When it comes to compliance, ignorance is not bliss. You should be aware of the state regulations, compliance challenges, and the consequences of non-compliance. The more insights you gain, the better the compliance. Leaders of all organisations must be aware of the benefits and challenges of compliance.
There has been a plethora of changes in regulations regarding the administration of churches in recent decades. Leaders who rely on outdated regulatory information may encounter more challenges than those who stay updated. Identifying and managing these challenges in advance can help guide churches and ministries towards better compliance.
This blog post discusses some of the decisive compliance challenges that all churches and ministries have to encounter. Please keep reading to learn more!
1. Managing Church Activities
All day-to-day activities of churches and ministries must be as per income tax regulations. Participation in any activities that are not tax-exempt may lead to the loss of the tax-exempt status of the church. These church activities might include but are not limited to:
- Renting out facilities for use to the local public.
- Organising bake sales.
- Running stores that include financial benefits during non-church or non-ministry events.
A church can engage in all these activities by following the necessary guidelines. Any mistakes in handling these activities can result in losing the tax-exempt status of the church.
2. Unique Fund Accounting
The balance sheet of a church is unique in nature. It varies from normal businesses as there is no place for profit or loss. They are replaced by fund balances in the equity section. Regulators need to know whether the funds allocated for a specific cause were utilised for the same.
People with little or no experience in managing such accounts might be prone to make mistakes. Leaders of churches must engage those with proper knowledge and experience to deal with fund accounting. They may also consult attorneys or accounting professionals to substantiate their compliance in this area.
3. Maintaining Church Nurseries
Just like other parts of a church, nurseries are not excluded from compliance requirements. The cribs kept in your church must also align with regulatory standards. Removing and/or donating of non-compliant cribs and purchasing new cribs that fulfil the criteria are to be done following the same rules.
Any danger or injury to children in church nurseries can put church compliance under review.
4. Monitoring Internal Controls
Small churches are often made to stretch funds and sanctions over administrative functions. Inexperienced volunteers might be unaware of the right usage of funds. These situations may give rise to fraud or misuse.
Internal controls play a pivotal role in managing the accounting compliance of a church. Checks and balances are required to ensure that the funds of a church are protected from fraud and misuse.
5. Remitting Correct Payroll Taxes
Some church leaders might be unaware of the tax structure of a church. Contrary to common belief, religious institutions are not exempt from paying all taxes, although there are certain exemptions that all religious institutions enjoy including churches. But payroll taxes are not included in them.
Churches are required to retain state, local, or other such taxes from their employees. Leaders must be aware of these regulatory requirements in order to comply.
Managing churches and ministries is not an easy task, especially when it also includes compliance challenges. One way to ensure that your church stays compliant with state regulations is to provide compliance training in your church. Leaders, employees, and personnel engaged with managing the operations and activities in your church get an in-depth aspect of the compliance requirements.