Risks of the Law in Operations

Churches and other faith-based groups often do things that put them at risk of getting into trouble with the law. They don't show up until they cause the government to penalize them or put them in jail. These legal risks in the church's daily operations, like how it hires and manages volunteers, controls contracts, and fills in compliance gaps, can put the church's finances and ministry mission at risk.

This blog talks about the most prevalent legal risks that churches don't always think about. It also gives you a helpful framework for undertaking “thorough audits” to find, analyze, and lower these risks. Regularly checking your work makes your ministry stronger and more in line with the law.

Why Churches Should Care About Operational Legal Risks

Churches have a lot of moving parts, such as staff, volunteers, contracts, property, and private information. Not being able to detect hidden legal problems can lead to:

• Lawsuits from employees, volunteers, or members
• Fines and other punishments from the government
• Damage to the ministry's reputation and the faith of its donors
• Money lost and trouble in running things

A legal risk audit of operations is a means to detect and fix problems before they get worse.

Legal Risks That Churches Often Face

1. Following the rules when it comes to hiring and firing
• Putting people in the wrong group, such as volunteers or contractors instead of employees.
• Not obeying laws on wages and hours, including the ones that state how much overtime and minimum wage you have to pay.
• There should be more restrictions about safety, harassment, and discrimination at work.
2. Risks of Being a Volunteer Manager
• No clear agreements or background checks for volunteers.
• Not enough training on how to keep kids safe, halt harassment, and keep secrets.
• Injuries to volunteers who don't have enough liability waivers or insurance.
3. Watching Over Contracts and Vendors
• Contracts for service providers, vendors, and ministry partnerships that are either absent or not worded correctly.
• Not looking over contracts for insurance needs, indemnification, and termination terms.
• Obligations that aren't met or automatic renewals that prohibit the church from getting better deals.
4. Taking Care of Buildings and Property
• Not obeying safety requirements, building codes, or zoning laws.
• Not enough insurance to pay for damage to property or legal fees.
• Unsafe situations that make people want to file injury claims.
5. Data Privacy and Cybersecurity
• Not keeping personal information safe, like member information and donation records.
• There are no standards for how to tell individuals about data breaches and what to do about them.
• There are no security measures in place to protect websites.

How to Undertake an Audit of Operational Legal Risk

1. Gather your audit team

Include board members, church leaders, lawyers, and other important staff members. If you need help with anything specific, like cybersecurity or employment law, you might choose to hire someone from outside your company.

1. Make goals and set restrictions

Choose which operational areas to check based on the church's size, complexity, and past problems. Make sure you know what your goals are for discovering risks, making sure you're following the rules, and making things better.

1. Get the right forms

For employees and volunteers, make sure you have handbooks, contracts, insurance policies, meeting minutes, financial reports, and IT rules. Check out old audit reports or legal opinions.

1. Check for risk and compliance

Make sure that what you do today is in line with the law, your denomination's standards, and best practices. Look for places that don't have all the documents they need, have antiquated rules, or have holes.

1. Write down the hazards that are most critical and establish plans on how to deal with them

Put risks in order of how likely they are to happen and how bad they could be. Give suggestions that can be carried out, with clear timelines and persons in control.

1. Write a report and follow up

Send the results to the board and leadership for approval. Follow through on the advice and plan regular re-audits to make sure you are still following the rules.

The Good Things About Doing Operational Legal Audits on a Regular Basis

• More awareness of dangers and the ability to fix problems before they happen.
• Less likely to be in trouble with the law or have to pay fines to the government.
• Governance and running things have been better.
• There is more trust between donors and church members.

Last Thoughts

You can often see operational legal issues, but if you don't pay attention to them, they can have terrible implications. Churches that vow to undertake regular, thorough legal audits protect their ministry, preserve people's trust, and set themselves up for long-term success.

Links Inside

• Learn more about respecting church laws about hiring and firing.
• Take a look at our church's liability waivers and risk management plans.
• Learn about the church's report on legal audits and compliance.

Links to Other Websites

• U.S. Department of Labor – Employment Law Overview
• ECFA – Risk Management Resources
• National Council of Nonprofits – Contract Management

This blog post is just for information and not legal advice. Get tailored risk evaluations and audits from a church law lawyer who knows what they're doing.