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          TO:  Interested Onliners or Ministries                                                                                         FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                                                                                        FILE:  0209-03/jrnl
   
           RE: 
J I Ms  J R N L  for the month of September 2003                                                          Originated:  September, 2003  

PURPOSE:  To help your  Ministry Finance Team  be more effective:


     This process allows me to share some rather personal comments/thoughts (and sometimes written Prayers)  about Ministry Finance issues for this month.  Please go to  0200  for further explanation and links to earlier JIM's JRNLs.  The four digit links  xxxx  below come from www.bcidot.org .  If you would like to receive the next current  JIM's JRNL  during the first week of the next subsequent month,  please join the following Yahoo Group:   ---- http://groups.yahoo.com/group/JIMsJRNL/.    If any of the links below do not work, let us know which one at LINK@bcidot.org.  Incidentally,  our more recent www.bcidot.org  Web Docs, or writings, can be found at 9712.   


    MINISTRY FUND ACCOUNTING AND BANK ACCOUNTS.

   This month I have a "BEE IN MY BONNET" !!  Accordingly, I will devote this entire JIMs JRNL edition to the topic of MINISTRY FUND ACCOUNTING AND BANK ACCOUNTS. Here is what has been happening.
   During this past month I have frequently encountered situations where a Church, or another Evangelical Ministry, has multiple checking/savings Bank Accounts that are directly tied to various special endeavors within the Church or Ministry.  This especially seems to happen in Churches for monies associated with such things as:  Various Adult Sunday School classes, Mission Projects, the Construction/Building project, or some other non-General Fund restricted monies. Some of these separate bank accounts and their annual activity were not even included in the annual Treasurer's report - they almost function as a law unto them self, or their actions seem to indicate that they were NOT under the control of the Leadership Board.  I have even seen where certain high priority General Fund departments have their own Bank Account.
    Of course, accounting accuracy/integrity of such special funds is essential, but it does
not take multiple checking/savings Bank Accts to accomplish this.  This should be done via common checking and savings accounts as described below. 
    As I have pointed out within  0041, the whole process of  Ministry Fund Accounting  is complex enough and these practices, in my judgment, unnecessarily complicates it that much more and adds to the bookkeeping workload   For example, aside from the fact that you need to be sure and use the proper deposit slip when making deposits, or use the applicable check when paying bills, it is much easier to monthly bank reconcile two Bank accounts rather than ten.
    Please digest the following analogy of "Two Sides of the Same Coin" as you pursue how your Ministry does it's Ministry Fund Accounting.

Two Sides of the Same Coin

    Please note that the Side "1" Imposed Limits Management  issues below relate to caring for such accounting and reporting about special monies described aboveThen note that Side "A"  -  Liquid Assets Management  below as it is associated with asset management in general and specifically Bank Accounts. 

   S I D E "1" -  IMPOSED LIMITS MANAGEMENT

    SIDE "1" represents the Liabilities and Fund Balances listed below that need to be appropriately managed:  

Liabilities:

200

Accounts Payable

$ 625

220

Due on Credit Cards

$ 6,328

260

Others

$ 779

Total Liabilities

$ 7,732

Fund Balances:

330

Donor Restricted

$ 5,124

331

Construction Project

$ 60,000

334

Adult S. School Classes

$ 7,773

337

Short Term Mission Trip

$ 2,880

340

Board SetASides

$ 39,588

350

Approved Projects

$ 12,761

390

Others

$ 1,243

Fund Balances

$ 129,369

YTD GPFund Excess

$ 46,587

Total Obligations

$ 183,688

   "Imposed Limits" management features of SIDE "1" include: The Ministry should be on the Accrual Basis of accounting to insure full and complete reportingIn order to make informed decisions, your accounting system needs to provide daily knowledge of  Obligations/Fund Balance status and applicable activityAs to deficits of Special Purpose Funds (see list of such accounts above that adds up to $129,369) -- the Ministry needs to comply with Board policy concerning scope of temporary borrowing from other Special Purpose Funds.  The policy re any General Fund deficit might be different.

S I D E " A" -  LIQUID  ASSETS  MANAGEMENT

    SIDE "A" shows a pool of assets generally represented by Cash on Hand and  Bank Balances as shown below:

Asset Pool - see Money Management Issues below

101

Checking

$ 1

102

DIBS-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.  See Money Management below.

   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 account shown above within SIDE "1" .    
    Please especially note that you go the SIDE "1" part of the system to ascertain meaningful Fund status and activity info and not to SIDE "A".
 

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

M O N E Y    M A N A G E M E N T

    All of us, especially Ministries, should be good money managers and make prudent short term investments.  This is extremely difficult when you have a scattering of Bank Accounts mentioned above.  My intent here is to encourage all of us, but especially Ministries, to gain the maximum amount of Interest Income from money left at Banks.  As outlined above, my thrust is for you to operate from only two separate common bank accounts: namely, a Daily Interest Bearing Savings (DIBS) Bank account (often called Money Market Account) plus a Checking Account Bank Account where you efficiently pay your bills, etc.  Of course, you sometimes will want to invest certain blocks of money for longer periods of time in such instruments as the appropriate Certificates of Deposit.

D A I L Y   I N T E R E S T   B E A R I N G   S A V I N G S   (DIBS)

                 The features of the Daily Interest Bearing Savings (DIBS) account include:

  •    Established at a Bank (this includes Credit Unions 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 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. See below as to how some financial institutions automatically "sweep" the daily balance in the Checking Account to the DIBS account, but as of the above date this must be done manually at ECCU.  Click here  and learn about some Float Management options at ECCU.  This document tells you about getting your ECCU bank statement equivalent weekly and float manage via QuickBooks using such resources.
  •    Do these transfers manually via Phone calls (ECCU has a PhoneLink system plus an Internet process).

C H E C K I N G   A C C O U N T

  •    The function of the Checking Account is 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

     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 from the DIBS so that the Checking Account balance is zero (or an agreed float amount) 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.
      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.  You will probably have to pay an agreed Sweep daily or monthly fee.
       Possible Bank Reconciliation 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

        If no automatic sweep arrangement is possible with your 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.         

        AGAIN, THE THRUST is:  Do NOT leave unnecessary balances in your Checking Accounts; be sure Bank Balances are earning the maximum amount possible !!!


       DEAR LORD:  Every Ministry has to administer restricted or designated monies.  Please help each one to do so prudently and efficiently.  My prayer is that the above data will assist a Ministry to appropriately care for these matters.  Further, that it will also help each one to NOT add to their bookkeeping burden by having too many unnecessary Bank Accounts like that described above.  Thank you for the love and mercy of the Lord Jesus Christ that I most certainly do not deserve.  In thy PRECIOUS NAME - AMEN !


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This document was updated last on:  April 20, 2011