Links on the www.bcidot.org Web Site include: HOME | ABOUT US | OUR PURPOSE | SITEMAP | COMPUTER FUND ACCTG | HELPS | GLOSSARY
Jim Bramer, Retired
RE: J I Ms J R N L for the month of February 2007 FILE: 0202-07/jrnl
(Click Here for "Blogger like" perspective/rationale)
To help your Ministry
Finance Team be more effective
RESOURCES: 1st Website and 2nd Website
01 - Donations of Non-Cash Assets -- Double Tax Benefit - (01)
Not too long ago a very Church finance savvy person raised tax reporting questions about a person donating non-cash appreciated assets to a tax exempt organization (Ministries or Churches, for example). I mean assets like "Real Estate, or Stock-Bonds" that are now worth far more than what they originally cost. When I say "appreciated" non-cash assets/property, I am sure the Ministry much "appreciates" such a donation.
An example is something that you paid $15,000 for some time ago and the Fair Market Value (FMV) is now $75.000. Or if you sold it this year there is a $60,000 long term capital gain to report. This Church finance savvy person believed that the donor would have to pay taxes on the above $60,000 if this $75,000 asset was given to a tax-exempt Ministry.
When I became the Comptroller of a publically supported Ministry in the middle 1960s (Go here for specific bio info) it was then that I learned that the government graciously allows such a donor of such non-cash property to have a "double tax benefit" from such a donation. Namely, per the above example, when a donor makes a donation of such non-cash asset they would not only get a long form tax deduction for the $75,000 donation, but they would also NOT have to report the long term capital gain of $60,000. This Church finance savvy person was not aware of this "double tax benefit" that is available to owners of appreciated non-cash assets, etc.
You can see why ministries (Click here and obtain what "Crown Ministries" provides along these lines) widely and appropriately make known this donation option to their constituents. As we all know, real estate especially has significantly increased in value for a variety of reasons. Donations of such non-cash assets often are used for such purposes as the following:
>> To fund a "Gift Annuity", or you make both a donation plus you get an income for life
>> To fund an "Endowment" (Go here for details) whereby the income earned therefrom is usually used for a certain agreed Ministry Operating purpose, etc.
>> Simply direct this donation to the Ministry's "General Fund" or to a certain "Board-approved Ministry project."
You can see why the above person was so pleased to find out that the donor, when s/he makes this $75,000 non cash donation to a tax-exempt Ministry, does NOT have to pay taxes on the above described $60,000 gain. Or the donor obtained, not only one tax benefit (a donation per a long form tax deduction), but also a significant second tax benefit (they do NOT have to report any long term capital gain).
02 - Coverage of all Ministry Finance Tasks - (02)_
It believe it is best for a �Ministry Finance Team� to write down all of their tasks and then assign them to the responsible entity (group or individual). Perhaps we all too often begin with the expectation, via a �Job Description� pertaining to that entity, and possibly overlook where this entity fits in overall. Please go to 0074 for more detail of a worksheet that includes columns for:
2> Named Executive and
3> Ministry Finance Team - MFTeam and task groups which might include these categories:
c> Receipts and related Issues
d> Disbursements and payable
g> Budgets and
h> Property records.
03 - Check Signing at a a Ministry -(03)
Not too long ago I had some Online interaction with a member of a Ministry Board Finance Committee that started with their comments below. Then please go to the content within 0066 as to how this person's concern was addressed.
The Bookkeeper and I are EXTREMELY frustrated with our Ministry's required "two-signature" check signing policy. As a part of our "Internal Financial Control" effort we require that every one of our checks require signatures by two different unrelated Ministry officials; at least one Signer is a volunteer Board Member. All too often we have to chase down one or two Board members in order to get bills paid timely. Also through no fault of ours, we sometimes MUST process a check right now!
We know that it is 'taboo' to pre-sign checks, but ..... getting two "sigs" is such a "PAIN". I have to admit that we will often write out a check that includes the Payee, but not the amount...then fill out the amount later. I am sorry to admit, but our officials have even pre-signed blank checks. I know .... I know!!!! Jim, we know that people have stolen money from Ministries, and we genuinely want to be good financial stewards, but there has to be "A BETTER WAY" as we simply waste too much time in this process. Any Ideas?
By the way .... the following three month disbursement analysis via the June 2004 edition of JIMs JRNL might also be of interest:
Same vendors each month
Up thru $1,000 -Single sig
Over $1,000 - Two sigs
04 - Vehicle Expenses at a Ministry - (04)
Appropriate accounting for Personal and Ministry Vehicle Expenses can sometimes be a challenge.
Some use their personal vehicle for legitimate (commuting costs by a Staffer is a personal expense) and budgeted Ministry purposes. Or a Staffer may use a Ministry's vehicle for personal reasons. As explained in depth at 0076 we maintain that you know what miles were used for applicable purposes and you use the current authorized IRS per mile rate to account for such matters.
Or you do NOT attempt to have both the Ministry and the Staffer pay the vehicle's obvious (depreciation expense, for example is not obvious) operating expenses like: (gas, oil, maintenance, etc. The Staffer pays all such expenses for their personal Vehicle and the Ministry pays for all such expenses for the Ministry Vehicle. Or you do NOT try to to allocate actual expenses between that which is personal and that which is for the Ministry.
This expense sharing takes place per the reimbursement of the current approved IRS miles process. Or, when you use your personal vehicle for Ministry Purposes you know the mileage and compute the reimbursement by the number of miles times the current rate (e.g., 453 miles times 45 cents a mile - or $203.85) Or when a Staffer uses a Ministry vehicle for personal purposes (especially for commuting, etc.) then the Staffer keeps track of their personal miles and reimburses the Ministry like the above 453 mile example.
05 - GAAP and "Vital Signs" via your Ministry Accounting System (05)
The primary objective of the Ministry Fund Accounting system is to timely provide decision makers with the following seven "Vital Signs."
01> How much money is on deposit
02> When applicable, who owes us money and how late are they
03> Are we current with our bills and like obligations
04> What "strings are attached" to this money on hand; or our money pertains to which part of our Ministry and what is the scope of donor restricted money
05> What is the amount of Board discretionary money; often setaside by the Board for a specific purpose.
06> Are we living within our General, or Operating, Fund budget constraints
This can best be done via an Operational Accounting Set of Books that is designed for this purpose --- and it does NOT include all of the non cash fiscal resources. Please go to 0127 for more details along these lines. The content of Two Sides of the Same Coin might also be of interest. Please note the use of the terms PHOTO and VIDEO in the this 0086 link content and in this issue of JIMs JRNL..
Generally Accepted Accounting Principles (GAAP) for Ministries is dealt with in depth at 0004. - especially note the Daily/Internal portion thereof. We also deal with what we call "Functional Expense and GAAP Overkill" at churches in our 0919 Editorial below.
06 - Method of Accounting for Credit Card Purchases at a Ministry (06)
One of the reasons that I advocate use of Credit Cards at a Ministry is to have current and meaningful "Actual to Budget" weekly reports. Please go to 0114 for more details about aspects of this system. In order to do this, we need to weekly get Credit Card (Plastic) purchase information into the accounting system. Unless you utilize the method set forth in step 12> below, you do NOT rely on cash transactions only. Please see the steps below:
01> Emphasis ---- currently know if you are in compliance with pre-authorized budget constraints
02> It is not easy to retain small Credit Card purchase docs/receipts
03> Not for Profits Organizations are tax-exempt; there is no need to substantiate expenses to the same degree that you do for tax deductions at a regular business.
04> A Ministry Staffer is provided with their own Ministry Credit Card.
05> It is now very efficient for Staffers to go Online and to access their Credit Card Account.
06> They then hard copy/print out the latest Online statement.
07> And they weekly satisfy themselves that these charges via their Credit Card Account are proper
08> As part of this process, they go beyond being satisfied with simply vendor info and hand write the needed "what" "why" data on this weekly print out
09> It would no longer be essential for Staffer to retain Credit Cards docs/receipts.
10> But this is desirable and when the Staffer does, they are also attached to this weekly print out document
11> This completed document (including "what" "why" info) then goes to the Bookkeeper on a certain agreed day of the week --- who inputs such info into the accounting system.
12> There might be merit in the Bookkeeper Online paying off each weekly balance which means they would be distribute to the "Actual to Budget" categories with no need to enter each purchase. Please GO HERE and HERE for more info along these lines.
13> The Bookkeeper can do the necessary weekly reminding as a part of this overall effort.
14> A Staffer will know if their periodic "Actual to Budget" report is up to date based on whether or not they have provided this required weekly information to the Bookkeeper.
Said Staffer's Credit cards would no longer be available if they do not timely get this appropriately completed printed out Credit Card document to the Bookkeeper. If the Staffer uses their own resources to do their Ministry buying (which is not preferred), they MUST have complete Credit Card purchase docs/receipts for all reimbursements, etc.
07- ASSURORs - not Auditors per se (07)
The general concept here is to have someone like a Retired Accountant (Auditor or CPA) perform some ASSUROR services for you at the Ministry. Many of these folk ( HOMERS -- "Retirees" or "Moms at Home") have much to offer a Ministry as there are utilized primarily via the Internet (across the Street or across the Country) as volunteers or for nominal fees. Or you efficiently interact with these folk in person, or remotely (Online or phone), so you can be even better stewards of your finances.
For more perspective and information about such matters, please read the contents of these links: 0038 0077 0057 0647 and 0676.
Links that are "NOT" via Jim Bramer
Internal Revenue Service (IRS) "Tax Guide for Churches etc" Publication. ---- http://www.nacba.net/PDF_FILES/pub1828.pdf
via Jim Bramer
Available resources for Ministries re the IRS ------ http://www.bcidot.org/all/0110-77.html
This Month's previous Editorial - "For What It is Worth" rendered in July 2002
at Churches with respect to the need for " Functional Expense"
related GAAP (Generally Accepted Acctg Principles) matters
Current "Ministry Finance" Truism
Below is one of the Truisms found when you go to 0069 .
While Ministries are tax-exempt per se, they MUST comply with applicable State and Federal laws with respect to such matters as payroll, etc. Please note the following as to proper handling of tax deductible donations to your Ministry in and around a calendar year end.
Year End Tax Deduction -- Like 12-31-05, the calendar year ended on a Saturday. Tax deductible gifts (at churches in particular) must be either physically received or given to a Ministry's agent (like the Post Office), not the donor's agent like an Online Payor, on or before Saturday 12-31-05. Checks dated 12-31-05 and placed in Sunday's (01-01-06) offering are tax deductible in 2006, not 2005. The determining factor is when it is available to the Ministry; not the date on the check.
Prayerful Thots :
Thank you, Lord, that my 92 year old Mom in Portland, Oregon is doing fairly well following a debilitating stroke last month. Please bless my sister Stella (and husband Charles), and family in that area, as we expect Mom to be at home soon. Help all of us, dear Lord, to be much in prayer for our family members and their various needs.
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. 9706 and 9707
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
HOME | ABOUT US | OUR PURPOSE | SITEMAP | COMPUTER FUND ACCTG | HELPS | GLOSSARY
Click Here for more JIM's JRNLs info that includes topical Indexes by year - Contact Jim@bcidot.org
This document was updated last on: November 15, 2010