51-JIMs JRNL for November 2006 -- 0211-06 ZZjrnl

                                          - - 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 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 0919It 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):

                                                         Method One:

        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

                                                          Method Two:

        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 accountThe 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.  

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   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