Financial Policy Manual at a Church, Sample of -- 5005-08 ZZchu

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 TO:  Interested Churches                                                                                            FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                                                             FILE:  5005-08/Chu

 RE:  Church Finance Policy Manual - Sample of                                                    Originated:  October 2001                                   


        Below is material regarding a Church Finance Policy Manual Sample via this Web Site in this format.  Feel free to print copies from your browser, or if you would like to receive a copy as a "Word Doc" we encourage you to follow the sample Email content below:

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Hi

    Thank you for asking for a Word Doc copy of our "Church Finance Policy.�  Beginning in 2010 we will meet your request as detailed when you  CLICK HERE   as you follow a paragraph within our JIMs JRNL as we encourage you to join that indicated Yahoo Forum whose purpose is shared below:

------- Via the content at  www.bcidot.org/chu/5005-08.html  you are provided with a written example of a Church's finance Policies so that these important aspects of governing can best be cared for, etc.

------- A number of you have asked for this information as a Word doc so you can personalize and get this cared for ASAP at your Church.

------- The ultimate effectiveness of such an effort, of course, includes such steps as the following:

>>     Upon your self examination the Church realizes which matters need to be
     addressed/improved/placed in writing.
>>    Then approved by the governing body
>>    Then digested/understood/implemented by those who handle the finances.
>>    As we all know, things seem to always need updating due to change .... so segments of
     the policy need to be a part of the regular Finance meeting agenda so they are reviewed
     and appropriately brought current.

------- We respond to your initial request by asking you to join this Forum.

------- After you have been approved to join Yahoo Forum, you would obtain the requested Word doc by going to the "Files" section of this Forum within the pane to the left.  
CAUTION:   you can only access the "Files" portion of the forum after your request to join has been approved.

------- Or the new member gets their Word doc by going there and not by us providing the usual Email attachment.

------- But even more importantly, the purpose of this Yahoo Forum is to provide you with the means to inter-act and assist one another in this overall effort. The important issue is that the Church gets such matters documented and improved ASAP. But, of course, once you get your Word doc copy, you can opt out of this Forum at any time.

    However, if you prefer to NOT join this Forum, please check back with us at Jim@bcidot.org or Brad@rpfin.org and we will provide you with the indicated "Church Finance Policy� Word doc by Email attachment.

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              Also please  Click Here for access to free WebBOOKs on the general topic of Ministry Finances

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              We trust you find the following helpful:
 

        Church Finance Policy FAQ             5005-01
        Policy Manual                                       0054-01

    Our item list appears below; please click on those of interest to you.

000-099 - Church Finance Governing

000 - Constitution and/or Bylaws
005 - Church Congregation and annual Report/Budget

010 - Board of Leadership/Elders
020 - Finance Group
060 - Finance Task Assignments

100-199 - Church Accounting System and Matters

100 - Fund Accounting Perspective or Philosophy
110 - General Purpose Fund (GPF or GPFund)- Singular

120 - Special Purpose Funds (SPFs or SPFunds) - Plural

150 - Missions Accounting

160 - Benevolent Fund Issues
170 - Construction Entity

200-299(1) - Church Tangible Assets, or Resources

200 - Pool/Checking/Savings Accounts
210 - Special Checking Accounts
220 - Investment Issues
230 - Land, Buildings and Equipment Issues

300-399 - Church Debt or Liabilities

300 - Church Debt or Borrowing philosophy/perspective
311 - Internal borrowing by the GPFund
320 - Due to Vendors
350 - Land, Building and Equipment Acquisitions

400-499 - Church Funds and their Balances

400 - Board Discretionary - perspective/philosophy
410 - SetASide for future needs
460 - Church Ministry Groups

500-599 - Church Income

500 - Offering and Collections
510 - Pledges at this Church
520 - Fund Raising for Special Projects
530 - Scrip Store and Fund Raising
540 - Contribution/Donation Designations or "Pass Through" Issues 
550 - Offering and Collections/Counting Team
590 - Giving Records

600-699 - Church Expenditures-Budgets 

610 - Payments to Staff
620 - Department Operations
630 - Board Budgets Adjustments during the Year
660 - Staying within Budget Allotments

700-899 - Other Church Fiscal Matters

700 - Financial Reporting
710 - Financial Audits
720 - Finance Internal Control Policies
730 - Insurance
740 - Obtain/Use of Government Funds
750 - Deferred/Planned Giving
760 - Auxiliary Entities
770 - Retention of Financial records

900-999 - Personal Finance Issues

900 - Designed to assist Church Constituents
910 - Internal resources
920 - External resources.

 

 


000-Constitution and/or Bylaws 

    NOTE:  Place information here from your Constitution and/or Bylaws that has to do with the corporate Treasurer, finances, Fiscal Year end/Annual congregational Meeting, Budget etc.

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005-Church Congregation and annual Report/Budget

    An annual General Purpose Fund (Go Here) Budget (And Here) is to be approved at the Annual meeting; see more Budget information within the above 600-699 Section.     

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010-Board of Leadership/Elders

    The Board of Leadership Treasurer is Chair of the Finance Group.
    All proposed Finance Policies flow from the Finance Group below before they are authorized by the Board of Leadership    

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020-Finance Group

    A Board Finance Sub-Committee, or the Ministry Finance Team, which consists of the Board Treasurer, Senior Pastor, Computer Bookkeeper and other staff and Church members as appointed by the Board as they regularly review and articulate Finance Policies for Board approval.  Also Go Here
    This group is also responsible for written "Board Policy Manual" which they regularly review, prioritize and determine implementation of 
MIFI or Most Important Finance Issues

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060-Finance Task Assignments

    It is this Finance Group's responsibility to be sure that all Church Finance Tasks are determined, clarified and assigned to appropriate staff member or volunteer. (Go Here) and (Here).   

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100-Fund Accounting Perspective or Philosophy

    `   Please Go Here  for more information about  the use of every day  "INTERNAL" Generally Accepted Accounting Principles (GAAP)" matters as apposed to the many unnecessary GAAP daily requirements that are needed only for  "EXTERNAL"  fiscal year end reporting purposes.   We will follow these indicated "INTERNAL"  features of GAAP during the year and apply the indicated  "EXTERNAL"  GAAP features only at the fiscal year end.
        Many of these GAAP matters apply because our Church handles both money that has "strings attached" --- or it is to be spent as designated by either Providers  or by the Board of Leadership ---- and money that is general in nature and is to be spent at the Board's discretion per their pre-approved budgets, etc.   We call this the operational "GENERAL PURPOSE FUND - GPFund"   monies and the other we call the operational
"SPECIAL PURPOSE FUNDS - SPFunds"  monies.    

For more info Go Here and Here).

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 110-General Purpose Fund (GPF or GPFund)- Singular

    Please notice that GPFund is "Singular", or there is only one Fund. This is under Church Department line item budget control. See Section 600-699 for GPFund Budget policies.

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120-Special Purpose Funds (SPFs or SPFunds) - Plural

    You will notice that SPFunds is "Plural"; or there are a number of these funds. SPFunds spending control is based entirely on available fund balance of the respective SPFund.  Please Go Here

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150-Missions Accounting

        This Church includes Missions within the GPFund operation as a Department that is subject to line item budget control. Separately funded Mission projects flow via the SPFunds structure.

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160-Benvolent Fund Issues

   The Board authorized Benevolence Fund (Also known as the Deacons or Giving Fund)  (Go Here) operates as follows:

  •      A number of times during the year, after a worship service, the congregation is asked to contribute to this Benevolence Fund .

  •     The Board or it's appointees (Benevolence Group)  disburse these contributions (either cash or non-cash). The recipients are  Church Attendees who are in dire financial need. It is the job of this Benevolence Group  to determine that there is in fact a dire need.

  •      Some contributors to this Benevolence Fund  express the desire that their contribution go to a named Church Attendee.

  •      The church does not guarantee that such named  Church Attendee will get this contribution as this Benevolence Group  must determine if there is in fact a dire need. Or the Benevolent Group (as delegates of the Board) is in control of who gets these contributions. It is vital that all understand that they are in control of these contributions and NOT the Donor.

  •      Everyone needs to understand that it is entirely possible that the  Benevolent Group  will decide NOT to financially assist this Church Attendee as they use all contributions to this Benevolence Fund  as they see fit.

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170-Construction Entity

    From time to time, the Church may need to go into a Building Program of some scope - (Go Here)
   
When/if this happens, then we will establish a Building Fund  that embraces only this activity. It, obviously, does not fall within the parameters of the usual Operational SPFund as described above.

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200-Pooled checking/savings Accounts

    It is the policy of this Church to earn as much Interest Income on bank deposits as possible. See contents HereTo accomplish this, it is our policy to pool all monies and NOT have separate bank accounts for various endeavors. As explained within Section 100-199, we have a GPFund and variety of SPFunds Said SPFunds are NOT allowed to have their own checking account.   All such transactions are included within our "Unified accounting and reporting system"
    As much as is feasible, all deposits will go to daily interest bearing savings account and money will be transferred to Checking accounts as needed.
    All interest earned from this process will go to the chosen Church operating Fund.

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210-Special Checking Accounts

      The preference is to use Plastic these days, but some "petty" purchases can best be efficiently paid from a Petty Cash Asset. This will be in charge of the appropriate Office staff member who is authorized to make individual payments of no more than $50,00.; the amount in this Fund should not exceed $500.00.   For more info please   Go Here.
   
Occasionally it is necessary to immediately pay a bill by check. Accordingly, we authorize the establishment of a "NOW" checking account within the following parameters:

  • Checking Acct balance is no more than $1000.00.
  • An immediate check is signed by a non bookkeeper staffer.
  • Maximum amount of a single check is $500.00

    We do NOT authorize various groups to have their own checking accounts.  Please Go Here and  Here  for more policies about this topic.

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220-Investment Issues

    Regardless of how enticing it seems, it is our policy to NOT "play the stock market." If we receive stock gifts, it is our policy to convert them to cash ASAP. If we want to facilitate further stock gifts, and it is prudent to keep a needed account open, then the amount will not exceed $1,000.  Go Here
   
Accounts at financial institutions are insured up to $100,000. Any of our balances beyond this amount need to be carefully monitored.

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230-Land, Building and Equipment (LB&E) Issues

    The Equipment Inventory generally consists of items costing $500 or more. This Inventory should equal the amount appearing as  Equipment on the books and a physical inventory should be taken on a regular basis. Individual Church departments are to be accountable for Equipment under their control.  Please Go Here for more information about LB&E assets.
    Depreciation of LB&E assets does NOT appear as an expense within the GPFund. Such Deprecation is to be recorded and reported annually only.
    As to "Use of Church facilities by others", please see policies related to Weddings, Sports, etc. Be sure of clarity as to respective personal use of Church Equipment by members and non-members of the Church.
    Staff personal use of Church vehicles are to reimbursed at the prevailing IRS mileage rate. Please Go Here for more info.

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300-Money borrowing philosophy/perspective

    In general, we will borrow money as would a prudent business man in order for the Church to go forward. Also please Go Here  also see type of borrowing details below.

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311 - Internal borrowing

    Sometimes the GPFund has more expenses than income. Occasionally a SPFund will have more expenses than income; or these funds will be in a deficit position. It is our policy to internally borrow only from balances in Board Discretionary SPFunds. See Section 100-199 for more info.

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320 - Due to Vendors

    It is our policy to record expenses when they are incurred - not when they are paid. Accountants call this being on the accrual basis of acctg.  Our policy is to do as much as possible of our consumer buying via Use of Plastic, or Credit Cards. Then pay off the Plastic Account Balance before any Interest Expense is incurred. For two basic reasons: 1> We maintain our bank balance until it is needed ( Go Here ), and 2> We can potentially control our volunteer spending by who has the plastic. ( Go Here ). Our policy is to pay Payroll withholding liabilities and such things as utility and phone bills as they are known.  A staffer or volunteer who uses their own resources to pay for a Ministry Expense, can not be reimbursed upon pre-approval for more than $100.00.
    It is our policy to NOT have an Operating Bank "Line of Credit".

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350 - Land, Building and Equipment acquisitions

    We may borrow (certain leases are borrowing) to fund the purchase of certain equipment or vehicles as would a prudent business man. We may also borrow to acquire certain land/buildings and/or improvements.
    For each project we need to be sure that we have the necessary  GPFund resources so we can make the required  Debt Service Payments

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400-Board Discretionary - Perspective/Philosophy

    Some of the excess of Assets over Liabilities, or Fund Balances, are Board Discretionary. Or there are no external "Strings attached" to such Fund Balances and the Board can decide how to use these Funds as it carries out the purpose of the Church. Examples of Board Discretionary items are this year's GPFund's excess of Income over Expenses and prior year's  GPFund Balances.

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410-SetASides for future needs

    Generally these Fund Balances are the result of charges to the  GPFund . If they are residuals from prior years, they are Board Discretionary.  Please Go HereBut if they result from current  GPFund charges they are to be retained for that continued purpose. 

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460- Church Ministry Groups

       The Board allows a number of our Church Ministry groups and Mission Projects to collect and disburse their "Own" funds as long as the Board is ultimately in control.   No separate checking accounts are authorized.

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500-Offering and Collections

    The operating expenses (GPFund) of our Church is funded by "Contribution Income" or "Event Expense Reimbursements (see Defrayments)" from our current Constituency. 
    We adhere pretty much to what is addressed when you Go Here   with respect to the handling of Restricted Donations - especially proposed new Restricted Donations and donation "pass through" issues.  Also Go Here  below.
    It is our policy to use any Estate Income (death proceeds to be used as the Board see fits) to fund special projects and NOT pay for our current operating costs. 

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510-Pledges at this church

     It is the policy of this church to NOT seek pledges from our Constituency to cover the annual operating expenses. Please Go Here.  Pledges, or Faith Promises, are sought for special endeavors like a Building Fund project.

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520-Fund Raising for Special Projects/Events

    Generally it is OK for Groups to have fund raising projects for the purpose of defraying the costs of a certain Church endeavor. This includes merchandise buying/selling.
    Sunday, however, is for worship and fellowship. There is to be  no merchandise buying/selling on the Church property on Sunday.
    At this time we do NOT allow Auction Fund Raisers.

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530-Scrip Store and Fund Raising

    The Church operates a  Scrip Store that allows Constituent Buyers to accumulate money for payment of Church sponsored events (Camps, Church Trips, AWANA and VBS) or to make tax deductible contributions to allowable Church endeavors like Mission Endeavors or Church Group Projects.  Please Go Here.
   
There is a separate set of books for the Scrip Store and does not function as a SPFund.
 But, in conformance with what is shared Here,  the Scrip Store does NOT have it's own checking account.
    Our policy is that the Scrip Store is NOT open on Sunday.

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540-Donor Designations and/or Constituent "Pass Throughs" (540)

    All contributions to the Church must be under the Board's control for the Ministry of this Church.
    Regardless of their donative or righteous motive, we do NOT allow someone to write out a check to the Church and then require us to process that amount on to an entity of their choice. Please see Section 100-199 for the proper way to handle Benevolent cases.  Also Go Here

   
If someone makes a restricted donation to something of their choosing (we do NOT allow donations to specific General Purpose Fund  -GPF-  area or operations) , we first verify that it is NOT  an authorized Church project.  Then we take the following steps;  1>  We place the money in a Holding Liability Acct  2> We contact the donor and let them know that this is  NOT an authorized church project.  3>  And we then suggest that this donation go to something already authorized by the Board of Leadership - including the GPF especially if said donation is for one of our GPF departments, like AWANA or VBS etc.  4>  If none of these suggestions satisfy the Donor then the money is taken from the Holding account and returned to the Donor.

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550-Offering/Collections and Counting Team

    See content Here. Some of our policies regarding the Counting Team are as follows:

  •      All Sunday monies are to processed so that the bank deposit is made no later than the following Monday (except when Monday is a holiday)

  •      There should be a minimum of three Counters; only two can be related.

  •       Ideally, there should be more than one Counting team and the teams rotate.

  •      Monies collected during the week should either be left at the office or placed within the Drop Box, or Drop Safe.

  •      It is against our policy for monies collected during the week to remain at someone's home past the following Sunday.

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590-Giving Records

    It is our policy to maintain giving records by Giving Units, or family.  Such information is kept within our People Database and not our usual finance and accounting software system.
    Right now we require that a calendar year giving report is rendered to each Giving Unit by the middle of the following January. However, we are seriously considering a proposal to render such information more frequently during the calendar year.
    The Pastoral Staff is not permitted to know individual Giving Unit information.
   

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610-Salaries and Benefits

    These matters are handled annually by a  "Salaries/Benefits" sub-committee of the Board.  It is our policy that only the Payroll Bookkeeper and this sub-committee know what people are earning and their respective benefits.  We specifically do NOT want the Constituency to know these details.  Salaries and Benefits Issues include:

  •  Unique Clergy stipends and allowances ( Go Here)
  •  Applicable medical insurance
  •  Retirement and applicable government compliance
  •  Staffer Expense Reimbursement methods and procedures.

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620 - Department Operations

    Department managers plan and conclude what they hope to accomplish this next year. They put dollars to these plans and the result is their annual departmental budget for the year.   See content of  Here and Here.
    The Board agrees with these Departmental plans converted to dollars (their annual budget) and then the Ministry Finance Team puts it all together and submits it to the Congregation for approval.
    Department Expenses are recorded when incurred - not when the check is processed (Go Here) Department costs include Purchase of Equipment and any Facility or Equipment Debt retirement of Facility and applicable SetASides assessments. Please  (Go Here) and (Here).  See buying observations within
Section 300-399

    The above Sal/Benefits and Departmental Operations are combined into the overall Annual Budget and upon Board approval it goes to the Congregation for approval at the annual meeting.

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630 Board Adjustments during the year

    Our policy is that the Board can change the Congregational annual budget by 5% ... either up or down, depending on the GPFund Income. Example - 5% of an annual budget of $500,000 is $25,000, or the Board can increase or decrease the annual budget by $25,000; anything beyond $25,000 requires Congregational approval.  Also see content Here

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660 - Staying within Budget Allotments

    A Department head MUST spend only what has been authorized.  They receive monthly Expense Actual to Budget reports; or upon request at any time. An example is found Here

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700 - Financial Reporting -

    We use Computer systems resources and Electronic transactions as it is our policy to use current tools to manage our Church Finances. (Go Here re QBs).  The status of our GPFund and SPFunds is reported to the Board on a weekly basis.  Please  Go Here . The Ministry Finance Team has a full status and operations (including Actual to Budget) reports at least Monthly. Please  (Go Here).  We report our finances to the Church constituency at least annually.  GPFund giving information is regularly known via the church bulletin. We produce Annual reports that meets the need of our  CPA-Auditor (Go Here)

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710 - Financial Audits

    See our By-laws/Constitution.  The Leadership Board needs to decide on this issue annually, The ideal is to have an external Opinion Audit by a Auditor CPA firm every third year and a Review in the years between.  Please Go Here for more information about such matters.

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720 - Financial Internal Controls policies include:

    Our overall policy in handling money is to embrace this statement: "We take steps and procedures by which what one independent person does in carrying out their financial tasks becomes a check and balance on what another independent person does."  Also see content Here)

RECEIPTS:

  •    Money is always in view of at least two people

  •    Cash receipts are provable by other records;

  •    Documentation occurs by the first person handling cash

  •    The Cash receipts staff has limited access to other accounting records like the Accounts Receivable;

  •    Online receipts for donations and events are encouraged

  •    All cash receipts are promptly deposited intact.

CASH/CHECK PAID OUTS:

  •   Cash paid outs is limited

  •   We use pre-numbered checks;

  •   Staff who produce and process checks have limited access to other accounting records;

  •    Invoices/check requests are authorized by non-accounting staff;

  •    Payroll is authorized by non-accounting staff;

  •    Invoices are balanced to vendor's statements;

  •    Invoices/check requests accompany checks to be signed;

  •   Two signatures of unrelated parties on checks are generally required --  after they have been written

  •    No pre-signing of checks.

  •    Online payments of net pay and certain repetitive bills is encouraged; with check signor review and OK thereafter.

GENERAL INTERNAL CONTROL ITEMS:

  •    Two unrelated people sign authorized  Journal Voucher  forms;

  •    There is regular comparison of  GPFund Actual to Budget expenses

  •     Monthly bank reconciliation --- preferably by someone not doing Cash receipts or Paid outs;

  •     Monthly reconciliation of Plastic purchases on the books to their statement.

  •     Periodic historical statements (at least annually) go out to Donors by non-counters;

  •     Make proper use of the Imprest "Petty Cash/Now Bank Account" system;

  •     Equipment/furniture are physically inventoried and balanced to a control account on a periodic basis.

  •     Important records are in a Safe Deposit Box.

        These Financial Internal Control policies are to be periodically reviewed for compliance by applicable auditing group.

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730- Insurance

    We should take a fresh look at our insurance needs every other year. See content of Here.

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740 - Obtain/Use of Government Funds

    It is our policy to NOT accept any government funds with regard to our Operations or our Facility

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750 - Deferred/Planning Giving

    It is our general policy to NOT use current operating income to fund any  Deferred or Planned Giving  costs.  See content Here

    Our Endowment or Quasi-Endowment emphasis is nil.

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760 - Auxiliary Entities

    Auxiliary Entities covers at least the following:  Adult Sunday School Classes, Choir Groups, Women Ministry, Mission Groups, Self Funding groups like Sports, AWANA or Vacation Bible Schools.  A separate checking account for these Entities is NOT permitted.   Please Click here and see where this topic was covered earlier. All such transactions are included within our "Unified accounting and reporting system"

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770 - Retention of Financial records

    It is our policy to keep only what is necessary. See guidelines within content Here.

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900 - Designed to assist Church Constituents

    We believe people at our church need some help with regard to their  Personal Finances in this day and age as we adhere to:   Proverbs 27:23 says:  "Know well the condition of your flocks, and pay attention to such herds.". See content Here

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910 - Internal Resources

    We therefore encourage our  Deacon of Personal Finance as he engages our Church people to have  Righteous Personal Finance as unto the Lord.

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920 - External Resources

    Part of our annual GPFund budget will include financial assistance to the appropriate  Para-church  groups as they provide biblical  Personal Finance helps to our people.

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           Please  Click here f or list of Church resources here on  www.bcidot.org.  The bulk of this Publication originated in October 2001 and was . UPTD: February 24, 2013

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