A growing number of churches are being energized as they take ownership of their role in overseas missions. The need overseas is great and church members can see first-hand through site visits how the church’s efforts and resources are used to impact lives.
But ministry overseas is also complicated and it requires careful consideration that wouldn’t necessarily be needed in local ministry. Allow me to highlight a few financial administrative responsibilities connected with managing an overseas ministry that your church should consider (based on experience with my own church).
First, churches should understand two common types of church engagement in overseas ministry.
The first type of ministry takes place when a church provides financial support through another North-American registered charity that acts as the implementing partner. Common characteristics of this first type of engagement are:
- The church has varying interaction with overseas ministry representatives — day to day program decisions are managed by the Canada/USA-registered charity that partners with the church.
- For the price of an administrative fee, the Canada/USA-registered partner charity takes full responsibility for gathering financial information, assessing the effectiveness of program ministry, and ensuring compliance with labor, tax, and reporting expectations by government agencies
A common example of this first type of engagement is the church’s financial support for their international mission agencies.
The second type of engagement takes place when a church supports an overseas ministry without partnership with a Canada/USA-registered charity. Common characteristics of this second type of engagement are:
- The church has significant ministry interaction with the supporting church representatives — churches work with international (non-Canada/non-USA) charities and individuals in designing and implementing the programs and ministry objectives
- The church manages all financial aspects of the ministry within Canada / USA including receipting charitable donations and wiring funds overseas.
With this second type of engagement, it’s more complicated than simply sending funds overseas. A church is a tax-exempt organization, so it must demonstrate how its money is being spent overseas as directed by the church’s leadership bodies and in accordance with the church’s charitable purpose. Canadian and USA tax guidelines define this as the church’s ability to demonstrate “discretion and control”. The overseas ministry must also align to the church's tax-exempt purpose and be in compliance with local laws. Criteria for meeting these requirements include the church’s ongoing ability to:
- Review and approve transferring of funds
- Stipulate how the funds will be used
- Require grantees (overseas recipients) to provide periodic records verifying that funds were expended for the purposes approved by the church
- Review these periodic records for reasonableness, sufficient supporting documentation, and spending alignment with any restrictions imposed by the church
- Refuse to make grants or contributions in the case that grantees are not complying
- Prove that it is complying with labor laws, charitable registrations, and tax laws of both the Canadian/USA government and the government of the country where the ministry is taking place
If your church is taking part in this type of overseas ministry, consider these best practices:
- Define the ministry’s purpose and verify that this purpose aligns with the tax-exempt purpose of the church
- Consult qualified experts to identify what legal, reporting, and tax requirements are in both the Canada/USA and the overseas country in which the ministry operates
- Identify qualified volunteers within your church who can serve on a committee to manage the overseas ministry
- Develop a clear mandate for this church committee outlining decision boundaries, expectations on the frequency of meetings and documenting of minutes, and this committee’s accountability to church council
- Identify qualified overseas individuals/organizations that can serve as the church’s agents in managing the overseas ministry
- Communicate with these overseas agents clear ministry objectives and the criteria to measure them
- Determine the standards and frequency of reporting financial and program results/progress. These standards should meet the needs of the church and any government compliance requirements.
- Formulate appropriate budgets to funding the program objectives and administrative requirements
- Conduct annual internal or external audits in order to examine supporting receipt documentation and verify spending compliance to gift restrictions
Unfortunately, there have been cases in the past where charities have not been able to demonstrate how their donations are being spent overseas and the Canada/USA government revoked their tax-exempt status or gifts supporting the overseas ministry have been assessed as not tax-deductible charitable donations.
I believe the best way to avoid these complications is for a church to partner with another Canadian or USA licensed charity that has proven experience in overseas ministries, entrusting them to help manage the overseas programs and provide appropriate oversight as the fiscal agents of the ministry. For Christian Reformed churches, it would be wise to confer with the denomination’s global mission agencies (Back to God Ministries International, Christian Reformed World Missions, and World Renew).
Partnering with a Canadian/USA licensed charity does not mean sacrificing a church’s engagement and personal connection with the overseas ministry. In fact, the opposite may be true. By allowing a sending agency to take on more of the behind-the-scenes work, church members can spend more time developing personal relationships with your overseas ministry partners.