Governance Issues That Can Stop a Ministry Merger

Joining two ministries is a terrific opportunity to go bigger, share resources, and have a bigger impact on the community. But merging ministries is a hard process that involves more than simply a shared vision and goal. It also needs governance mechanisms that work well together. Governance difficulties are often not found until they produce problems, conflicts, or legal challenges that threaten the merger as a whole.

If you're a pastor, ministry leader, or board member who is thinking about or going through a merger, it's vitally important to know about the common governance difficulties and how to fix them so that the merger works and lasts. This in-depth guide talks about the governance issues that typically get in the way of ministry mergers, why they matter, and how to fix them with real-world, legally solid remedies.

Why Governance Matters for Mergers of Ministries

Governance is the set of rules, procedures, and practices that a ministry uses to operate itself. It ensures that the ministry observes the law, is responsible, and stays true to its goals and principles. When two ministries work together, their governance systems need to work together so that there is no fragmentation and confidence is retained among members, funders, staff, and regulatory authorities.

Bad governance integration can:

• Make Role Confusion: It's tougher to respond fast and efficiently when you don't know who's in charge and who can make decisions.
• Make Policy Conflicts: Different rules and bylaws can cause legal challenges and make it hard to run a business.
• Ignore your reporting and regulatory requirements, putting compliance at risk, which might mean fines and losing your tax-exempt status.
• Erode trust: When boards don't perform their base, it joins funders, and the ministry slows down.

It's crucial to detect and fix problems with governance early in the merger process so that it can be successful in the long run.

Problems with Governance That Often Get in the Way of Ministry Mergers

1. It's not obvious what the board's functions and makeup are.

When two ministries come together, their boards often have difficulties with:

• Choosing the size and makeup of the merged board can be hard, especially if one ministry has a board that is much bigger or more active than the other.
• Authority and Decision-Making: If it's not apparent who has the greatest power during the transition and after, there could be delays and power struggles.
• Conflicts of Interest: Members who sit on both heritage boards may have real or perceived conflicts, but there are no clear procedures on how to handle them.
1. Policies and rules that don't match up.

The statutes that govern a ministry are called bylaws. They say:

• How to choose and set up boards
• How to hold meetings and how many people should be there
• Officer responsibilities and terms
• Rules for dealing with conflicts of interest
• Requirements for audits and financial oversight

The merging ministries' bylaws may be different, which might lead to:

• Laws that aren't explicit about what choices are legal
• Disagreements about who can sign contracts or hire people
• Nonprofits having trouble respecting state laws
1. No strategy for what comes next.

A merger also means a change in who is in charge. Here are some common mistakes:

• There is no structure in place for getting senior leaders to work together, so it's not apparent who is in charge of what.
• Not having rules or term limitations for how new board members should be chosen.
• Unclear or overlapping deadlines for passing over leadership.
1. Bad oversight of compliance.

Merged ministries could have to cope with:

• Not paying your federal and state taxes on time, which could get you in trouble.
• People not knowing who is in charge of making sure that regulations are followed and reports are produced.
• You missed the deadline to fill out IRS Form 990, register as a charity in your state, or hire someone.

These kinds of mistakes might put the ministry's tax-exempt status in danger or perhaps lead to legal action.

1. Issues with culture and communication.

How leaders talk to and work with each other is also part of governance. Here are some of the problems:

• Legacy boards that are used to making decisions or conducting things in different ways.
• There aren't any clear means or places to discuss issues or disagreements.
• Not enough work to bring people from different cultures together and make their visions work together.

When government officials don't communicate well, people don't trust them and don't want to be involved, which could hinder the merger.

How to Fill in Governance Gaps to Make the Merger Go Smoothly

1. Check the governance completely.

Before establishing plans for the merger:

• Look over all of the governing documents from both ministries, like bylaws, policies, and minutes from board meetings.
• Look for faults, discrepancies, and places where rules aren't being followed.
• Look at how the board is made up, what the leaders do, and how the organization is administered.

This audit helps establish merger governance plans that are specific to each case.

1. Write down the rules and bylaws that everyone agrees on.

Make a whole set of rules that:

• Make sure everyone knows how big the board is, what its duties are, and how it is made up so that it can do its job.
• Decide how to vote, how many people need to be there, and how to make choices.
• Set rules and norms for ethics and conflicts of interest.
• Outline how to keep an eye on money, run audits, and deal with risk.

Legal assistance helps ensure that the bylaws are in line with the best practices and state regulations for organizations.

1. Make a clear plan for how things will change in leadership.

Make sure that the board chairmen and executive leaders know what their jobs are during and after the merger.

Set timeframes and rules for when board members' terms end and when elections take place.

Add leadership training to assist people in getting ready for increasing responsibilities.

1. Set up systems to keep an eye on compliance.

It is the role of compliance officers or committees to make sure that rules are followed and filings are made.

Set up frequent checks, audits, and training sessions to make sure everyone knows how to follow the standards of governance.

Make sure to keep good records of all approvals and filings.

1. Encourage clear and open communication.

Set up board meetings, retreats, and committees that operate together.

Share leaders and the congregation quick access to reports and the chance to share their thoughts.

Teaching people how to communicate can help build a sense of community and a shared goal.

How Our Tiered Legal Plans Help with Integrating Governance

The Foundation Plus Plan (Tier 2) includes governance audits, policy reviews, and establishing conflict of interest policies to detect and fix problems before they grow worse.

The Pastor Support Plan (Tier 3) includes establishing consistent bylaws, dealing with leadership changes, making sure everyone follows the rules, and seeking priority legal counsel to help with governance problems.

The Executive Plan (Tier 4): This plan involves full governance collaboration with strategic facilitation, aid with resolving disagreements, and ongoing oversight to keep governance healthy after the merger.

How Fixing Governance Saved a Merger: A Case Study

Two medium-sized churches attempted to work together so they could combine their resources and reach more people with their mission. At first, everyone was happy, but soon they didn't know how to run things:

• Legacy boards couldn't agree on who could make choices and who should be able to do so.
• The bylaws didn't make it clear what the quorum and officer terms were.
• People missed compliance deadlines in the middle of all the changes.

After employing skilled lawyers and coming up with a unified governance plan through the Pastor Support Plan, the churches were able to:

• Create a board that was unified and had defined powers and limits on how long they could serve.
• Establish new guidelines that considered the demands of all the governing organizations.
• Set up compliance tracking to meet the deadlines set by the state and the IRS.
• Develop a plan for church leaders and members to communicate with each other.

The merger went well, and after a year, the ministry was thriving again.

Last Thoughts

One of the biggest reasons ministry mergers fail is because of gaps in governance. However, these gaps can be prevented with planning, foresight, and good legal guidance. Ministries may eliminate governance gaps and work together more effectively and clearly by evaluating governance, coordinating policies, preparing for leadership transitions, ensuring compliance, and promoting open communication.

Our tiered legal subscription plans are designed to give ministries the information and resources they need to handle the challenges of governance and make mergers work.

Links Inside

• Learn more about the church's report on legal audits and compliance.
• Learn more about the services of a church governance lawyer.
• Learn about the legal way to pay pastors.

Links to other websites:

• National Council of Nonprofits — Board Governance
• IRS Guidance on Tax-Exempt Organizations
• State Charity Compliance Requirements

This blog article is not legal advice; it is merely for information. If you need specific help with merging ministries, talk to a lawyer who knows a lot about church law.