66. The Church Board Chair and the Operations of a Charity

Most churches in Canada function as non-profit charities.While congregational leaders acknowledge this, the implications often elude them or in some cases are just ignored. If you serve as chair of a church board which is a registered charity, this reality will shape to some extent your responsibilities as chair. In article #65  The Church Board Chair and the Annual General Meeting I outlined, for example, how the legal requirement for the board of a registered charity to hold an annual general meeting within certain periods defines some of the chair’s responsibilities. However, this is only one of several important functions that a church’s status as a legal charity requires the chair to attend to. Please note that I am writing from the perspective of Canadian charities and legal requirements in other jurisdictions may be different. You should check with denominational leaders if you have specific questions.

I will focus my comments around  4  areas:

1. Governing in accordance with the church’s constitution, bylaws and policies, as well as within all legal parameters.

A board chair needs to be familiar with the church bylaws and all board policies so that he/she can guide the board appropriately in its work. A good board secretary can be a great assist here. What needs to be clear are the matters that the board can decide by itself and what requires congregational approval. As well, the board itself may have (and if not, should have) developed and adopted some key principles to guide its operations. As the board’s chair you are bound to facilitate the board’s work within those principles, unless the board directs otherwise.

Beyond these internal standards, the chair should have a general working knowledge of external legal boundaries and any other stipulations within which the particular charity must operate legally and ethically. For example, the chair should know the essential tax guidelines that define what a charity may and may not do, as well as for what purposes it may issue a tax receipt for funds received. Further, it is helpful to know about any legal agreements that the charity has made with financial institutions (i.e. mortgage, letters of credit, etc.) or other agencies with which it may be partnering (i.e. mission organization, local parachurch agency, denominational agencies, etc.). There may be stipulations in such agreements that limit the freedom of the board to act in specific ways. As well, in today’s world being somewhat aware of human rights regulations will also be of significant benefit, particularly when it comes to staff issues, member discipline, etc.

It may be that you will not need to be an expert in all of these matters because the lead pastor or others on the board will have such knowledge, but the more you can educate yourself about such matters, the wiser and more effective your leadership will be.

2. Overseeing the appropriate use of resources.

A local church as a charity normally will have three kinds of resources — personnel, monetary, and property/facility. Although the board will not usually be providing direct oversight of these resources, it has to ensure that their management is being conducted, fairly, honestly, ethically, and responsibly. In other words there will be delegation, but with specific accountability. One means by which to manage the accountability will be to make sure that clear, written boundary principles are provided to the ones delegated to administer specific resources. These principles should be written in the negative, i.e. what the person with the responsibility cannot do, so that the worry areas of the board are taken care of. In addition, there must be clear, consistent reporting guidelines so that the board knows that the boundary principles are being followed. In the area of financial administration board guidelines may include the level of qualifications necessary for a person to act as controller, who approves expenditures, where and how income is managed, provision of quarterly reports that clearly show the financial health of the charity, the nature of the annual financial review, etc. Charities often receive restricted gifts and the board must decide whether to accept such a gift and if it does, to ensure that it is used appropriately.

In the case of property and facilities the board will want to ensure that any legal documents (property deeds, mortgage papers, etc.) are kept in a secure place (e.g. safety deposit box), that all property is adequately and consistently insured, that facilities are maintained in a safe condition, etc. Again, the board normally will not do this directly, but will need to make sure that these things are being managed responsibly.

Where personnel are concerned, the board will want the charity to be known as a good employer and this requires appropriate employee policies to be developed and adhered to.

3. All activities of the charity, i.e. the church, fit within its stated mission and charitable purposes.

You probably think this is a ‘no-brainer.’ Everyone knows what a church is supposed to do. However, in the last decade some clear guidelines have emerged limiting the manner in which a charity can engage in political activity, direct its benevolence, partner with foreign agencies. and develop business ventures that legitimately fit within its ‘charitable’ mandate. For example, the operation of a Day-care as a related business is permitted but only under specific circumstances. The charity cannot receive a gift of money designated for a person; the charity cannot be used as a vehicle to serve the purpose of private benevolence. There is a gray area here when it comes to raising money for short-term mission projects, etc., because often family members are encouraged to give in support of other family members who are participating. In the political sphere a charity cannot participate in “partisan political activity.” A charity, for example, cannot donate to the campaign of one person during an election.  In the case of activities outside of Canada, a charity cannot give money to individuals or churches in other countries directly. Such transactions must be done through another organization regulated by a specific agreement.

4. Employee and volunteer care.

With the growth of church staff church boards increasingly are involved with employment issues. If handled well, the ministry and mission of the church will flourish; if neglected or poorly managed, such matters have potential to destroy the effectiveness of the charity. Hiring practices, evaluation processes, harassment policy, termination procedures, various kinds of leaves, are all important policies for a church board to have in place and implemented consistently. Make sure all employee policies are current and consistent with provincial labour codes. Your denominational office should be able to help here if you have questions. Salary decisions should be made on the basis of an explicit grid linked to experience, expertise and level of responsibility; benefits should be defined in writing; all appointments should be based on a formal written proposal that includes a clear position description and terms of employment. Verbal agreements are not sufficient. Do not forget the criminal record check which should be done for every new employee as a condition of employment.

As chair you probably will not be directly involved in the implementation of such policies and procedures. However, you need to ensure, both as a board member and chair, that the charity, i.e. the local church, is operating within these boundaries. If your lead pastor says “trust me”, be very cautious. Trust is good, but accountability is still necessary. Make sure you do your due diligence as chair in these matters, because you will be protecting not only yourself, but safe-guarding the life, ministry and testimony of the congregation.

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