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Jim Bramer, Retired
RE: J I Ms J R N L for the month of November 2006 FILE: 0211-06/jrnl
(Click Here for "Blogger like" perspective/rationale)
01 - Ministry Budgets - General Info (01)
Despite what I share HERE, many of you still function from January through December (calendar year and not an operational fiscal year), so this month's emphasis have to do with "Ministry Budgets" . As a Retired CPA-Auditor I suppose you would classify me as "numbers oriented" so when I decided to write on this topic via this edition of JIMs JRNL I said to myself: "I am going to see how many times the word "Budget" appears in the some 600 www.bcidot.org web pages that I categorize within xxxx."
Wow, the word "Budget" appears exactly 999 times within www.bcidot.org (lucky you, I will not include all of them in this JIMs JRNL edition, but I will direct you to 0062 for a Glossary of Budget matters.) The "Budget" topic is rightfully high profile, as we become good stewards of our finances,
I trust you find the following helpful as you look to "Budgets" for your new calendar year.
02 - Ministry Budgets - GAAP Info - (02)
As defined more in depth when you Go Here, a Ministry's Budget is "an expression in dollars of it's upcoming prudent plans." Or a Christian Ministry needs to plan ahead (at least annually) as unto the Lord - and convert its plans to dollars that are needed in order to carry out such plans.
To remind you .... GAAP is G)enerally A)ccepted A)ccounting P)rinciples (or, I prefer to expand it to include; P)olicies and maybe even P)rocedures). GAAP helps a Ministry set down some "how to" preferences since its overall goal is for reports to appropriately reflect, for control and internal monitoring purposes, appropriate "Actual to Budget" information. Obviously, this applies to discretionary monies and is for Non Year End Internal (Daily, if you please) application and not External (Annual) GAAP purposes as discussed when you Go Here.
When you Click Here and HERE you will notice that a Ministry budgets does NOT include "Depreciation Expense" but it does include mandatory "Debt Retirement" and discretionary replacement of "Furniture and Equipment." These certainly are issues that are only Non Year End, and not issues that pertain to External (or Year end, or Annual) GAAP. Non Year End GAAP must, not only serve the above GPFunds "Spending Control" purposes, as you monitor discretionary Ministry monies within categories, but ----- there is the need to readily know the present balances of each SPFund -- since running balance information of such activity usually determines if money can be spent for their purposes, etc.
You might also find of interest my very personal opinion of certain "GAAP Overkill" matters, at a Church, as covered within my editorial at 0919. It is essential for an accounting system to have an understood Internal (Daily) infrastructure and not emphasis the possible External (Annual) GAAP accounting - reporting needs.
03- "General Purpose Fund " Budget Reporting-Control Methods - (03):
The usual Ministry Department "Actual to Budget" structure shows the amount authorized by the "Type of Expenditure" within their GPFund Department. Or a Ministry shows at least the amount of "Actual (what has been spent since the 1st of the fiscal year for this "Type of Expenditure") and then compares this info to the "Year to Date-YTD" authorized "Budget" --- plus it also can show the total authorized for the entire fiscal year for this departmental "Type of Expenditure."
Of course, they can only spend what has been authorized for that "Type of Expenditure" within their Department. A Church sample via this method can be found at 0706
As most of us know, the discretionary income to a Ministry's GPFund is often very volatile -- or you do not know what to expect. Or a Ministry finds that the GPFund is really lagging behind and it can not borrow internally from all of the Special Purpose Funds - SPFunds on hand for GPFund purposes.
So they prayerfully determine what has to be paid in priority order (examples are: fixed expenditures for payroll, facility & debt retirement, etc.) and they divide up the GPFund into priority Spending Areas. When GPFund money comes in, they assign, by order of priority, to these Spending Areas. Via this weekly alternative Budget System they control their spending by knowing that all expenditures are reflected within the system and that, after the weekly deposit ( at a Church, for example), a certain priority Spending Area has a balance. If there is no available balance, then no can spend, etc. Sometimes, it is necessary to defer a fixed payment until more comes in the next week, etc. More about this method can be found when you Click Here. and Here
I trust you are acquainted with our New Website , established in July 2006, that is designed to assist Internet Centric (or Internet Friendly) Christians and Small Ministries in their SPENDING CONTROLS.
04 - Purchases via "Credit Cards - Plastic " rather than via a "Purchase Order System" - (04)
Advance approval applies to "Ministry Budgets" but it particularly applies to its buying approval process. Some Ministries attempt this via a Purchase Order (P.O.) system. Management of a P.O. system in a volunteer setting can be quite awkward, so we recommend the use of a Plastic Buying system per the details set forth within 0114.
Very very few vendors these day do NOT sell via Credit Cards, or Plastic. Therefore, we recommend, rather than have a number of different vendor charge accounts, that you have only one charge account -- namely, your Credit Card, or Plastic account. The control of charge accounts then is dependent on who has the PLASTIC.
Further, such controlled charges are entered into the accounting system as such expenses are incurred throughout the month. Ask us about the general idea of writing a PLASTIC weekly check from known plastic charge slips on hand. In essence, it is vital that the Ministry is on what is called the "Accrual Basis of Accounting" --- as it contributes to letting everyone know the complete and current financial situation. Please Click Here about also consider using the Debit Card option.
The Ministry Plastic is given by the Ministry Purchasing Agents to authorized volunteers who return the Charge Slip and the Plastic (often the next Sunday, etc. in a Church setting) where immediate entry can go into the accounting system. Plus, there is the aspect that the Ministry needs to write only one monthly Plastic check regardless of how many vendors were involved.
CONTROL THE PRACTICE OF STAFF MEMBERS and/or VOLUNTEERS BUYING WITH THEIR OWN CASH OR CREDIT AND THEN SEEKING REIMBURSEMENT FROM MINISTRY; HAVE CAREFUL FINANCIAL POLICY/PRACTICE WITH REGARD TO HOW THEY GET AUTHORIZATION IN ADVANCE OF THEM MAKING SUCH A PURCHASE.
REMINDER: A major aspect of all of this is to control spending and NOT NECESSARILY MAKE PURCHASING CONVENIENT.
05 - Building Project at a Church - Note the "Actual to Budget" Format.- (05)
I work with a Church who recently completed a Building Fund project that cost them over five & a half million dollars. They use QuickBooks - QBs (which they call REG) to handle their accounting per Method One described when you go to 0601. As suggested when you go to 0127 , they established a sister Building Fund QBs Company for just the "Building Fund" project activity. Within the context of 0006 , they also operated from a pooled Bank Accounts within REG -- or they did not have a separate Bank Account for the Building Fund project. Their money transactions went in/out of REG's general Bank Accounts and the apposite entry was placed into REG's "Building Fund Clearing" - which was carried as a QBs Other Asset account. Utilizing a sister Building Fund QBs Company like this accomplished at least the following Cash Flow accounting and reporting objectives:
>> The transactions within the above "Building Fund Clearing Account" were shown as QBs Bank Account activity that mirrored the activity in said REG account - except, or course, in the apposite direction.
>> By doing this, they did not clog up the Church's normal - Special Purpose Funds- operations with the activity of this "extra" Special Purpose Fund (i.e., the Building Fund).
>> They were able to report via the Cash Basis system of accounting as their Cash Receipts were shown as QBs Income -- even though some were in fact "Loan Proceeds" and not "Income" per se.
>> Plus they were able to show all of their Construction Costs as QB "Expenses" even though there was some debt retirement and they, of course, were in fact ultimately capitalized as Ministry Fixed Assets.
>> They were able to use the QBs "Actual to Budget" reporting feature for various "Controlled Spending" areas of the project.
>> This Building Fund project was for far more than 12 months, so they were not limited to the fiscal year aspects of the REG system, etc.
>> The indicated bottom line, or Cash Basis "Net Income", always agreed with the balance in REG's "Building Fund Clearing" account.
>> Further, they were able to prudently "Internally Borrow" from available discretionary monies in an efficient manner during construction and, of course, reduce the amount of "External Borrowing" and related costs.
. . The required Debt Retirement of their over 2 million loan is over $15,000 a month and it is a budgeted operating expenditure of their General Purpose Fund. It might be of further interest that any ongoing Pledge and From GPFund Budgeted Transfer Money goes beyond this $15,000 budgeted monthly requirement and directly reduces the Building Fund loan. Please go to these 5024 and 3333 links for more Building Fund information.
Below is an example of the general format of their periodic Building Fund QBs produced report - please note the "Actual to Budget" reporting capability.
See Below Budget $ Over Budget Receipts prior to 12/01/xxx4
like non Loan Proceeds below
1,366,393 Receipts since 12/01/xxxx4 300 Inflow 301 Pledge giving. 894,945 302 Non pledged giving 111,410 303 From the General Fund 335,763 304 Interest Income 32,537 380 Loan Proceeds 2,788,200 Total 300 Inflow 4,162,855 Total Receipts 5,529,248 Expense 400 Non Contractor Costs 400A Architectural - prior to 12/01/xxxx4, etc 91,704 91,704 401 Other Initial Sanctuary costs 224,557 224,557 404 Architectural etc -since 12/1/xxx4 171,512 171,512 Total 400 487,773 500 Contract Costs 501 Site Demolition 12,000 12,000 0 502 Re-Bar 51,414 51,414 0 503 Concrete 230,680 230,680 0 504 Masonry 285,007 285,007 0 505 Metal Studs & Drywall 476,402 476,402 0 506 Finish Carpentry 14,500 14,500 0 507 Cabinets 25,717 25,717 0 508 Insulation 113,690 113,690 0 509 Roofing 146,200 146,200 0 510 Metal Doors & Frames 19,640 19,640 0 511 Finish Hardware 24,500 24,500 0 512 Glass - Storefront 95,700 95,700 0 513 Lath & Plaster 112,500 112,500 0 514 Ceramic Tile 22,421 22,430 -9 515 Acoustical 54,000 54,000 0 516 Floor Covering 51,020 51,020 0 517 Painting 53,870 53,870 0 518 Counter Tops (Restrooms) 9,970 9,970 0 519 Signs 2,000 2,000 0 520 Toilet Partitions 14,482 14,482 0 521 Toilet Accessories 5,150 5,150 0 522 Mirrors (Restrooms) 5,000 5,000 0 523 Mini Blinds 1,000 1,000 0 524 Fire Sprinkles 54,900 54,900 0 525 Plumbing 131,343 131,343 0 526 HVAC 510,000 510,000 0 527 Electrical 422,276 422,276 0 528 Metal Structure 684,860 684,860 0 540 Temporary Fence 3,500 3,500 0 541 Temporary Restroom 2,500 2,500 0 542 Job Trailer 3,000 3,000 0 543 Dumpsters 12,000 544 Job Communication 2,000 545 Labor to install hardware 7,000 546 Insurance ($6 Million) 9,500 547 Supervision 100,000 548 Overhead & Profit 100,000 550A- Contingency 144,384 Total 500 Contract Costs 4,014,126 550 Beyond Sanctuary Costs 550B-Contingency other 97,263 551 Stage Light Grid 5,973 40,000 -34,027 552 Parking 0 60,000 -60,000 556 Courtyard Upgrades 15,097 20,000 -4,903 557 Pews 111,799 130,000 -18,201 558 Pulpit/Communion Table 0 10,000 -10,000 559 Misc. Tables & Chairs 16,943 15,000 1,943 560 Baptistery 0 5,000 -5,000 561 Orch. Modesty Rail 0 3,000 -3,000 562 Choir/Orch Chairs/Risers 0 60,000 -60,000 563 Sanctuary Raised Flooring 0 20,000 -20,000 564 Acoustical Wall/Ceil Panels 85,644 44,997 40,647 565 Removable Floor Panels 0 20,000 -20,000 566 Owner's Liability Insurance 0 20,000 -20,000 569 Testing & Inspection/Tech 0 29,000 -29,000 571 City Sidewalk Repairs 0 2,000 -2,000 572 Audio (incl floor Box, misc) 119,400 116,743 2,657 573 Image display 66,846 73,925 -7,079 574 Light System 211,536 183,242 28,294 575 Utility costs 0 3,000 -3,000 576 Alarm System 0 4,000 -4,000 577-New Sanctuary piano 84,102 Total 550 Sanctuary Extra Costs 814,603 859,907 -45,304 600 Other costs 606 Groundbreaking costs 3,688 2,930 758 607 Lending fees 38,436 38,436 0 608 Initial debt retirement 52,593 609 Purchase of needed Land 101,240 101,105 135 610 Campaign costs 2,987 10,000 -7,013 612 Old Sanctuary costs 2,836 2,695 141 613 Off Campus Parking 5,950 614 Existing upgrades 5,016 Total 600 Non Sanctuary costs 212,746 155,166 57,580 Total Costs or Outflow 5,529,248
This Month's previous Editorial - "For What It is Worth" -- Written in March 2001 :
ANNUAL BUDGETS - ARE THEY SACRED ? http://www.bcidot.org/fwi/0910-03.html
Current "Ministry Finance" Principles or Truism on this topic
BUDGETS ARE A GIVEN - realistic operating budgets are essential; Ministry buyers MUST know their spending limits. Also see 5009 regarding some Church Budget Truisms. Note the above editorial content re some believed Annual Budget Issues. BUYING CONTROL - processing a check is the back end of a financial transaction; more control is needed at the front end or at the time an expense in incurred. INTERNAL BORROWING -- Sometimes the General Purpose Fund - GPFund has more Expenses than Income so you need to borrow from discretionary internal Special Purposes Funds- SPFunds. Go to 5005 for a sample of how a Church's Finance Policy manual about how it is improper for the Church to even temporarily borrow from non-discretionary SPFunds.
Prayerful Thots :
Oh Lord, this past month my wife and I so much enjoyed participated in a Bible Study where the emphasis was Your Grace (unmerited favor,) I was impressed with this quote:
"Grace is God's PLAN to pay for my salvation: POWER to save me, LOVE that pursues me, is a PROMISE that works for my good; and Grace TEACHES me to live like Jesus; It is so AMAZING that I can not stop praising You that it SAVED a wretch like me !" Thank you!
This "Blogger" like monthly endeavor (99) allows me to share some personal comments/thoughts as to Ministry Finance issues plus matters concerning Righteous Personal Finance for Christian people. Please go to 0200 for further explanation and links to earlier JIM's JRNLs. The four digit links xxxx and some "Click Here" info contained herein come from www.bcidot.org sources.
If you would like to receive the next monthly JIM's JRNL during the first week of the subsequent month, please join the following Yahoo Group: ---- http://groups.yahoo.com/group/JIMsJRNL/. Caution --- the non www.bcidot.org web links that I reference herein do NOT necessarily imply my endorsement. Further, if any of these links do not work, let us know which one at Jim@bcidot.org. Lists of our www.bcidot.org articles (or Web Docs) can be found at 9703. 9704 9705. and 9706
Probable "Ministry Finance Lingo", or "Frequently Used Vocational Terms" used herein, appear below:
BLVR = Someone who has accepted Jesus Christ as Lord and Savior, CBA = Church Business Administrator, CBAer; CMS = Church Management Software/System; CPA = Certified Public Accountant; GAAP = Generally Accepted Accounting Principles/Practices; GPFund or GPF = General Purpose Fund; MFTeam or MFT= Ministry Finance Team; QBOE = QuickBooks Online Edition; QBooks or QB = Quickbooks; RPFin = Righteous Personal Finance , SPFunds or SPFs = Special Purpose Funds
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This document was updated last on: November 15, 2010