Float Management or SWEEP Issues    0006-01  ZZall

                                               - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -

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          TO: Interested Ministries                                                                                 FROM: Jim Bramer, Retired CPA-Auditor 
                                                                                                                                         FILE: 0006-01/all

          RE: Bank Account Balance Management or SWEEP Issues                Originated:  July 1994

        All of us, but especially Ministries, should be good money managers.  This is very difficult when you have multiple Checking and/or Savings bank accounts.   This is why we recommend for you to  (Go Here)  and (Here)   for you to  learn about a money pool approach and  NOT HAVE  a Bank Account for applicable departments within the  General Purpose Fund  or for any of your Special Purpose Funds.
        The purpose of this writing is to encourage you to earn the maximum amount of Interest Income from Bank Deposits. The general idea is that you operate from only two separate bank accounts: namely, a Daily Interest Bearing Savings (DIBS) account plus a Checking account where you efficiently pay your bills, etc. These terms and aspects are explained below:


                 The features of the "Daily Interest Bearing Savings (DIBS)" account include:

  •    Established at a financial institution or Credit Union (such as the Evangelical Christian Credit Union, 'ECCU' where you can earn interest at the highest possible rate on the daily balance of your account - not on averages, etc.

  •    This may not be possible at all Credit Unions, but the idea is to place all of your operating deposits directly to the the DIBS account --- you DO NOT make any operating deposits to your Checking Account.  ECCU, for example, has agents throughout the country where you can make an 'In Person' deposit to a teller, or via use of their Night Depositary facilities. Bank of America facilities are known to be available for this purpose.

  •    No operating bills are paid from the DIBS account --- the only disbursements from the DIBS account are transfers to the Checking Account. Some financial institutions automatically "sweep" the daily balance in the Checking Account to the DIBS account

  •    Do these transfers by going Online or do it manually via Phone calls.

C H E C K I N G   A C C O U N T

   The Checking Account is used to pay bills in the most efficient manner possible --- make maximum use of Online Payments and other electronic transfer facilities.

   The Checking Account will be subject to Bank processing charges (although I have known of some Commercial Banks who make no such charges to Ministry Bank accounts). Periodic deposit transfers from the DIBS account cover just the checks honored by the Bank.

   Sometimes a certain amount, or float, remains in the Checking Account to cover paid bills, or disbursements, in between periodic deposit transfers from the DIBS account.

        REMEMBER ...... the objective is to leave the maximum amount in the highest yielding Bank account (DIBS) for the longest period of time possible. The net effect of this procedure, namely, the DIBS Interest Income less any possible checking Account Bank charges, should far exceed the different between a single Checking Account's interest earnings less their Bank charges.

S W E E P    S Y S T E M S  (3)

     A sweep arrangement at a financial institution involves the above DIBS and Checking Accounts, plus a automatic loan, or Line of Credit (LOC), arrangement. At the end of the business day, the financial institution honors all of your checks or charges, and automatically moves the necessary coverage amount to/from the DIBS so that the Checking Account balance is ideally zero at the end of the Bank's business day.  If nothing was in the DIBS for such coverage purposes, then the Sweep system gets what is needed from the LOC account as the Ministry borrows money, etc.
      Go to www.eccu.org as of December 2006 and locate under "Church" what ECCU provides in the way of a SWEEP tool.

      The obvious "plus" for the Ministry is that it does not  'guess'  how long it takes to honor checks written and then manually move balances from the
DIBS for Checking account coverage, etc.   
       Possible Bank Reconciliation (2) aspects for the two Sweep Accounts include the following:  The general ledger (chart of accounts) has, not two, but one account .... a possible generic name is "Sweep Bank Accounts." You do NOT record the individual Sweep bank transfers within the general ledger.  When you get the two bank statements you manually be sure that there is a charge and responding credit within the respective bank statements. Then bank reconcile to the sum of the two bank statement balances ...  of course, the Checking Account balance should be zero as the entire balance is supposed to be within the DIBS account.  Or reconcile the transactions within the two bank statements as if you are doing a bank reconciliation from a single bank statement.

M A N U A L   S W E E P   P R O C E S S (1)

        If no automatic sweep arrangement is possible via your Credit Union or Bank then make arrangements to maximize your Online access to your Bank Accounts and manually do this at a regular time.  Pursue arranging it so that you can use Online Banking to view the total amount of daily checks that the Bank has paid (the Checking Account on your books will have a running overdraft balance).  Then transfer the exact amount of the paid checks from the DIBS to the Checking Account and either zero out this account or leave agreed float amount therein. We encourage you to have a Line of Credit (LOC) safety net arrangement. 
        You might also look into the  After the Fact (ATF) process available via the  eFinFax  accounting system where you do NOT do the usual  Bank Account or Credit Card reconciliation of your entries to theirs.   Please especially note the following process:

                     - - - - -  QuickBooks (QBs)  and the Manual Weekly BREC/SWEEP - - - - -

    You weekly go Online via the Internet and do the Bank Reconciliation (BREC) and the (SWEEP) Money Manage process so that you can earn the maximum amount of "Interest Income."   At any time you have no more than something like  $1,000 in the Bank "Checking" account while all of your other pooled money is in a "Daily Interest Bearing Savings - DIBS" account.   Or you have the minimum amount in the Bank "Checking" account and the maximum amount in the "DIBS" Savings account. This requires steps like the following:

  •     You post your deposit total into the Bank "Checking" account within your QBs system

  •     You write your checks via the QBs system so that along with deposit information, these bank transaction entries appear in this Bank "Checking" account.

  •     You weekly go Online and obtain the equivalent of your to date "Bank Statement".

  •     Like the usual BREC process, you work from this "Bank Statement" info and you identify within QBs the transactions that have cleared the Bank "Checking" account

  •     All entered checks or deposits that have NOT yet cleared the Bank "Checking" account are re-dated to the next day following the date of this Online "Bank statement".

  •     So that ultimately your Bank "Checking" account amount will agree with your QBs "Bank Statement" balance as of the Online "Bank Statement" date .

  •     Plus you now know which entered transactions have not yet cleared the Bank; in some cases you will either timely replace or remove.

  •     You preferable make deposits during the week directly to the DIBS account, but, like the first step above, you could make the deposit to the Bank "Checking" Acct

  •      You obtain a detailed report (maybe Print out) from the  QBs system of  all known transactions per the "Bank Statement" account transactions that have not yet cleared the bank

  •      Then you "guesstimate" from this report (to the best of your knowledge) the dollar amount of Checks that will hit the Bank Acct during the upcoming week

  •      Then every Thursday you go online and transfer money to/from these accounts so that Bank Account per QBs has only a $1,000 balance and the DIBS account has all of other pooled money on deposit earning daily interest at the prevailing interest rate.

  •       If we do not move enough from the DIBS Account to the Bank Acct to pay a check then the Bank will automatically transfer money to the Bank Acct and accordingly charge you a fee. 

                                                AGAIN, THE MESSAGE OR THRUST !!!!!

    Do NOT leave unnecessary balances in your Checking Accounts; be sure your Bank Balances are earning the maximum amount possible !!!


BREC - Bank Reconciliation
DIBS = Daily Interest Bearing Savings account
ECCU = Evangelical Christian Credit Union
LOC = Line of Credit; borrowing means 
MFTeam = MFT, or Ministry Finance Team
NPO = Non Profit Organizations
Pooled = Common Bank accounts for the entire Ministry; 
Sweep = see above; means of earning the maximum
        amount of      Interest Income. 

   This publication originated in July 1994 and  UPTD: December 15, 2010