3. New Birth Missionary Baptist (Lithonia, GA) +3,500
4. Salem Baptist (Chicago, IL) +3,366
5. Without Walls International Church (Tampa, FL) +3,330
6. Asbury United Methodist (Tulsa, OK) +3,240
7. St. Luke Community UMC (Dallas, TX) +3,037
8. Willow Creek Community (Chicago, IL) +2,900
9. Grove City Church of the Nazarene (Grove City, OH) +2,861
10. Community Bible Church (San Antonio, TX) +2,858

Elders Want Audit of Church Finances under Ousted Pastor

A popular church in Bellevue that recently ousted its pastor is auditing some of its financial records after concerns about the church's bookkeeping, a spokesman for the church elders said.

The audit of documents at Bellevue Community Church is of records directly involving former pastor David Foster, spokesman and elder Richard McKinney said Tuesday.

He would not elaborate on exactly what records were being audited. He said elders met with an attorney Monday who recommended they hire a "forensic auditor" to review the records.

McKinney said the elders discovered some of the issues more than a year ago and confronted Foster about them and the problems stopped.

However, as elders are facing a revolt among church regulars over their decision last week to fire the charismatic pastor, they have called in an accountant to review the books.

"It did not follow standard accounting practices," McKinney said of the records. "It did not have the normal checks and balances you'd expect in an organization this size. We're having an accountant review it to see if there's anything untoward."

Foster said he does not know what McKinney and the other elders are talking about. He said he didn't handle the church's books or its money — that fell to an office administrator and the elders.

Foster said he believes the elders are picking out issues to pile on him in the wake of an unpopular decision to fire him and his wife, Paula Foster, who was the head of the nondenominational church's youth ministries.

"In all the 13 months we've had discussions and meetings, I've never heard that brought up," Foster said. "I have nothing to do with the finances. I don't sign the checks. I don't count money."

McKinney said the financial issues have been a concern for elders, but the chief issue that led to Foster's ouster was his style and bullying of staff.

"His personality and his unwillingness to be anything but the boss, period," McKinney said. "In any work setting, but in a church particularly, you have to have a congenial work environment.
You cannot have someone bullied."

Foster has acknowledged that he has not always acted as he would like in dealing with the staff, but he said it was more a matter of his "passion" for doing the job right than any effort to mistreat the staff.

McKinney said the flare-up that led to Thursday's firing started in June 2005 after an elder approached Foster about two of the pastor's daughters being on the church payroll. Foster blew up at the issue being raised, McKinney said, and the concerns of the elders quickly shifted to what they describe as Foster's explosive temper.

"He just blew up, and he said, 'I've had it,' " McKinney said. That episode sped up a process of elders looking to hire a head pastor and move Foster into a founding-pastor role.

Foster disputes McKinney's version of the discussion regarding his daughters being on the payroll. He said he never quit, but he does not wish to battle the elders on their decision to fire him.

"It's over," he said. "They've fired me. I accept it. I accept that my wife and I have been fired"

Source: www.tennessean.com staff writer: BRAD SCHRADE

Former Arizona foundation executives convicted of fraud, await sentencing

PHOENIX (ABP) -- In what has been described as the largest case of fraud targeting a religious group, the former top executive and legal counsel for the Baptist Foundation of Arizona were convicted on multiple fraud-related counts July 24.

A Maricopa County, Ariz., Superior Court jury convicted former foundation President William Crotts and Thomas Grabinski, the group's former top lawyer, each on three counts of defrauding investors and one count of knowingly operating an illegal operation. The jury also acquitted two of 23 counts of theft. Jurors reportedly determined that Crotts and Grabinski did not personally gain financially from the scheme.

Because the convictions require mandatory jail time, according to the Arizona Republic, the two were immediately handcuffed and taken into custody. They will be sentenced in September.

The convictions are the result of a 10-month trial that came nearly seven years after the foundation collapsed and the fraud allegations first came to light, shocking the non-profit world.

The foundation, controlled by the Arizona Southern Baptist Convention, declared bankruptcy in 1999 after state regulators ordered it to stop selling securities. About 11,000 investors -- many of them elderly members of Baptist churches in Arizona and elsewhere -- lost more than $550 million.

Prosecutors said Crotts, Grabinski and other foundation employees marketed the charitable fund to individuals interested in investing in a fund that would support Baptist and other Christian ministries. Bible-quoting foundation representatives claimed the investments would deliver above-average returns while helping "to do the Lord's work," the Republic reported.

However, the prosecutors said, the foundation's investments were actually losing money. The executives created "off-the-books" corporations to hide the losses while touting strong returns to sell the foundation to new investors to cover those losses -- essentially creating a non-profit pyramid scheme.

Defense attorneys countered that the foundation would eventually have been able to pay off investors if it had been able to wait out a bad real-estate market, but state officials shut the foundation down too soon. The jurors rejected that argument.

"They got caught up in something they couldn't get out of," the Republic quoted juror Nathan Redmond as saying.

Five other foundation officials have already cooperated with prosecutors in the case, pleading guilty and testifying against Crotts and Grabinski. A sixth is reportedly too sick to stand trial.

The accounting firm Arthur Andersen -- which also was connected to the massive Enron fraud scandal -- in 2002 paid a record $217 million to Arizona to settle a lawsuit involving the Baptist case. Andersen served as the foundation's accounting firm.

Steve Bass, the chief executive officer of the Arizona Southern Baptist Convention, expressed optimism in reaction to the verdicts in a July 24 entry on his weblog.

"Many in our Arizona Southern Baptist family are ready to close this chapter of our life together and move on," he wrote. "As I visit our churches and hear our people, the BFA issue is no longer the 'hot topic.' It appears that our people have moved on to our greatest passion: sharing the good news of Jesus Christ with our world."

As a caveat, though, he added: "Arizona is now watching us. Will we remain humble? Will we seek to forgive and to reconcile? Will we invest the kind of evangelism energy in what God has taught us through this experience as Kingdom Children? We must. For whatever we think of Bill and Tom, their trial is now over and ours is just beginning."

By Robert Marus
ABPnews.com
Published July 25, 2006

Church Salary Report

From Leadership Network: an E-publication of the Resource Network.

LN's Salary Survey

Since their inception, Leadership Network forums have been a place where peers are able to share mutual strengths, concerns and solutions. In many of the forums that I have attended over the years, we conducted informal salary surveys of the participants. This was usually done in a crude way, such as passing a blank pad around the room with various forum groups recording slightly differing information.Even with this crude methodology of collection, many participants considered this data to be invaluable when compared to other compensation surveys. Why?

1. It came from a group of churches they considered peers. In other surveys, they felt that the data, even though from a larger sample, gave too much weight to churches that were not growing.
2. The forum group of churches had similar needs when it came to facility and ministry expansion that affects staffing levels and other ministries.
3. The data came from churches they wanted to be like and so they wanted to know in detail how they compared with each other.

In late 2001 and early 2002, we gathered compensation data from a very select group of churches with more intentionality than in previous years. We hand selected a representative sample of churches that we considered to be some of the best in the country. We tried to balance the sample by denominational background, regions of the country and context within their region, as well as the tenure of the senior minister.By no means is the data as scientific or statistically valid as an advanced, expensive survey undertaken by a university researcher. Our approach was to gather data from churches with good practices and then create a report from which other churches could learn. To obtain a copy of the complete report contact Leadership Network. The following summary report has some highlights of the findings.

Survey Highlights: Church Size and Income

• The average church size was 3,700 in weekend worship attendance. The range was from 1,150 to 17,000 and the median size was 3,300.
  
• The average church income for regular giving was $4,986,834. Almost all of the churches were over budget last year.
  
• The average number of regular weekend worship services was slightly under four.
  
• The average for total giving by the congregation was $7.4 million.
  

Based upon these figures, the average gift per attender for the year was approximately $2,000. In most instances, giving amounts were correlated to church size.

Salary level

The survey asked for cash salary plus housing allowance for various staff roles. It did not include other benefits that are often a part of a minister’s total compensation package. The figures were all over the place and had no correlation to size. The figures below are all averages.

• Senior Pastor – $124,831 (range was from $74,000 to $210,000)
• Executive Pastor – $91,846 or approximately 75% of the senior pastor salary average
• Church Business Administrators – $77,080
• Worship Pastor - $71,794
• Small Groups Pastor - $54,449
• Teaching Pastor, other than Senior Pastor - $59,983
• Equipping Pastor - $58,748The survey also examined about 20 other roles including part time roles.

Benefits Section

All the churches provided medical insurance

Two-thirds provided disability insurance

Three-fifths provided life insurance and cell phones to staff

Slightly over half provided dental insurance

Half provided sabbatical leave and book allowances

A more complete discussion of benefits is also included in the full report.

Salary Increases

We wanted to know what the churches used as a guideline for salary raises within the past year and we asked for the average annual percentage increase given. Please note that this is a highly subjective number due to many factors.

The average increase for cash salary was 4.3% for all staff. The range for the averages was from 0 to as high as 10%. In addition, approximately 25% of the churches had some bonus structure in place. How should you use these numbers? Use them as a means for comparison and norming when working through your salary and benefits plan. Do not use the survey as the final solution. Regional factors, cost of living factors, as well as experience and tenure must be considered when establishing compensation plans. Several times each year I have telephone conversations with members of governing boards concerning issues of compensation, benefits and the retention of key staff members. Our conversations not only deal with financial compensation, but also with non-financial ways to improve staff morale and well being. Most congregations fail to realize how valuable staff are for accomplishing their congregational mission.

Christianity Today has a number of good articles on salary and staff compensation at: www.ChristianityToday.com/cgi/texis/webinator/search4/?query=salary+survey

Other groups that conduct compensation surveys include:
The National Association of Church Business Administrators www.nacba.net
The Institute for Church Leadership http://www.iclonline.com/