Should Your Church Get a Legal Audit?

Churches are lively places of worship, but they also run as complicated nonprofit organizations behind the scenes. As ministries grow, add new programs, or change leaders, it becomes more and more important to stay within the law. A church legal audit is a great way to find hazards, make sure you're following the law, and preserve the future of your ministry. If you want to know, "Is it time for a church legal audit?" this complete guide will explain what audits are, why they are important, when to do them, and how Church Law and Strategy's Tier 2 and Tier 3 plans may help keep your church's legal health. This whole guide will help you understand what audits are, why they are important, when to act, and how Church Law and Strategy's Tier 2 and Tier 3 plans may help keep your church legally healthy.

What Is a Legal Audit for a Church?

A church legal audit looks closely at your ministry's rules, contracts, tax status, and how well it follows federal, state, and local regulations. The purpose is to find possible legal problems and provide ways to fix them.

Why Churches Need Legal Checks

1. Growth and Complication: Larger churches and ministries with more members are more likely to get sued. Multi-campus or multi-denominational structures make things even more complicated.
2. Following the Rules: IRS rules for 501(c)(3) tax-exempt status necessitate continuing compliance. There are legal requirements when it comes to employment, labor, and kid safety. Legal oversight is needed for property and contract disputes.
3. Reducing Risk: Avoid expensive litigation or fines for not following the rules. Keep board members and leaders from being personally responsible. Keep the ministry's good name and the trust of its donors.

When Your Church Needs a Legal Audit

• You've grown or expanded quickly.
• There have been recent changes in leadership or the board.
• People are worried about following IRS or state rules.
• Recent events have brought up worries about the law or safety.
• You don't have any new bylaws, policies, or contracts.
• You want to get ready for a big project, a merger, or an acquisition.

Important Parts of a Church Legal Audit

1. Rules and Governance: Look at the structure, roles, and decision-making power of the board. Check to see if the bylaws are up to date and follow the rules.
2. Status as Tax-Exempt: Check to see if you are following IRS 501(c)(3) rules. Check the rules for submitting and making information public.
3. Policies for Work and Volunteering: Check the HR processes, employment contracts, and background checks. Check that you are following all the rules for wages, work, and volunteering.
4. Safety and Protection for Children: Look over the policies, training, and ways to report incidents. Make sure that all kid protection laws are followed.
5. Contracts & Deals: Look over contracts with vendors, leases, and collaborations with ministries. Find possible liabilities or clauses that aren't good.
6. Insurance Coverage: Check to see if insurance policies are enough and cover what they should. Look for holes in coverage.

Advantages of a Church Legal Audit

• Finding and fixing legal problems early on.
• Better governance and clearer operations.
• Transparency has made donors more confident.
• Peace of mind for leaders and members.
• Getting ready for changes in the organization or strategic expansion.

The Dangers of Not Having a Legal Audit

• Risk of fines, penalties, or losing tax-exempt status.
• Risks of going to court over work, volunteering, or safety issues.
• Hurt relationships with donors and damage to reputation.
• Not being ready for mergers, acquisitions, or big projects.

How Church Law and Strategy Help with Legal Audits

The Foundation Plus Plan (Tier 2) from Church Law and Strategy contains a full legal assessment and a report on what to do next that is specific to your church's size (900–2,500 members). This service makes sure that you stay in compliance, protects your trademark, and gives you access to top-notch professional networks. The PASTOR SUPPORT PLAN (Tier 3) includes all the elements of Tier 2, plus quarterly executive meetings, priority assistance, assessments of overhead costs and insurance, and pastoral support programs that help with personal IP protection and wealth planning. This plan is for churches with 2,500 to 10,000 members.

How to Get Ready for a Church Legal Audit

• Get together your bylaws, policies, and other governance papers.
• Put together tax paperwork and IRS filings.
• Put together contracts, leases, and agreements with vendors.
• Write down the steps for hiring and volunteering.
• Look over your insurance policies.
• Find out what problems or recent events are worrying you.

Checklist: Is It Time for a Legal Audit of the Church?

• Quick development or expansion of the church.
• Changes in leadership or the board.
• Concerns about following IRS or state legislation.
• Recent events that were dangerous or against the law.
• Old rules or ways of running things.
• Getting ready for big projects or mergers.

In Conclusion

A legal audit of your church is an important step in protecting the mission of your ministry, making sure it follows the law, and making sure it will be there for a long time. Your church can prosper and serve with confidence if you find hazards ahead of time and make sure there is strong governance. Through our Tier 2 and Tier 3 plans, Church Law and Strategy is committed to offering customized legal audit services to help churches deal with the challenges of expansion and compliance with the help of experts.

Links Inside

• Find out more about compliance and legal audit reports for churches.
• Look at the legal technique for pastoral recompense.
• Learn about advising for church tax strategy.

Links to Other Sites

• IRS Charitable Organizations Compliance Guide: https://www.irs.gov/charities-non-profits/charitable-organizations
• ECFA Ministry Compliance Resources: https://www.ecfa.org/Content/FinancialPlanning
• Child Safety Policies for Churches: https://www.safechurches.com/child-safety-policies

Disclaimer: This blog is not legal advice; it is simply meant to give you information. For personalized advice on how to follow the law, talk to a competent lawyer.