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, Resonate Global Mission, 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.
Comments
Our congregation helps to support two missionary and three missionary families and we personally know them all. I can't think of a better way of doing it.
Thanks Bill for your comments and especially for your church's generous support of these various missionaries.
Jeff: Thanks for this post.
There are some nuances for Canada that should be highlighted to provide insight into the different context of doing charity work in Canada. The terms "charitable objects" and "direction and control" are key to understanding the regulatory environment for Canadian charities.
Churches are registered charities in Canada meaning that the government has given them the ability to issue receipts for gifts given in support of the churches charitable objects. This is a legal privilege for a charity not a right. In Canada registered charities can only give to other registered charities. The intention of this regulation is that a Charity support only the things that that align with it's "charitable objects".
The founding documents of a church contain the purpose or "charitable objects" of the organization. These documents are called either letters patent or letters of incorporation. For Canadian charities their operations are limited to the items listed in their "objects". Most churches in the CRC denomination have very broad objects: "preaching the word', "benevolence", "support for Christian education" and "support of the ministry of the CRC denomination".
These objects are general in scope but intentionally do not include direct overseas ministry. The Canada Revenue Agency (CRA) has always had a more stringent set of regulations for organizations that send money outside of Canada verses those that do work within Canada's borders. In this way CRA has developed a differentiated regulatory context for domestic and international charity work. (This distinction is beginning to blur as CRA moves toward a more stringent regulatory environment for all charities.)
If a Canadian church wants to engage directly in overseas ministry they should consult their founding documents to ensure that they are able to do so in a direct way. In most cases founding documents will be silent on overseas ministry. For this reason (among others) the CRC denomination has agencies i.e. World Missions, Back to God and World Renew that do ministry overseas. The best practice for any CRC church is to coordinate their desire to work overseas with the appropriate denominational agency in order to remain in compliance with CRA regulations.
A church must also ensure that any money it disburses to another charity will support it's own charitable objects. This is where the principle of "direction and control" comes into play. A charity must be able to demonstrate it's direction and control over the money it gives away. (i.e. that it's money is being used for it's charitable objects or purposes.) In essence the "giver" must be telling the "receiver" how the giver's money should be spent. It is incumbent on the giver to also ensure that the receiver is using the money for the intended purpose so that the giver's charitable objects are being fulfilled. In other words a charity must "direct" funds to it's the charitable objects and ensure that "controls" are in place to verify that the giver's money is actually spent on the charitable object. (direction and control).
This Canadian regulatory environment is what makes doing charity work outside Canada much more complicated. By the way this stringent regulatory environment (direction and control) includes money Canadians might direct to ministry in the USA as well as anywhere else on the Globe.
Thanks Larry for posting your comments and emphasizing some Canadian nuances that may prohibit a Canadian church to directly manage an overseas ministry. All churches should consult their registration documents and ensure compliance with government requirements in terms of both soliciting charitable donations and disbursing monies. Church partnerships with our denomination's overseas mission agencies is an excellent way to avoid some of these administrative / legal headaches.
I know this is an old thread. Our Church is considering supporting a missionary i. Kenya who is a national. It is difficult for him to get support because hecis not a US citizen and has no US sending Church. What is the best and legal way for our Church to support him (send funds)? It is very expensive to send wire transfers through a bank. Thanks
Jamie, is he working with an organization that has a US partner?
No, he is an independent. He also has no tax exempt or NGO for his ministry. He is legit though. He has started two churches already and wants to go into Tanzania long term. He lives in Kenya and can only do short-term trips as he is able to raise enough funds to go. It would be nice to get him hooked up with some organization that could help him. He is a Baptist.
Since he is not currently working with an organization that has a USA partner, you need to either find a USA 501(c)3 charity to partner with or your church will need to provide direct oversight. I suggest searching the web for Baptist-affiliated charities that work in East Africa. If you are unable to have a suitable USA charitable organization partner, your church will need to evaluate whether they have the capacity to provide sufficient oversight should they decide to support this Kenya church planter. In my opinion this oversight would include having authorized members of your church meet regularly to review ministry plans, approve budgets, and receive regular financial statements & progress reports about the supported ministry. I also recommend your church planter identify an appropriate ministry partner in Kenya that could serve as fiscal agent - facilitating the transfer of funds, reviewing & approving properly supported expense reimbursements, and making sure there is compliance with local Kenya laws and tax reporting.
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