Financial Guidance and Support
From Maria Gillespie, Director of Finance and Administration
Note: Audits are due September 1, 2020. Because this deadline is a canonical requirement, no extensions can be granted. Learn more.
Budgets and money are not always at the top of the list of topics clergy and lay leaders want to think about when trying to lead church members to Jesus and provide pastoral direction. However, we must embrace the truth that operating a church is not free. Having this conversation with church members is an
excellent idea, and not just during stewardship season. Explaining needs can be a vulnerable situation but is necessary, especially during a crisis.
If the you are a leader who has relinquished most involvement in the finances of the church to committees and boards, this is now the time to re-engage.
Diocesan Council has also taken action.
The PPP is the Paycheck Protection Program Loans/Grant Act
NEW (July 9, 2020): On July 4, 2020, the Federal government extended the availability of loans under the Paycheck Protection Program (PPP) until August 8, 2020. Previously, the final day to apply for a PPP loan was June 30, 2020.
The Small Business Administration has released the application for forgiveness of the Paycheck Protection Program loans.
Start your church's PPP forgiveness process. (Filing on hold until August 10, 2020)
On April 23, 2020, the SBA issued guidance that borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.
On May 13, 2020, any borrower whose PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees
If you are eligible under the new guidelines, learn more about applying below.
The Paycheck Protection Program Loans/Grant Act opened April 3 and the close has been extended to August 8, 2020 (see above). It is on a first-come, first-served basis so it is imperative to read this now.
The loan is forgiven in full if, during the eight-week period beginning when the church receives the loan, the money is spent entirely on:
- payroll costs
- group health care expenses
- interest on any mortgage obligations
- rent, including rent under a lease agreement
- interest on debt incurred before February 15, 2020
If salary or wages of an employee are reduced by more than 25% during the period February 15, 2020 through June 30, 2020 (for an employee who made less than $100,000), loan forgiveness is reduced by the amount of the salary or wage reduction in excess of 25%.
Please visit the Small Business Association (SBA) and U.S. Dept. of the Treasury websites for any updates they list. The SBA application has now been listed on the Treasury website as well. We are encouraging you to review the SBA application and to begin to gather the required supporting documentation in preparation for the program start date.
- Presentation: Paycheck Protection Program Loans/Grant Act (from Maria Gillespie, director of finance and administration)
- Calculation spreadsheet (from Maria Gillespie)
- PPP Application - Do NOT use the diocesan EIN ending in 469
- PPP Forgiveness
ECONOMIC INJURY DISASTER LOAN
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic.
- This program is for any small business with fewer than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.
- Borrowers can apply for both an SBA Economic Injury Disaster Loan and the Paycheck Protection Program loan. However, the Paycheck Protection Program loan funds and the Economic Injury Disaster Loan funds cannot be used for the same purpose.
- Learn more: Powerpoint | PPP and EIDL Comparison
- Apply here.
The National Council of Nonprofits has also released guidance regarding various pieces of financial and employment legislation addressing the effects of coronavirus. Read it here.
Notice: As of 5/15/2020 New Eligibility for Economic Injury Disaster Loan and Advance: SBA will begin accepting new Economic Injury Disaster Loan (EIDL) and EIDL Advance applications on a limited basis only to provide relief to U.S. agricultural businesses.
COLLECTING ONLINE DONATIONS
The Diocese has set up an online donation portal through Stripe for all of our churches during this time of suspended in-person worship. While churches are encouraged to continue with whatever online giving programs they have already established, this option is available to support churches that have not yet established online giving. Upon clicking the button, donors will have the option to choose to donate to any church in the Diocese - or to a general church assistance fund the Diocese will distribute to the churches most in need during this time.
To add the link to your website, just copy and past this address: https://givingtools.com/give/1182/1995.
If you are interested in researching other online giving portals, we recommend the following:
ASK FOR HELP
for accounting, business and financial experience in your church and community partners. Partner
with business and members who have talent that can make your church prosper. Networking and getting to know your neighbors is more important than ever. Use internet searches and local maps on the web to reach out to potential partners through email or mail.
Be aware that the Diocese does not have sufficient financial assets to bail out churches. Each church must exercise its own financial prudence. Clergy and lay leaders have this responsibility to both the church’s members and to the Diocese. Along those lines, a church remains responsible for paying its debts, including any mortgage on the property. Note that all diocesan policies regarding preapproval of real estate transactions remain in effect.
Before applying for a diocesan church adaptation grant, made possible by the North Carolina Church Foundation, please examine your budget using the guidance further down this page. The application will ask for the steps your church has already taken to adjust its budget and explore non-diocesan funding.
HELP FROM CPG
One immediate action CPG is taking is to waive the obligation that some parishes owe to CPG for clergy pension plan assessments for a period of up to two months. (This means those parishes will not have to pay for two months of pension for their clergy.) To qualify, a diocesan bishop of the Episcopal Church must certify 1) that the senior most government official in his or her nation, state, or region has declared a major disaster (such as a state of emergency), 2) that as a direct result of the disaster, the ability of each parish seeking relief to function has been severely impaired, and 3) that there are inadequate resources (including endowments) within the affected congregation and diocese to pay assessments and continue to function. Please contact Maria Gillespie to discuss a waiver.
HELP FROM CHURCH INSURANCE COMPANY
Effective immediately, Church Insurance Company will be extending payments for 90 days beyond the effective/due date before cancellation. It will take them time to make adjustments to the system-generated notices. Please be in touch with their billing department in order to make the necessary adjustments. The toll-free number is 1-800-819-2984.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) contains important provisions that will affect HSAs, HRAs and FSAs:
- HSA-qualified health plans can now cover telehealth and other remote care service expenses below the HDHP statutory deductible limit, or at no or low-cost sharing, without affecting an account holder’s ability to continue contributing to their HSA. This provision will last until December 31, 2021.
- Over-the-counter drugs and medicines can be paid for or reimbursed through an FSA, HRA or HSA without a doctor’s prescription.
- Menstrual care products are now considered a qualified medical expense and are eligible for payment or reimbursement through an FSA, HRA or HSA. All expenses incurred after December 31, 2019 qualify, and the provision has no expiration date.
- Learn more.
EXAMINE YOUR BUDGET
When you step into the realm of numbers, there are so many variables. However, churches often limit total compensation for all (staff) personnel to no more than 50% of their budget. Below I have identified some changes that can be made to budgets before re-examining personnel costs.
This is a pause button for fiscal year 2020 until all things realign in the world (and they will. They always do.)
- Scrutinize your budgets.
Ask financially savvy parishioners to help look at costs that can be adjusted. Let them know up front what your priorities are before the process begins. (It is strongly encouraged that priorities are defined between the focus group and clergy before engaging additional help.)
This process should have different phases. The priest should have a direct and active role during all phases of this process. Financially trained professionals usually know how to tactfully discuss and navigate difficult decisions. If you don’t have members who have these skill sets, please reach out to your canons.
- Phase One: 80% of Annual Income
- Do a deep clean of the church, and then suspend the process until in-person gatherings resume.
- Ask for volunteer services to cut cost in areas like lawn care. (Parishioners may have more time then extra funds right now, and in-kind donations are a big help.)
- Cap supply purchases, and reduce consumption of supplies. Note that paper consumption will fall naturally because worship bulletins are not being printed at present. When worship services resume, redesign bulletins to conserve paper. Likewise, the budget for flowers, communion bread and wine, visiting musicians, coffee, etc., can be reduced.
- Suspend continuing education for the time being, and possibly for the year.
- Limit travel budgets and mileage to that which is absolutely necessary.
- Re-examine software needs.
- End or pause monthly subscriptions.
- Evaluate utility costs and adjust thermostats and lights to reflect a closed building.
- Reduce funding to clergy discretionary accounts.
- Evaluate employee benefits. Can any employees go on a spouse’s insurance plan instead of the church's insurance plan?
- Rethink processes that are outdated.
- Review church insurance needs.
- (After restrictions on in-person gatherings are lifted) consider renting space to third parties. Some businesses will have to give up expensive office space in the coming months.
- Examine cellphone expenses for possible savings.
- Cancel or postpone out-of-town vestry or parish retreats.
- Postpone building renovation
- Phase 2: 60% of Annual Income
- Consider insurance cost sharing with employees for the remainder of 2020.
- Hours can be cut if positions require less than 30 hours per week but more than 20 hours per week. Insurance benefits can be suspended as a cost to the church, but the employees can stay on the plan and pay for the costs through a pre-tax payroll deduction.
- Freeze hiring and eliminate empty positions. Reallocate workload across current employees and volunteers.
- Create a new approval process for any expenditure over a fixed amount, such as $100, even if it was already budgeted. Ensure that approvals are obtained before money is expended, rather than after it is has been expended and a parishioner is looking for reimbursement.
- Analyze salaries. Note that YOU MUST contact the bishop in advance before changing salary, working hours, etc., of a priest.
- Phase 3: 40% of Annual Income
- Please contact a regional canon, the canon for congregational mission or a missioner to discuss additional options.
- Manage cash carefully.
Although no one wants to make more financial adjustments than hindsight will prove to have been necessary, it’s also true that the longer one waits to make adjustments, the more severe they will have to be. Start watching your church’s cash balance on a weekly basis.
One recommendation: Take measures to achieve a net zero monthly cash flow by May 31, 2020 and to maintain at a net zero monthly cash flow for the remainder of 2020.
Avoid drawing down your church’s operating financial reserves too quickly. Once they are depleted, not only are you in a more difficult financial bind, you will find that it’s not possible to restore the reserves until 6 or 12 months after the crisis has passed. One recommendation: Try not to draw down more than 20% of your operating financial reserves in the first half of 2020, and no more than 50% this year.
Liquidating endowments in order to raise cash means selling investments at a deep discount. This is not recommended; exhaust all other options first.
After scrutinizing and analyzing the budget, the focus group needs to switch to fundraising. This is where you will need to engage your tech savvy members because fundraising will take lots of creativity right now. Get to know your local town managers and endowment fund managers. Lots of them right now are offering assistance. If you find some in your area, share with other local churches.
We will not only survive, but thrive, as we emerge from this disaster. Working together has never been more necessary because we are all being affected at the same time. Losing faith and hope is not an option. I like to look at this as a pause button and beginning to a new way of doing things in the future.
IRS Tool for Economic Impact Payment Support for Non-filers
Some people who normally don’t file a tax return may not realize they’re eligible for an Economic Impact Payment. Share this tool, created by the IRS, to help non-filers get Economic Impact Payments. Visit IRS.gov/coronavirus for more information on tax relief related to coronavirus.