Financial Experts Discuss How Churches, Faith-Based Organizations Can Navigate the CARES Act

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Churches and religious non-profit organizations are not immune to the difficult financial realities that the Coronavirus has caused on our country. In an exclusive interview with Christian Headlines, financial experts Ken Tan and Stan Reiff of the Capin Crouse financial firm discuss how churches and non-profit organizations can understand the Stimulus Package/CARES Act and how they can prepare for the financial futures of their organizations in this fast and ever-changing world.

This interview has been edited for clarity.

1. Can you please tell us who Capin Crouse is and what you guys do?

Stan: Absolutely! At Capin Crouse, our mission is to be professionals providing innovative services to organizations whose outcomes are measured in lives changed. We are a national CPA and consulting firm serving over 1,500 clients in 60 countries and through God’s favor, we have not deviated from specifically serving churches, nonprofit ministries, and faith-based educational institutions.

2. There are a lot of pastors/church leaders who are concerned about the economic situation of our country and how it will affect them. Should they be concerned?

Ken: It’s not an exaggeration to say that we are all experiencing a situation none of us have seen in our lifetime. When looking at history, nothing like this has happened in the U.S. in over a hundred years. People are understandably worried about providing for their families and keeping a roof over their heads. But we must remember that God is sovereign. 2 Corinthians 8 teaches us about the importance of those who have abundance sharing with those in need. And then when you are in need, those with abundance will help you. Verse 14 says, “At the present time your plenty will supply what they need, so that in turn their plenty will supply what you need.” This is a time for pastors to engage their congregations and remind them of God’s sovereignty. History has shown that the church doesn’t turn away from a crisis. Now is the time to step into the crisis. It’s a new crisis, but God is with us.

3. How can a pastor prepare his church, for what might be coming their way?

Stan: This is such a time of uncertainty and unknowns, but also such a time to demonstrate the power of faith and God’s love. Pastors should communicate clearly and compassionately to their congregations. Churches have needed to adapt quickly over the past few weeks. One of the best ways to offset revenue is to focus on meeting the needs of the community. Remind your congregation, “We are the Church being the Church in the community, and this is how we’re using your generosity to make a difference.” That is more appealing and likely to be more successful than telling them you need their donations to make the church mortgage payment. This is a time for churches to use their cash reserves if they have them. If they don’t have reserves, look at the programming, look at the programs that are not being implemented because of the current situation and adjust resources accordingly. Start creating cash lists. For example, if your church building isn’t being used right now utility bills are likely to be lower, saving some cash. If they have a note, I’d encourage them to check with their bank about extending your loans. And, look at government assistance programs and to check eligibility.

4. Are there some resources that church leaders can look at to prepare themselves financially for the future?

Stan: Yes! I mentioned the CapinCrouse Church Financial Health Index™, an online dashboard with key financial measures, ratios, benchmarks, and peer information to help churches make informed strategic decisions. Church leaders can go to the home page and see current live averages for the Cash Flow and Reserve ratio and Debt ratio. Church leaders can also access a number of resources about ratios and how to calculate and use them on our website, capincrouse.com. This blog post about cash flow and reserve ratios is a good starting point. Cash reserves and liquidity are key right now.

church leaders should also consider ways to increase online giving. We mentioned that the data shows that 48% of giving comes from mail or weekend services. Without getting too technical, churches should tell their congregations about the reality of their expenses and talk about how much of the budget goes to fixed expenses. Remind congregants that expenses don’t stop just because the church building is closed. The only expenses that are saved when a church building is closed are utilities, coffee, and donuts. Everything else continues. This is also a good time for churches to talk with their congregations about the great opportunity they have to share the gospel and to provide benevolence as a way to open the doors to evangelizing. So, with the added expenses associated with benevolence (not just cash assistance, but providing food, etc.) their expenses may actually go up during this time. People give to vision, so now is the time to be aggressively casting the vision of how the Church can be the Church during this time. This takes resources.

5. What is the CARES ACT?

The CARES Act creates a new federally-funded Pandemic Unemployment Assistance benefit designed to provide coverage to individuals who otherwise do not qualify for state unemployment benefits. This includes individuals who are not eligible for regular unemployment compensation or extended benefits under state or federal law, self-employed individuals, individuals seeking part-time unemployment, individuals with insufficient work history, or individuals who otherwise do not qualify for regular unemployment or extended benefits under state or federal law.

6. Can you give us a summary of the paycheck protection program?

The Small Business Administration (SBA) has released temporary regulations on which lenders, employers, independent contractors, and sole proprietors may rely when applying for Paycheck Protection Program Loans (PPPLs).

A few highlights:

• The terms of the loan have been finalized at 1% interest, a two-year maturity, and a six-month deferral of interest, principal, and fees (although no fees are anticipated).
• Interest will begin accruing from the date of disbursement but is eligible for forgiveness.
• The regulations require that 75% of the funds be used for payroll costs. The portion of funds that fail to reach the 75% threshold will need to be repaid. Knowingly using the funds for unauthorized purposes could subject the organization to a fraud action.
• The regulations make it clear that organizations receiving a PPPL will remain eligible for all relevant constitutional, statutory, and regulatory protections of religious liberty.

7.  For What purposes may a borrower use the funds?

The proceeds of a PPP loan are to be used to cover:

• Payroll costs, as that term is defined above
• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
• Mortgage interest payments (but not mortgage prepayments or principal payments)
• Rent and utility payments
• Interest payments on any other debt obligations that were incurred before February 15, 2020, and/or refinancing an SBA Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020

It is unclear how self-insured organizations will be able to factor in their costs of continuing their group health care benefits.

Importantly, the regulations state that you must use at least 75% of the funds for payroll costs. For purposes of determining whether this 75% threshold was reached, any amount of an EIDL loan refinanced into the PPPL must be included in the computation.

8.  Are we going to get through this?

Stan: As a nation and broader, as people across the globe, we will certainly get through this, without a doubt. Often, we’ve heard the phrase, “history repeats itself,” but I emphasize more importantly, history has given us hope. The 1918 influenza pandemic ravaged the globe while it was already coping with the losses sustained during World War I. The world has seen hardship and crises before. However, we will be stronger and more resilient if we focus and rely on God and His sovereignty. As a Church, this is our time to step into the crisis and our communities and serve according to what God has taught us. Our communities will remember how we as a Church responded to times of need. What better way to be on mission for God than right now in your own community!

Photo courtesy: ©Getty Images/Beright

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