"JIMs JRNL" Edition
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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 July 2008 FILE: 0207-08/jrnl
(01) Deficits of the "General Purpose Fund - GPFund" (8)
It happens, doesn't it? Seemingly, all too often the Ministry's annual operating expenditures of the General Purpose Fund (GPF or GPFund) are more than the income? Or do you have a GPFund deficit from earlier years? This was accomplished by you using resources from the Special Purpose Funds (SPFs or SPFunds) in order to cover such deficits? Doing this is a serious matter since you are spending money for NOT the intended purposes.
The real issue is that your Ministry is not controlling its discretionary GPFund spending. A way to do this is the use of two separate Bank Accounts..... one for the GPFund and one for the SPFunds. This is not recommended for the "pool" reasons displayed Here and Here. Below is our recommended way for the current year to function so you have no more GPFund deficits:
>> It begins with the use of a unique accounting system. Please first digest the contents of this BuxBox link.
>> You will discover that all GPFund monies that come into the Ministry are pre-assigned to Spending Areas, or BuxBoxes.. Or like the Mvelope system, recommended for individuals, you place your receipts into prioritized Spending Areas and you can only spend when that Spending Area ( BuxBox ) has a balance. No Balance no can spend.
>> This means, of course, that your Ministry must timely do the applicable accounting and reporting
>> Since the Ministry buyers MUST know at least weekly if there is a balance in their Spending Area ( BuxBox ).
>> Brad and Alex dialog in depth about all of this in the setting of a Small Church when you Go Here. In their weekly example below they discuss how you make full use of such info as: 1> That $2,706.41 is still borrowed from the indicated SPFunds. 2> The total of BuxBox balances of the prioritized GPFund Spending Report areas is $442.59 3> And, for example, there is only $272.70 for the "Staff Costs" that are due to be paid soon, etc.
SPFund BuxBoxes 51 ABC Project $ 28.53 52 XYZ Project 405.57 59 GPFund (-) deficit from Previous Yrs -2,706.41 59 Building Fund 11,574.00 Total SPFund BuxBoxes 9,301.69 GPFund BuxBoxes 01 Staff Costs $ 272.70 02 Missions Costs 28.65 03 Facility Costs 59.06 04 Church Office Costs $ 37.30 05 General Ministry Costs 44.88 Total -GPFund BuxBoxes for this year 442.59 Total Year To Date BuxBox Balances $9,744.28
Paying off the $2,706.41 deficits of prior years could include the following processes:
>> Donors make annual pledges which go directly to the above SPFunds Deficit BuxBox account.
>> Part of the prioritized current year's GPFund donations structure is a Tithe (or some like amount) which is used for this purpose. Of course, this reduces what can be spent for this year's Ministry since this Tithe money does not get into the GPFund BuxBoxes.
Of course, Ministries MUST deal with these important fiscal management issues.
(02) GAAP at Ministries (4)
OK, what is "GAAP at a Ministry"? In most "gap" situations, something is missing, right? Well, in this case nothing is missing, but it is another one of our vocational acronyms that stands for: G)enerally A)ccepted A)ccounting P)rinciples, or GAAP.
So without getting into a bunch of additional CPA vocational acronyms, let's just say that professional accountants must do things "according to hoyle" , or they have certain pronounced finance accounting rules and regulations as financial information is captured and displayed for applicable users. Some of the GAAP issues are generic and some pertain uniquely to Ministry, or Non Profit Organizations. By the way, some view the "P" in GAAP to also include "Practices", "Procedures" and/or "Policies." In our opinion, we believe Ministry finance GAAP matters have two segments, namely -
- That which pertains to Daily /Monthly matters ---- since it is primarily for internal reporting and "Spending Control" management purposes, and
- That which pertains primarily to Year End matters ---- or the emphasis is external reporting to the Ministry's public, etc.
Accordingly, we have identified GAAP topics by type of Ministry (Churches, Mission Agencies, Schools and Camps etc) when you Click Here and have also placed them into the above two segments. You might also find of interest our views when you go to 0127 with regard to having "Current' and "Dormant" sets of books -- especially as to "Year End" matters.
(03) - Discussion about a "FISCAL FITNESS EXAM" - (03)
Question #1: What does "FISCAL FITNESS EXAM" mean? Where did the name come from?
Response: Recently I went to my family doctor for my periodic physical, or I had a "Physical Fitness Exam." Yes, the doctor said I weighed more than I should, but the obvious analogy is for your Ministry to have a periodic "Fiscal Fitness Exam."
Question #2: Who does this apply to and why should it be considered?
Response: . This is simply a technique by which a Ministry secures help from a Ministry experienced financial expert -- usually a CPA. It is primarily for smaller Christ-Centered Ministries who handle $500,000 or less per year. Many of these Ministries do not have the usual annual CPA firm Audit. As indicated when you go to 0025 it is valuable because it provides a professional look at your financial health, with emphasis to methods, procedures, and record keeping and reporting results, and the rendering of a written grade report on a variety of different issues. Then, like a physician, you are advised to seek answers to any poor "Fiscal" health concern.
Question #3: Can this be done Online or remotely?
Response: We encourage a remote Online Assignment. While an on-site type of engagement is often desirable, it usually is too dollar costly for most Ministries of this size
The usual steps include:
Question #4: How is a remote FISCAL FITNESS EXAM done?
1> You establish a mutually acceptable Online relationship with this person . This may take four or five Emails and probably at least one phone call; plus your confirmation of professional status and reference follow-up.
2> There is often merit for a Ministry originated conference phone call with members of the Onliner's MFTeam as you get information from multiple sources.
4> Research is started and the MFTeam is asked to provide various finance material and financial statement information. Ask us for the specific list. Be sure and look into the methods mentioned when you go to 0130.
5> When possible, you attach files to Emails and exchange data in this efficient manner.
6> Other MFTeam TODO requests are made as you interact almost exclusively by Email (the MFTeam originates any phone calls when interactive clarity is needed) until research is completed and the CPA has enough information that enables them to render their grades.
7> Something like a "Written Examination (Grade) Report" is provided by Email and you inter-act therefrom.
8> It is usually desirable to have a MFTeam originated Conference phone call that allows any of us to thoroughly go through the perceived poor grades. Sometimes opinions are changed upon issue clarification at this time. All need to understand poor grade conclusions, even though they may not agree.
9> As appropriate, make suggestions as to sources of help in improving poor grades.
Question #5: What could the report look like?
Response: Please go to 0128 for some material on this topic. It usually covers such topics as: Fiscal Overview, Board Matters; Reporting and Management, Tranx processing system; plus it provides for expressing if there are any Tax Issues.
Question #6: Who provides such services and what would be the approximate cost?
Response: Contact me about a list of who I view as Ministry finance savvy CPAs for such an effort. You, of course, would have to find answers as to their fees from them. Not likely, but it is possible that I might be interested in such an effort -- as to my fees, please go to 0100.
(04) Reasons why we recommend that you use Plastic Debit (not Credit) Cards. (04)
First -- this is not a "going into Credit Card debt" issue. We are just convinced that it is prudent for Ministries to do their buying with Plastic ( use of the Debit Card is the same as writing a check ) rather than by using cash. Why -- because you have purchase documentation plus it is often dangerous to carry around "green stuff.". Especially when Small Ministries us the eFINFAX accounting system and account for their buying. Most all vendors ask if you want a Debit or Credit card use of the Plastic. For vendors who do not offer the Debit Card option, you will, of course, use your Credit Card plastic.
Second -- It is preferable to use Debit Card Plastic via a Bank account as your accounting system then would deal with only one financial institution account. When you have both a Bank Account and a Credit Card Plastic account you need to process their transactions via two separate accounts within the system. The fewer accounts the better.
Third -- When you use just a Debit Plastic Card (via the Bank Account), of course you don't need to worry about Plastic Credit Card debt -- even if you pay off the Credit Card Plastic account weekly as recommended.
(05) Use Scrip Cards for Internal Purposes. (7)
As described when you read 0101 the "Scrip System" allows users to buy -- usually in the form of Gift (Plastic) Cards -- from Scrip vendors and the some 4% to 10% discounts flows directly to your Ministry. Some Ministries keep records so that Buyers know the accumulated amount of the discounts so they can use it to pay for their personal activities at the Ministry or they can make designated donations. Of course, Ministries can obtain Scrip Plastic Cards for their own departmental purposes as purchases are made at the available Scrip discounted price. Like Gift Cards, you eat away at the total prepaid amount until it is used up, etc.
(06) Church Mission Trips -- Finance Issues: (02)
A Church needs to be careful about the way it handles finances re "Missions Trips" -- especially with regard to the issuance of Tax Deductible contribution for said endeavors. Please let me know if you have any questions as you consider the following:
01> Church Mission trips need to be defined …… there are times when a trip within the USA might have the proper “Missions” purpose and qualify for funding via applicable tax-deductible contributions.
02> The Church should have a written finance policy concerning this entire topic.
03> Please search the archives of the http://groups.yahoo.com/group/churchadmin as much is out there within this Forum on this subject. Also please go to 0177 for some specifics via a Ministry savvy attorney on such matters.
04> All Church staffers/leaders and volunteers should be well informed with respect to the following before the Church begins such as project. We believe that each participant should be provided with a copy of such policies, etc.
05> Basically this is a Church Ministry per se and not a self humanitarian effort by any one of the participants.
06> The Church leaders of the "Mission Trip" needs to determine what is expected to be the total cost of the project …… such pooled costs of the entire project usually includes at least the following: > travel > meals > lodging > plus the needed supplies/expenses for the project. ALERT: Trip expense advances, via checks made payable to Leaders/Participants, MUST be fully documented and accounted for, etc. The preference is for them to NOT carry local "Green Stuff" for expense payment but and pay for said expenses via Credit/Debits cards, etc.
07> The amount to be funded by the Church is subtracted from this total. Let’s suppose that the total planned costs are $15,000 and the Church funds $2,000 up front.
08> Then the residual amount of $13,000 is divided up evenly by the number of participants (husband and wife are both participants) – let’s say there are 10 participants. Or each one is to come up with $1,300 for their equal share in the project.
09> This $1,300 per participant is funded by tax deductible donations (all checks are payable to the Church -- not to any participant or to a vendor) and usually come from: -- a> The participate themselves or their taxable entities -- b> Interested church members or their taxable entities -- c> Or non church members - like family and friends, etc. There are no refunds. All of the above $15,000 expenses of the endeavor is paid by the Church -- not by any of the participants.
10> The Church needs policies if each participant either does not raise the required $1,300 or they raise more than the $1,300. Sometimes the Church helps individual participant beyond the above referenced $2,000. See comments below
11> One of the needed Church policies has to do with what happens to the money that is raised but is less than the required $1,300. First, it is NOT refundable. It either is used to care for others who are short when you reach the deadline time (all of this is determined by the Church ---- with limited participant preference involvement, etc.) Or the Church policy might be that it stays with the Church for other "like kind" of projects. Remember --- again, no refunds of any of these tax deductible donations, etc.
12> The Church keeps a record of how each participant is doing in raising the targeted $1,300. Please go to 0200 and read about our coverage of such related matters like: -- a> The “Expected Receipt” computer system -- b> Issuing of Donor Receipts at the time of the donation – c> Special handling of non Church member giving --- d> How to integrate such giving into the annual Donor Giving reports from the Church.
13> To emphasize again, to be a Church tax-deduction it is required that all checks are paid to the Church and not to a participant or some vendor involved in the project. The Church's policy limits the type and scope of participants getting reimbursed for project expenses --- especially air fare expenses, etc. The Church arranges and pays for this and not the individual participant.
14> If the project is within the USA and participants “car pool,” etc, be sure you have a system whereby participants appropriately pay for the cost. Such costs are reimbursed at the prevailing IRS approved rate per mile to the participant driver (this is not based on the actual out-of-pocket costs, per se) and such amounts are added to the planned project costs. This includes any costs incurred by a Church vehicle. Or such costs are within the $15,000 overall costs mentioned above.
15> Let's suppose that the project actually costs $14.500, or $500 more money was collected than was paid out. Again the Church should have a policy for this, and hopefully such surplus is used for a like kind of future project at the Church, or as the Board of Leadership determines.
(07) Investments by Christian Endowments or Foundations (07)
>> The XYZ Foundation (my fictional name) keeps a lot of cash on hand, or at one year end some 73 percent was invested in money market funds, 19 percent in high-grade bonds and 8 percent in certificates of deposit. A year later, almost all the fixed-income portfolio was in money market funds. Only 5 percent was in bonds and 1 percent in certificates of deposit. "The return on this money will probably never be as high as you find elsewhere," said XYZ's chief financial officer. "We are not risk-takers. We need security."
If you are involved with Christian Endowments , or Foundations, please note below some of my gleanings down through the years. Initially, It is the investor's grail to: a> Generate significant income, b> Grow capital and, c> Above all else --- never lose any money. When it comes to managing their investments, Christian Endowments, or Foundations, face these issues. They need to: make money without taking on much risk, honor income, monitor growth, but also revere security. Please note the data below.
Allied link contents that follow might also be of interest:
(08) Ministries (not Payors) in charge of getting Receipts (08)
Ministries often enter into some type of monthly agreement with a Donor (a pledge for example) whereby a donation is to come into the Ministry at a specified time of the month. Plus Schools, of course, also make arrangements for Parents to make monthly payments of Tuition/Fees. My thrust here is for the Ministry to appropriately arrange it so that such payments come at the Ministry's initiative. Please go to 0907 for more info. Or this money comes in per the recipient's timing and not per the timing of the one sending the money. WHY: The person making the payment is relieved of taking any action. As a good steward, the Ministry or School can depend on money coming in at the agreed time. HOW: Of course, they notify the Payor when they process payments via any one of the following methods:
(09) This month's Links deal only with "Evangelical Council for Financial Accountability" per samples below: (05)
Audit Committee Charter via ECFA
Whistle blower Issues via ECFA
Internal Financial Controls via ECFA
(10) Editorial - "For What It is Worth" as rendered in 2003 -- Endowments
(11) Current "Ministry Finance" Truism (2)
Below is one of my Ministry Finance precepts/beliefs/principles, or "rules of thumb". Please go to 0069 for a complete TRUISMS list
"SPENDING -- General Fund income is generally very volatile, so regardless of any authorized budget, spending is limited to what comes in -- period! Knowing this information on a weekly basis is essential."
(12) Prayerful Thots :
Dear Lord -- thank you for making the following known to me: Please keep our lives free from the love of money, and may we be content with what we have, for the Lord has said, 'I will never leave you nor forsake you.' So we can confidently say, 'The Lord is our helper; we will not fear; what can man do to us?' In Thy precious name, Amen.
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" 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 9707 and 9708
Below is probable "Ministry Finance Lingo", or "Frequently Used Vocational Terms" used herein.
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 QBs = Quickbooks; RPFin = Righteous Personal Finance , SPFunds or SPFs = Special Purpose Funds
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This document was updated last on: November 15, 2010