TRUISMS re Ministry Finance          0069-01    ZZall

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                    TO: Interested Ministries                                                                      FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                                                        FILE: 0069-01/all                     

                    RE: Ministry Finance TRUISMS                                                         Originated:  November 1999                                 

      What follows is a list of maxims, or what we call Ministry Finance "TRUISMs".  The intent is to show here a partial list of unique finance and accounting principles and/or precepts (TRUISMs) that often are a 'rule of thumb'  that mostly applies to being good stewards as we obtain/manage Ministry money and related resources.

    ADMINISTRATION (13) - the skill and practice of efficiently and timely getting the appropriate thing done.

    AGENDA - an agenda is essential to an effective meeting.  It is a road map and often the glue to meaningful strategy and decisive action.

    ACCRUAL - a basis of accounting that reflect finances when expense is incurred and income when earned so a Ministry has all of the known financial facts for those who should know; Go to "More than Bank Balance"  and "CASH" basis below.  Please  Click Here  and also learn about a FinFax Expense Accrual Accounting system.

    BILLS; Charge accounts are to be timely paid as agreed.

    BUDGETS ARE A GIVEN - realistic operating budgets are essential; Ministry buyers MUST know their spending limits. Also see  Go Here  regarding some Church Budget Truisms.  Please Go Here for some believed Annual Budget Truisms.

    BUYING CONTROL - processing checks is the back end of financial activity; more control is needed at the front end or at the time an expense in incurred. See Budgets etc above.

    CASH - a basis of accounting that does NOT reflect amounts owed to you and earned nor does it reflect amounts you owe even though the expense is incurred.  See "More than Bank Balance" below and "Accrual" above.   Please  Click Here  and also learn about a FinFax Accrual Accounting system.

-  see Truisms Found Here on this topic plus the general concept of depositing to Bank intact and ASAP.

    CHARGE ACCOUNTS - must be prudently used and paid in a timely agreed fashion.

    CHART OF ACCOUNTS (9) -  Here are some suggestions if Ministry has less than $500,000 annual income -- 3 digit numbered so can easily ID type of transaction involved (1xx = assets; 2xx = liabilities; 3xx = SPFunds; GPFund items: 4xx =  Income; 5xx= payroll/benefits; 6xx= operating expenses; 7xx= Cross Funds to SPFunds).  Begin with as few 6xx GPFund  Operating Exp accounts as possible - expand number of accts only when really necessary.  Two digits, or xx,  via QB Class structure, to indicate what SPFunds  start the year with and why they change during the fiscal year, etc.  Four digits,  like 9xxx, to use QB Classes to ID GPFund  Operating departments.  Please Click Here  for some more info.  See Chart of Account samples Here.  Also Go Here for further info re a Church Chart of Accounts info.

    DAYS (for accounting purposes, especially), or dates,  OF THE MONTH - (6)  you generally do NOT date a tranx on the 1st day of month;   Examples: Tuition due and billing dates should be any date except the 1st day of a month;  Semi-monthly pay dates are the 15th and last day of month.  Click here regarding dates and Hourly payroll.  Calendar Year end donations that are post marked in December but actually deposited in January should appear as December deposits in transit, etc.  If you use a separate DonaMail package, the same dates, of course, should appear within both set of records/databases.  Be especially careful about using any of these TRUISMs re days/dates at a Ministry's fiscal year end.

    DEBRIEFING - following formal meeting sessions re helpful, but subjective written thought gathering (debriefing) shared right after any meeting from your perspective is extremely important. 

     DEFICIT  within the GENERAL FUND is a NO NO !!!! ---   See  GENERAL FUND DEFICIT  below.

DEPRECIATION  (10) -  This is a GAAP required once-a-year accounting process for allocation of certain Land, Building and Equipment (LB&E), or Fixed Assets capitalized costs, and should NOT be budgeted or show up in a Ministry's monthly General Fund  OPERATIONS.   Please Go Here  for more explanation and details.  "Depreciation" should NOT be confused with any voluntary assessment of the General Fund OPERATIONS , or "SetASides",  for future LB&E purposes.

    DESIGNATED DONATIONS (11) - Such donations must further the purpose of the Ministry and the Board must be in control of how it is spent - not the Donor.  Please  Click Here   and Go Here  for some information about "pass-throughs" to individuals, etc. 

    DONATIONS ACCOUNTING  -  see  Mail-Church below.

    EXPENSE CONTROL; processing checks is the back end of the obligation; more control is needed at the front end, or when the expense is incurred.

    FINANCE GOVERNANCE - the Ministry 'Board of Leadership' is to have a finance governing structure that begins with an active (not honorary) Board Treasurer. It might include a 'Board Finance Committee', but it needs at least a 'Ministry Finance Team', composed of minimally the Ministry Chief Executive, the above Treasurer and the Computer Bookkeeper.

    FINANCE REPORTING - the Ministry finance decision makers MUST timely know the financial facts.

    FLOAT MANAGEMENT - it is poor stewardship to leave too much money in checking accounts that do not earn interest income.

    FUND RAISING vs GIVING TO YOUR HOME CHURCH (14) -- At your Home Church (where you are probably a member, etc.) you have a spiritual responsibility to financially support the Ministry.  You need to make a financial commitment to this "Body of Believers" as a function of your overall stewardship of this world's resources.  Within this context, many of us think in terms of a "Tithe of our Income," but the real issue is that your Church leadership is not "Fund Raising" per se (like some Ministries). but they are admonishing us in our walk with the Lord "to make promises and keep them" in this financial area of our life just like we need to do in all aspects of our spiritual sojourn.  

    GENERAL FUND DEFICIT  is a NO NO !!!! (20).    (General Purpose Fund)  income for most Ministries is very volatile, so regardless of a pre-authorized "General Fund" budget, spending is limited to what comes in - period!   Knowing this information on a Weekly basis is essential.  After August 2010,  please GO HERE  to an  WebBOOK  on this topic.

    GLOSSARY -  Please Go Here  for a list/definition of Ministry Finance terms;  also Here  for Ministry Finance terms unique to Budgets at Ministries.

HOLISTIC - general concept of all Ministry finances flowing to the Board of Leadership via unified means -- especially with respect to churches and schools who often have sub-groups.

    HOURLY PAYROLL (7)  - in general, we recommend that you do NOT arrange your payroll timing so that you estimate and pay for unearned hours.  In the case of semi-monthly pay checks dated the 15th and the last day of the month  .... the time card should go through the 10th and the 25th.  This allows some turn-around time for producing the pay check for actual time worked.

    IMMEDIATE DEPOSIT - money collected by group treasurers MUST not remain at their homes; but flow via the appropriate ministry channels to the Bank ASAP.

    INSTALLMENT PAYMENTS - a Ministry enters into installment buying obligations ONLY after prudent asset acquisitions.

    INSURANCE - tangible assets need to be appropriately insured; contingencies are to be also adequately covered.

    INTEREST INCOME -  All Christ Centered Entities (corporations and individuals) should manage their finances so that they earn the maximum amount of Interest Income from their Bank transactions.  Please Go Here   for more information on this overall topic.

    INTERNAL FINANCIAL CONTROLS (5) - ministry financial systems MUST include the necessary internal controls that come about when people are a check and balance to one another; an entire financial transaction is NOT done by one person only. You are not questioning someone's integrity when you put internal controls in place ---- you are safeguarding all parties involved in a Ministry's financial transaction.  Please Click Here  for more info on this topic.

    INTERNAL BORROWING (12)-- Sometimes the General Purpose Fund has more Expenses than Income so you need to borrow from discretionary internal Special Purposes Funds- SPFunds.    Please Go Here for more Church details about how it being improper for the Church to even temporarily borrow from non-discretionary SPFunds.

     INTERNET FRIENDLY --  The general idea is that Christ Centered Entities (corporations and individuals) should embrace the Internet and appropriate computer system resources so that they can have access to the appropriate contemporary tools that enable them to be the very best steward of their finances.  A way to do this is set forth when you   Go Here.

    JUDGMENT - good judgment follows meaningful experiences.

    MAIL-CHURCH -   the idea is to have a combination donor and mailing  list, especially at Churches.  This is often called the Church Management System (via Software).  Please Click Here. Or structure the records so that names and addresses are maintained in a master file and used for as many multiple purposes as possible.  This way such information needs to be updated/changed in only one set of records. 

MONEY RECORD KEEPING - In order to be a God-honoring good financial steward of such resources you absolutely MUST do the necessary money record keeping.   Guessing about the amounts and the reasons (and where) you have money is extremely dangerous!

    MORE THAN THE BANK BALANCE (2)  - expenses should be booked when incurred and income should be shown when earned; otherwise the Ministry does NOT have all of the financial facts.   Please Go Here  for more specifics.

    OFFERINGS - As to Church collections, account for money and get to the Bank without delay.

    OPERATIONS (#1) - Most Ministries need to concentrate on what net liquid assets are available and who belongs to them.  The status of Land, Building & Equipment (Fixed Assets) does not contribute to making Operational management decisions, but they need updating at least annually.  Please See Click Here  for more information about possible reporting of Fixed Assets. 

    PAYROLL RECORD KEEPING - detailed payroll record keeping and reporting is required by law; plus you should really know other applicable Staffer statistics.

    POLICIES;   Ministries need to have written financial polices (what we always or never do under an understood set of circumstances) as predicated on their finance philosophy; often such an effort also results in stipulated procedures and methods.  Please Go Go Here  for Church samples.

RECORD RETENTION - observe content found Here  for some recommendation of how long to keep various financial records, etc.

Good financial reports are only good when/if the Decisions Makers understand them.

    RESTRICTED FUNDs - money restrictions come from both Donors and the Board of Leadership. The status of these financial facts should be known daily.

    SAME DATA/INFO - all too often a Ministry has the same Constituent data/info in multiple places -- or two or more computer databases. So when you add or update such info, you have to update it in all places. As explained when you Go Here,  please strive to have this data/info and donation/giving records in a single place.

    SCHAR - Sch)ool A)ccounts R)eceivable -Schar - records MUST be current and complete; especially when agreed payments to the School are late.  A school extends a loan to those who do NOT pay on time; most schools can NOT afford to loan Parents/Students money.  See Here  and  Here    Strive for Non School Loans; rather than a student leave school due to non-pay, the Parent/Student could borrow money from sources other than the School.

SPENDING - General Fund  (GPFund)  income for most Ministries is very volatile, so regardless of any authorized General Fund budget, spending is limited to what comes in - period!   Knowing this information on a Weekly basis is essential.  Ask us after October 2009 at about the "Assigned/Account Balance Controls", or A B C , system.

    STATEMENT of RELEVANT FINANCIAL FACTS - be sure these are defined by the money Decision Makers and are timely received. See content Here  for more specifics, etc.

    TASKS - Please Go Here  as to some Truisms along these lines.

    TITHE - Click Here and see comments above.

    UNIFIED ACCOUNTING SYSTEM (8) - The idea here is that all of the dollars handled by a Ministry ideally flows through a set of books with one common/pooled bank account.  This TRUISM is especially meaningful in a Church setting where there are a number of Auxiliaries who want to do their own thing and have their own bank account.  When they utilize this unified accounting system they are more likely to be appropriately responsible to the Church Board.

    VERIFIED Number -  As explained when you Go Here,  an Accounting System Truism is to enter a verified number once, and the system replicates that number in such a way that it is used for multiple valuable/needed purposes.

    YEAR END TAX DEDUCTION -- Like at  12-31-05, the calendar year ended on a Saturday.  Tax deductible gifts (at churches in particular) must be either physically received and given to a Ministry's agent (like the Post Office), not the Donor's agent like a Online Payor,  on or before Saturday 12-31-05.  Checks dated 12-31-05 and placed in Sunday's (01-01-06) offering are tax deductible in 2006, not 2005.  The determining factor is when it is available to the Ministry; not the date on the check.

      The bulk of this publication originated in November 1999 and was     UPTD: July 07, 2011