Float Management or SWEEP Issues 0006-01 ZZall

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

          RE: Bank Balance (Float) Management or SWEEP Issues                                                 Originated: July 1994

        All of us, but especially Ministries, should be good money managers.
        The purpose of this Writing is to encourage all of us to gain the maximum amount of Interest Income from Bank Deposits. The general idea is that you operate from 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:

D I B S

                 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 (usually a sister Credit Union) 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 manually via Phone calls (ECCU has a Phone Link system plus an Internet process).

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 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.
        Ask me at Jim@bcidot.org about getting electronically a weekly bank statement that allows you to bank reconcile and float manage that much more efficiently.
        Another aspect of this is the "pooled" Cash on Hand concept - or you do not have a variety of bank accounts for the management of Special Purpose Funds (money that has "strings attached" etc). Please go to the following links for more details about "pooling", etc: 0063 5005 0207 0043 0069

    AGAIN, THE MESSAGE OR THRUST !!!!!

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

  " FREQUENTLY USED VOCATIONAL TERMS"   BELOW INCLUDE:

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: May 03, 2008

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       (1) An Online Document, or WRIT (Writing), may be applicable to all Ministries, or it may be designed for just groups like: Evangelical Church, School, Missionary Agency or Organization, Christian Camp / Conference, or other named group.
       (2) WRIT formats include the perspective of   Jim@bcidot.org via IOMs (Inter-Office Memos) to the Ministry Finance Team (MFTeam); THRDs, a hypothetical Online conversation with members of the MFTeam; GLEANINGS, or Scripture within context of the MFTeam; FWIW; A periodic editorial (For What it is Worth); TRUISM, or believed Ministry Finance principles; and FAQ, response to Frequently Asked Questions