Ministries “Covered” By The Church
When talking with ministry leaders, we often hear the phrase, “We are covered by …”, or “We are covering XYZ ministry.” What is meant by saying “Covered” by one, may be interpreted differently by someone else. May we suggest, there are at least three realms where “Covering” may apply:
1. A new “Start-up” church, which has not yet formally organized;
2. A ministry that is occasionally traveling out from the church – eg the Pastor, or a Missions Team; or
3. An evangelistic or music ministry, which has developed within the church, and is now traveling in ministry full time. Such a ministry is often counseled to formally organize, with his own non-profit corporation, and getting an IRS exemption ruling letter for the 501(c)(3) status – or develop a formal relationship with the church, by corporate resolution, as a Covered_Ministry.
In each of these cases, the “Mother” church may be willing, and want to offer a covering for this ministry. They are to be commended, but should proceed with caution. What is being offered should be clearly defined in a carefully written [and adopted] Resolution in the Minutes of the church Board of Directors meeting. Church Policies are a cornerstone of excellent Church Administration.
There are three areas which need to be addressed in this corporate resolution when agreeing to be a covering: 1. Spiritual; 2. Legal; and 3. IRS-wise, eg: how the funds will be handled, any reporting which may be required, if receipts are to be given to donors, and to what degree the church will take responsibility for this ministry. Always keep in mind, that having responsibility requires maintaining authority. The church that agrees to “Cover,” a ministry must retain authority, and require of the “Covered” ministry an accounting of it’s activities and finances.
Spiritually - At first glance, all this may seem ungainly and counter productive, but there are many positive aspects, for the covered ministry, to establish such an arrangement. First of all – it’s Biblical for every ministry to be held spiritually accountable to an established minister or church. There are far too many “Lone Ranger” ministers traveling this nation and the world today, with no spiritual accountability. When we structure our ministries biblically, God will bless our endeavors with far more success..
Legally – in some cases, the insurance company may be willing to add the ministerial outreach to the church insurance policy, thereby covering the additional liability exposure. In any case, if there is to be an additional ministry covered by the church, the church insurance company will need to be fully informed, with the ministry’s activities fully communicated, so that the church is protected from any unforeseen liability incurred by the ministry.
IRS-wise - A ministry covered by, and fully accountable to, the church will not have to deal with the IRS in any form. It is literally “Off the radar screen.” The IRS is satisfied so long as accountability is maintained. And this is done via reports given the Board of Directors by the ministry regarding it’s ministry activities and finances. Whether the church has an exemption ruling letter or not, is really immaterial, for the church is automatically “501(c)(3)” and it’s exempt status is applicable to any ministry it chooses to cover.
Think of it – no requirement to incorporate, or to file the IRS 1023, and no requirement to annually file the IRS Form 990. Not only are the "start up costs" eliminated, but the “Hassle factor” of reporting is greatly reduced, and the costs related to filing a 990 with the IRS eliminated. All this is fully explained in our Covered_Ministry Manual, which contains sample Resolutions defining the relationship between the church and the ministry.
Per Diem - It also explains how “Per Diem” works. The use of "Per Diem" is an awesome means for the minister to receive a great portion part of any income, generated within the ministry, as reimbursement, therefore tax free.
By the way - all of the above is true for any ministry, whether they are Ordained, Licensed or otherwise.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE – Rev. Don L. Buckel - Director. 8419 Vista del Cajon Pl. Lakeside, CA. 92040 Don@admin-assist.com. Please feel free to call us at 619/443-5221. Please allow for West coast time zones, and call after 8:00AM PST
If you would like more information about similar issues, please consider "The Church Administration 'How To' Manual." This Manual, endorsed by three CPA's, an EA and two attorneys, was updated again in January, 2010, for the 11th time, since its original publication in 1991.
1. A new “Start-up” church, which has not yet formally organized;
2. A ministry that is occasionally traveling out from the church – eg the Pastor, or a Missions Team; or
3. An evangelistic or music ministry, which has developed within the church, and is now traveling in ministry full time. Such a ministry is often counseled to formally organize, with his own non-profit corporation, and getting an IRS exemption ruling letter for the 501(c)(3) status – or develop a formal relationship with the church, by corporate resolution, as a Covered_Ministry.
In each of these cases, the “Mother” church may be willing, and want to offer a covering for this ministry. They are to be commended, but should proceed with caution. What is being offered should be clearly defined in a carefully written [and adopted] Resolution in the Minutes of the church Board of Directors meeting. Church Policies are a cornerstone of excellent Church Administration.
There are three areas which need to be addressed in this corporate resolution when agreeing to be a covering: 1. Spiritual; 2. Legal; and 3. IRS-wise, eg: how the funds will be handled, any reporting which may be required, if receipts are to be given to donors, and to what degree the church will take responsibility for this ministry. Always keep in mind, that having responsibility requires maintaining authority. The church that agrees to “Cover,” a ministry must retain authority, and require of the “Covered” ministry an accounting of it’s activities and finances.
Spiritually - At first glance, all this may seem ungainly and counter productive, but there are many positive aspects, for the covered ministry, to establish such an arrangement. First of all – it’s Biblical for every ministry to be held spiritually accountable to an established minister or church. There are far too many “Lone Ranger” ministers traveling this nation and the world today, with no spiritual accountability. When we structure our ministries biblically, God will bless our endeavors with far more success..
Legally – in some cases, the insurance company may be willing to add the ministerial outreach to the church insurance policy, thereby covering the additional liability exposure. In any case, if there is to be an additional ministry covered by the church, the church insurance company will need to be fully informed, with the ministry’s activities fully communicated, so that the church is protected from any unforeseen liability incurred by the ministry.
IRS-wise - A ministry covered by, and fully accountable to, the church will not have to deal with the IRS in any form. It is literally “Off the radar screen.” The IRS is satisfied so long as accountability is maintained. And this is done via reports given the Board of Directors by the ministry regarding it’s ministry activities and finances. Whether the church has an exemption ruling letter or not, is really immaterial, for the church is automatically “501(c)(3)” and it’s exempt status is applicable to any ministry it chooses to cover.
Think of it – no requirement to incorporate, or to file the IRS 1023, and no requirement to annually file the IRS Form 990. Not only are the "start up costs" eliminated, but the “Hassle factor” of reporting is greatly reduced, and the costs related to filing a 990 with the IRS eliminated. All this is fully explained in our Covered_Ministry Manual, which contains sample Resolutions defining the relationship between the church and the ministry.
Per Diem - It also explains how “Per Diem” works. The use of "Per Diem" is an awesome means for the minister to receive a great portion part of any income, generated within the ministry, as reimbursement, therefore tax free.
By the way - all of the above is true for any ministry, whether they are Ordained, Licensed or otherwise.
The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE – Rev. Don L. Buckel - Director. 8419 Vista del Cajon Pl. Lakeside, CA. 92040 Don@admin-assist.com. Please feel free to call us at 619/443-5221. Please allow for West coast time zones, and call after 8:00AM PST
If you would like more information about similar issues, please consider "The Church Administration 'How To' Manual." This Manual, endorsed by three CPA's, an EA and two attorneys, was updated again in January, 2010, for the 11th time, since its original publication in 1991.
