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                             TO:  Interested Ministries                                                                                                        FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                                                                                                    FILE:  0094-01/all 

                              RE:  Two Sides of the Same Coin                                                                                        Originated:  November 1999                                       

        OK, please bear with me ......

        Financial management of the Operations of a Christian Ministry is like the analogy of two sides of the same coin.  Maybe even "two sides of the same fence" or "equal yet separate" as to the status of your finances at a point in time.  Liken Side "A"  -  Liquid Assets Management  to that associated with resource management in general while Side "1" relates to Imposed Limits Management  (this is ever before both Christian Ministries as well as Christian Family Units)  issues and related care.  To further this analogy, let me share:

S I D E " A" -  LIQUID  ASSETS  MANAGEMENT

    SIDE "A" shows the Operation's  pool of assets generally represented by Cash on Hand and Bank Balances at a point in time as shown by a portion of the Sample Balance Sheet-Photo, as recapped below.  This responds to the "WHERE" is the money issue --- again, at a point in time.

Checking/Savings @ Credit Union
101	Checking		$ 1
102	Money Market-rate x.xx		$ 25,395
103	CD-rate x.xx due xx/xx/xx		101,858
104	CD-rate x.xx due xx/xx/xx		$ 50,145
109	Office Petty Cash		$ 52
110	Imprest Checking		$ 1,500
140	Memo Accts re Fixed Assets  0102
	Total Checking & Savings			$ 178,951
120	Accounts Receivable			$ 4,214
170	SCRIP Store Advance			$ 523
	Total Asset Pool			$ 183,688

    The contents of this "Asset Pool" needs to be prudently managed in a secure fashion so that these balances earn a yield (Interest Income) between the time they are on deposit and when they are ultimately used to carry out the purpose of the Ministry.  We recommend short term investments in what we call replicating financial institutions. Make every effort to work with a financial institution that has a SWEEP system whereby your checking account at the Bank always shows zero at the end of a business day because residual balances are always in a   Daily Interest Bearing Savings (DIBS) accounts of the appropriate type. 

   TRUISM ---- never have undeposited money on hand; further, make sure all Bank Account Balances are earning the maximum amount of yield.

   Please remember that this SIDE "A" has a "pool" perspective .... for uncluttered management purposes, none of the short term investments are "married" to a specific Fund or obligation shown below within SIDE "1" .  Sometimes it is appropriate to distribute their allocated share of the pool's yield to applicable Fund Balances within SIDE "1" below.

    Other unique management features of SIDE "A"  include:  Utilize Sweep arrangements when possible; Comply with Internal Control issues whereby undeposited monies are deposited at least every other day;  When automatic Sweep arrangement is not possible, each deposit goes directly to a DIBS account (not to the checking account); Do daily transfer of funds to cover checks that daily clear the bank; Have a safety-net Line of Credit (LOC) in case transfers are not timely made; Make full use of Online services where you can access and view your bank account status and activities.

    S I D E "1" -  IMPOSED  LIMITS  MANAGEMENT

    SIDE "1"  emphasizes the need to manage the portion of the Balance Sheet (Photo) representing Obligations, plus Fund Balances/Net Assets with Imposed Limits ( it responds to the question of  WHAT are these monies here for or WHY do you have these monies) that are assumed by the Operations of the Ministry.  Please also know about the issues set forth when you  CLICK HERE.  Please also note the following:

•  Normal payables due to Vendors and to the Credit Card Company.
•  Monies held for others for whatever purpose.
•  Unspent Donor Preferences/Restrictions - Temporary; targeted for portions of the usual Ministry Operations or for ongoing Ministry Projects
•  Board Discretionary - Unrestricted: or available as needed to be determined by the governing board; plus monies SetASide  from the operating budget for specified future anticipated needs.

    Please see sample below:

Liabilities:
200	Payable to Vendors		$625
220	Due on Credit Cards		$6,328
260	Others		$779
	Total Liabilities			$7,732
Fund Balances/Net Assets:
	**Donor Restrictions**
300	Staffer Designations	$ 39,588
310	Other Donor Designated	$ 5,124
334	Special Missions Fund	$ 7,773
337	Short Term Mission Trip	$ 2,880
339	All Other such Designations	$ 1,243	$ 56,608
	**Board Discretionary**
350	Contingency Reserve	$ 60,000
355	Board SetASides	$ 12,761	$ 72,761
	Total Net Assets			$129,369
Year To Date General Fund Excess				$46,587
	Total			$183,688

     "Features of "Imposed Limits" management re SIDE "1" include such issues as: 

• In order to make informed decisions, your accounting system needs to provide daily knowledge of  Obligations/Fund Balance status and activity - see above status sample.. 
• The Ministry should be on the Accrual Basis of accounting to insure full and complete reporting. 
• The Ministry should have a Board policy as to temporary borrowing among the Net Assets above of $129,369 plus the $46,587. 
• Any General Fund  deficit can not exceed the above Board Discretionary amount of $72,761.

    For example,  the  usual way to process a check that you write is to first record it at your check stub (or equivalent) and reduce the Bank Account in Side "A" above.  Then simultaneously add it to the expenses in the General Fund or reduce the balances that reside in Side "1" above.  For more info along these lines, please go to the lady that we respectfully address as ALICE within  0009 .

    As explained within this Publication,  we recommend that the following groups of Net Assets/Obligations show up within separate Sets of QBooks as they are updated and utilized generally in/around the year end.

• Unrestricted Net Assets - Net Investment in Land, Buildings and Equipment.
• Permanent Net Assets - Endowments as required by donor mandates.
• Unrestricted Net Assets - Quasi-Endowments as established by decree of the governing board.

    Hopefully this "Two Sides of the Same Coin" analogy will assist the MFTeam  in its ongoing need to be a good steward of these "separate yet equal" management issues and resources.

     The bulk of this Publication originated in November 1999 and was   .    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 Memo 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