When a church lacks good governance

This is the fourth and final article in our series on the legal remedies available in South African law to address the abuses and malpractices identified by the CRL Rights Commission (CRL) in their report on the “Commercialisation” of Religion and Abuse of People’s Belief Systems (the Report). This article focuses on the issues identified by the CRL that relate to a lack of good governance (i.e. a lack of proper corporate governance and/or financial management) in churches. (In this regard, see pages 31 to 33 of the CRL’s Report).

Corporate governance is the system of rules, practices, policies and procedures by which a church (or religious organisation) is directed and controlled. The aim is to increase the organisation’s accountability in an attempt to avoid big(ethical, legal, financial, etc.) problems or risks. It also ensures the long-term success of the organisation. Good corporate governance is required not only by law, but it is essentially a Biblical principle: we are commanded to conduct ourselves in a manner that is worthy of the Gospel (Phil. 1:27), this includes having respect for the authorities, obeying the laws of the land, being ethical, transparent and accountable, and also being good stewards of the resources (both people and financial/material) which have been entrusted to us.

Issues incorrectly or illegitimately identified by the CRL:

Not every “lack of good governance” issue that the CRL identified in their Report, was a true legal non-compliance issue.

For example, in terms of the CRL Report, some churches operate without a registration and/or licensing certificate, or are not registered with the Department of Social Development (the DSD) as either non-profit organisations (NPOs) or public benefit organisations (PBOs), and fail to report to the DSD annually.

In South Africa however, churches do not need to be registered or obtain a licence, in order to operate. As FOR SA set out in our previous series entitled, Getting Your House in Order, there are various legal entities in which a church can decide to structure itself, namely a voluntary association (VA), a living trust or a non-profit company (NPC). While a VA does require a Constitution, formal registration of the VA with a government authority is not required in order for the VA to be recognised. A living trust must, however, be registered with the Master of the Court, and a NPC with the Companies and Intellectual Property Commission (CIPC).

All of these legal entities can (but are not obliged to) register as a non-profitorganisation (NPO) with the DSD in terms of the Non-Profit Organisation Act,1997. Thus, being an NPO is a voluntary choice a church can make. Only if the church is registered as an NPO with the DSD, does it become legally obliged to report to the DSD annually.

Furthermore, all of these legal entities can (but, again, are not legally obligated to) register as a public benefit organisation (PBO) with SARS in terms of the Income Tax Act, 1962. (Importantly, tax exemption for churches and religious organisations is not automatic - it has to be applied for through SARS’ tax exemption unit. To be tax exempt, churches must be registered as PBOs with SARS’ tax exemption unit, otherwise, they are taxed like normal companies.)

Issues correctly or legitimately identified by CRL:

The CRL did, however, also identify legitimate good governance problems in some churches, such as a lack of a code of conduct, lack of oversight structures, lack of splitting of fiduciary duties, lack of bank accounts or properties being registered in the church leader’s name (as opposed to the church’s name).

As a result, the CRL proposed that legislation should be passed to empower them (the CRL) as a State institution to grant licences to every religious practitioner, church and organisation (page 39 of the CRL’s Report). They also proposed that the Commission be given the power to appoint a group of senior Christian leaders to a top tier structure called the “Peer Review Committee”, who would evaluate all aspects of the practice of the Christian faith to ensure that these are “acceptable” (pages 42 and 47 of the CRL’s Report).

In many instances, where a pastor acts both as the pastor and treasurer of a church(i.e. a lack of splitting fiduciary duties), it is not because of some bad faith on his and/or the church’s part, but because of ignorance of a better way to do things. As a result, it is highly unlikely that a licensing scheme and/or top tier structure such as the proposed Peer Review Committee will solve this problem. If anything, it will likely result in the closing and shutting down of churches, as opposed to empowering and assisting them.  The same can be said for the rest of the good governance problems identified by the CRL: a lack of a code of conduct, lack of oversight structures, and the lack of bank accounts and proper property registration. In many instances, all of these are the result of ignorance and not ill will. It is true that there is often an inadequate level of knowledge in all these (often quite technical)areas in smaller / more informal religious communities.

FOR SA believes that these problems can be best solved through an education campaign. This could be driven by the CRL, which will not only empower churches with skills and knowledge but also adequately solve all the good governance problems legitimately identified by the CRL.

Viable Alternative Solutions:

Instead of a top-down, heavy, compulsory structure being forced on pastors and churches with the threat of being declared “illegal” (i.e. having their licences revoked and being shutdown) should they not comply, there are a number of viable alternatives to solve the problem of lack of good governance.

Alternative solution #1:

The CRL Commission should become a “one-stop-shop”.

These afore-mentionedsituations where churches need support provide the CRL with a prime opportunity to assist pastors to be legally compliant, to have good governance structures in place as well as to educate the religious community on why checks and balances are necessary and how to use them effectively.

The CRL Commission was created to promote respect for religious communities’ rights. (Section 185 of the Constitution.) It is thus a State institution funded by our taxpayer money to serve South Africa’s religious communities. The Commission is therefore ideally placed to educate pastors on what legal entities are available for churches, to provide them with sample documents to establish such entities (such as a Constitution in the case of a voluntary association) and to educate religious communities about good governance principles and how to employ them in the religious sphere. The compliance and governance issues identified by the CRL’s Report provide them with a golden opportunity to practically assist religious communities by educating them on how to put better rules, practices, policies and procedures in place to control their churches. As churches become aware of the different legal entities available, how to register properties and open bank accounts in the church entities’ name etc., this will also solve the problems of churches lacking bank accounts or proper property registration.

Fraternals also help to ensure greater local accountability and provide for a wonderful opportunity for education on issues of compliance and other relevant qualifications. The CRL should support the establishment of ministers’ “networks & fraternals” and encourage pastors to join them. This will solve the problem of lack of oversight structures.  Furthermore, by visiting fraternal networks as part of the aforementioned education campaign, the CRL can reach a vast number of pastors and religious organisations across South Africa. It is, therefore, a completely logical, reasonable and viable alternative that serves to strengthen religious communities’ right to religious freedom, which will otherwise effectively be limited by the CRL’s currently proposed recommendations.

Alternative solution #2:

The CRL should support the development of a “Code of Conduct” by and for the religious community.

The CRL also identified the problem of a lack of a code of conduct in some churches. This problem is easy to address in the above education campaign, where the CRL can educate religious communities and fraternals about existing solutions:

The South African Council for Religious Rights and Freedoms (SACRRF) has already been mandated by the religious communities (in a meeting of 70+ senior religious leaders) to draft and circulate a Code of Conduct for the religious community by the religious community. This Code will reflect the responsibilities corresponding to the rights set out in the Charter for Religious Rights and Freedoms, already adopted by 22 million people from across the religious and faith community of South Africa.

This Code, once finalised, will provide an agreed benchmark and a standard for the ethics and conduct of the religious community.

If the CRL educates pastors, fraternals and religious communities about the Code’s existence, the benefits of signing it and/or using it as your church’s own Code of Conduct, and encourages churches to do so, this will provide those churches who are lacking a code with a highly effective solution drafted by experts for the religious community.

Conclusion:

All of the(legitimate) good governance issues identified by the CRL will, not only beadequately solved by an education campaign, but best solved by it.

As demonstrated, the CRL is ideally placed to drive such an education campaign, and such a campaign is both practical and easily achievable utilising the existing networks and structures such as pastors fraternals.

In this way, the CRL will be taking a leading role in empowering the religious communities it has been created to serve, and assist in bringing about good corporate governance principles and practices in churches and religious communities for the protection and benefit of all.

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