- - And the Lord direct your heart in the love of God as you continue to faithfully serve Him - -

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         TO:  Interested Onliners                                                                                                            FROM: Jim Bramer, Retired Auditor-CPA
                                                                                                                                                                        
   
         RE: J I Ms  J R N L for the month of October 2006                                                                       FILE:  0210-06/jrnl        
                (Click Here for "Blogger like" perspective/rationale)      

01 - Accounting for paying off a Debt at your Ministry    (01)

        How about this scenario:  A business borrows money (either as a result of Land, Building or Equipment -Vehicle-  Fixed Asset acquisition or for some other prudent business purpose) and arranges to repay the loan in monthly installments of Principal and Interest.  Of course, the Fixed Asset and the Liability is recorded on the books of the business - or the business probably increases both the  Fixed Assets and the Liabilities by the amount of the loan. Let's further suppose that the monthly payment is $2,500 and the first payment was divided between $600 for Principal (reduces the liability) and $1,900 for interest (increases the expenses of the business).  
        In a Ministry setting, you would reflect the Fixed Asset and Loan Liability virtually the same way but you look to the General Purpose Fund (GPFund)  for the entire monthly "Debt Service" payment of $2,500 and budget accordingly. Or the GPFund is not immediately interested in dividing the payment between Principal and Interest -- its emphasis is providing and accounting for the money cash out-flow for the entire $2,500 total "Debt Service" payment.  However, it can go through a "Three-legged process" whereby you can also reduce the Liability plus increase the applicable Equity as part of the same entry.   Most Ministries wait until the end of their fiscal year to reflect the total reduction of the Liability and the increase of the Equity.
        Somewhat along the same lines, the GPFund might also provide in its annual budget the necessary purchase of Equipment and, somewhat like the "Debt Service" payment, it can involve a "Three Legged Entry"  which in this case increases both the Fixed Assets and applicable Equity. However, this also is usually done at the year end.
        Oh, by the way  ----   as explained within  0125,  your Ministry should NOT budget and account for Depreciation Expense, etc. within the GPFund .

02 - King David's Official.  (02)  

        Like you I have read about a number of King David's chief officials in I Kings and I Chronicles. One was "Jehoshaphat"  who is listed as a "Recorder."   I guess we will have to wait until we get to heaven in order to find out if he also kept money records, or if he was a "Bookkeeper/Accountant."

03 -  Periodic Fiscal Exam and Grade Report from a Professional:  (03)

        One of the topics within Jim B's links below for this month is "Grade Report Information"  --- I recently came across such an example.  Although, per the CPA-Auditor's Notes #1 below,  they apparently had access to only part of the Church's records during their apparent year end assignment.  Any way, I wanted to share this as maybe your Ministry would benefit from such a topical report in this format from such a finance professional.

	XYZ Church
	CPA-Auditor Grade Report - December xxx1
		STRONG	WEAK	NOTES
	Overview
A	Apparent Fiscal Stability	X		2
B	Debt Management	X		3
	Board/Governing Matters
C	Properly fulfilling its fiscal responsibilities			1
D	Appropriate use of Written Fiscal Policies		X	4
E	Functioning Board Treasurer	X
F	Functioning Board Committee	X
G	Does planning and projections	X
H	Overall protection of Church's
	tangible assets - insurance issues			1
	Reporting and Management
I	Adequacy of financial reporting
	especially regular Actual to Budget reporting	X
J	Overall Management of Accounting system	X		5
K	Adequacy of Restricted Fund Acctg-Reporting	X
L	Adequacy re use of Computer for finances	X
M	Attention to Cash Flow Management	X		6
	Tranx Processing System
N	Sunday counting and receipts to Bank			1
O	Donation Accounting System	X
P	Non-Sunday receipts			1
Q	Purchases/Payables/Disb - signatures			1
R	Payroll			1
S	Journal Entries			1
T	Bank Reconciliation			1
U	Acct Receivable - if applicable			1
V	Fixed Asset Accountability		X	7
W	Restricted Funds	X
Y	Work distribution for Internal Controls			1
Z	Other Issues			1
	1 = Limited info so can not reach a conclusion
	2 = Three successive years where income
	exceeded the expenses
	3 = No debt until xxxx1
	4 = Apparent absence of written manual
	5 = Uniqueness of system requires
	complete/adequate cross training
	6 = Positive operating cash flows
	7 = Lack of Fixed Assets details

04 - Financial Internal Controls and the QuickBooks system:  (04)

        Financial Internal Controls, as addressed elsewhere within this edition, is critical to a healthy financial system. One of the features of the software known as Quickbooks (QBs) is that it is "user friendly."  There are ways to make the most of both the needed  Financial Internal Controls and the "User friendliness" of QBs as also explained in the 0647-02 link contents below, Note also the editorial below on this general topic in an around an "Integrity Vow."

05 - Snap Shot of a Church Treasurer's Job  (05)

        The Church Treasurer is to carry out such fiscal stewardship responsibilities as the following:

1> -- The overall objective is to appropriately account for cash flowing through the Church - plus non cash tangible assets.
2> -- Specifically, timely know and report the amount of Money on Deposit and be able to report immediately after posting transactions which Fund have an investment in such "Pooled" Money on hand. NOTE: do not marry imposed fund balances to specific Bank Accts.
3> -- Important to provide understandable financial reports to Church people who need to know plus timely know and report if actual operating costs are within the authorized Budget
4> -- Appropriately handle the financial aspects of Donations and such record keeping.
5> -- Properly disburse money within imposed limits plus account for staffer pay and benefits -- especially unique Clergy matters.
6> -- Comply with requirements of outsiders like auditors and governments.

06 - Prepaid Cards and Spending Controls --  (06)

        Within context of our new website, that largely applies to those who are comfortable using the Internet, that is named "Spending Controls-Jesus Savior Pilot Me" may I share the following about the use of  Prepaid Cards:  I recently read about a special way of using Plastic  (I'll use this terminology rather than Credit Cards per se)  whereby you place your money in advance of the usual Plastic process -- or you use "Prepaid Cards."   Like when you purchase a gift card (Prepaid Card) and the recipient uses it to make purchases at the applicable places etc.  In this "Prepaid Card" method you simply place your money into separate "Plastic Cards" which you use to make purchases where that Plastic is accepted and to the extent of the remaining balance therein.   Let's suppose the following scenario:

1> Like all of us we MUST control our spending
2> This is further described when you go to 0400, or you define "Spending Areas" of your life. Then you establish separate  "Plastic Cards"  for these two purposes:

"LifeStyle-01" - Things that are somewhat static, like the following cost examples: Food at home; Auto & maintenance; home utilities and maintenance; Internet and computer use.
"LifeStyle-02" - Things that are not that static like these cost examples: Eating out; clothing; family entertainment and gifts; "her" and "his" discretionary spending.

3> Of course, all of the remaining "Lifestyle" payments are under applicable spending control and and are paid by Check or Online Payments. Examples might be:  Church financial commitments; ATM Withdrawals; Liquid Investments; Pay off old debt, Auto and House payment & insurance; Life insurance; Medical & Dental insurance costs.
4> So you transfer from your Bank Account an agreed amount into these two "LifeStyle-01" and "LifeStyle-02"  Prepaid Cards,    You had already established other "Lifestyle"  Spending Control areas mentioned in 3> above.
5> If you have a balance in the respective  "LifeStyle-01" and "LifeStyle-02"  Prepaid Card, then you can make purchases from these sources.  At any time you can go Online and find out the current  "Prepaid Card" balance.

    This basically means that you use the plus features of using Plastic (Click Here for a list, etc.), but you do NOT use Plastic to "buy now and pay later" - or borrow money. Which, as we all know, is too often abused.
     I am told that such a "Prepaid Card" method like this is also very helpful in the following circumstances: 1> Foreign travel (better than using traveler's checks, etc.) as it converts readily to foreign currency. 2> Use to provide and control High School/College Kid's allowances.

07 - Number Crunchers - (07)

        As you know, we accountants are frequently referred to as "Number Crunchers."    Not too long ago I viewed a cartoon whereby someone was interviewing for a job and made the following statement: "I lost my job as an accountant ..... I could never remember which numbers to crunch or which numbers to massage."   This is not a joke, of course, if this "massaging" is done in order to steal, etc.  Please note the March 2002 editorial below.

08 - Professional Handling of larger Non-Cash Donations - (08)

        What follows is a quote from a finance savvy Church Administrator:
        "We set up a Church Foundation through a Ministry know as: Servant Christian Community Foundation or SCCF. So when people have larger non-cash “stuff” to donate to us - like: cars, real estate, jewelry, time shares, etc.- I just have them call SCCF who does all the work for us. They have all the resources to determine if the item is worth receiving, and then sell it. Yes, there’s a fee, but the cost is minimal in light of turning it over to someone who knows what they are doing, etc."
        Let me know if you would like interact with this person; there is also more information about this service at the  SCCF's  website mentioned below.

Links that are "NOT"  via Jim Bramer     

Church Payroll
Servant Christian Community Foundation - SCCF
For Love and Money 
Model Church Financial Policy
Pension protections re tax-deductible donations issues

 Links that are via Jim Bramer        

View samples of Ministry Finance forms when you go to this folder list:   http://www.bcidot.org/forms/MinFin 
Grade Report Information:               http://www.bcidot.org/all/0128-77.html
QuickBooks and Internal Controls:   http://www.bcidot.org/qbb/0647-02.html

This Month's previous  "For What It is Worth"  Editorial - Written in March 2002"

 "Integrity vow" re handling Ministry Finances       http://www.bcidot.org/fwi/0915-03.html

Current "Ministry Finance" Truism

             INTERNAL FINANCIAL CONTROLS   A Ministry's financial system MUST include the necessary internal controls that come about when people are a check and balance on 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. See 0039  for more info on this topic.

Prayerful Thots :

        Dear Lord, thank you for your view about a prudent, or wise, man found in the book of Hebrews, namely: "Instruct a wise man and he will be wiser still; rebuke a wise man and he will love you; teach a wise man and he will add to his learning; the fear of the Lord is the beginning of wisdom." What about this statement, Lord: "Keeping your head in a crisis is usually based on how much planning and preparation you did before the crisis." Oh Lord, help us all to have meaningful wisdom as it concerns Ministry Finances, etc.