Current "JIMs JRNL" Edition
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TO: Interested Onliners ROM: Jim Bramer, Retired Auditor-CPA
RE: J I Ms J R N L for the month of October 2008 FILE: 0210-08/jrnl
(Click Here for "Blogger like" perspective/rationale)
01 - Ministries and accounting for "Land, Buildings and Equipment (LB&E)" : (3)AP
The primary objective of a Ministry Fund Accounting system as mentioned at HERE is to timely provide decision makers with such "Vital Financial Signs" as the following:
How much money is on deposit
Who owes us money and how late are they
What "strings are attached" to this money; or our money pertains to which part of our Ministry
Are we current with our bills and like obligations
What is the scope of donor restricted money
What is the amount of Board discretionary money; often setaside by the Board for a specific purpose.
Are we living within our General (Operating) Fund Income and budget constraints
But accounting for "Land, Buildings and Equipment (LB&E)" and related matters at Churches and other Non Profit Ministries within this context is ever before us. My view of "Generally Accepted Accounting Practices/Principles - GAAP " at Ministries is two-pronged.
The 1st Prong is that a Ministry needs definite Daily/Internal GAAP thrust that enables their leaders to make prudent financial decisions within the "Vital Financial Signs" mentioned above.
Year End GAAP
And the 2nd Prong is that, as explained when you go HERE , it seems that during the year there is a tendency to overlook "Daily/Internal GAAP" issues and over-emphasis "Year End GAAP " issues. Paramount among these "Daily/Internal GAAP" and related issues are matters that follow:
LB&E obligations like monthly Mortgage payments include both principal and interest. But the total obligation usually must come from operations income or the GPFund. Therefore, we recommend that the budget expenditure line item have a generic title like "Debt Servicing" and be for the total amount of the monthly payment. The principal portion will at least annually show up as a reduction of the liability account. More information along these lines is found at 2011. Please go to 0111 and see the discussion about a "Three Legged" accounting entry on this subject.
FURNITURE & EQUIPMENT ACQUISITIONS
At times Furniture and Equipment will be acquired from monies gathered specifically via a SPFund . But the usual practice is to purchase such items from the GPFund per se as a budget expenditure line item. All Furniture and Equipment costs should be added to the Fixed Assets at least annually. Please go to 0033 for more information about Land, Building and Equipment and related accountability issues. The Construction information at 5024 might also be of interest. Ask us about SetASide funding via the GPFund as to needed replacements or for anticipated major Facilities repairs and maintenance. Please go to 0111 and see the discussion about a "Three Legged" accounting entry on this subject.
DEPRECIATION - IS IT NECESSARY?
Yes, it is now required ONLY for "Year End GAAP , (Please note --- I said for annual GAAP purposes only -- not Daily/Internal GAAP) but it really should not be that big of a deal. Remember, as much "Depreciation Expense" as possible for tax deduction purposes is not an issue. I advise against laboriously accumulating the amount of Depreciation since date of acquisition on "each piece of fixed asset in inventory." I can not even get too excided about the need for partial year deprecation computations.
We recommend that all items be classified within life spans and you use the "block" method' of depreciation computation by year and by life span as demonstrated below:
-- Year FAssets Acquired --- Grand Accum This Yr's Total Life %
Total Depr Depr Accum Span Depr 5 yr
When you get rid of an item, then set up and use an account that says something like "Gain/Loss on disposition of Fixed Assets" --- or simply use the existing "Net Investment in Fixed Assets" equity account. Remove the computed year to date (no need to make partial year computation for the year of disposition) amount of previously accumulated block depreciation for that specific fixed asset --- then charge it to the above account. Then place, in the same account, the "Cost Equivalent" from respective "Fixed asset" account along with any applicable sales proceeds. This information will show up in the appropriate place within your year end report.
PHYSICAL INVENTORY of EQUIPMENT , ETC.
Please Click Here for details about how this might be done as you periodically verify that you have said Equipment on hand, etc.
OTHER MINISTRY SETS OF BOOKS
Information on Ministry resources tied up in Land, Buildings and Equipment (LB&E), along with related mortgages or long term obligations, and Accumulated Depreciation and related LB&E equity, is NOT needed for current decision making.
We recommend that almost all Ministries maintain this type of fiscal accountability in a separate "Set of Books" and only update this information annually. Please see Memo content for another possible reporting option. Year end reports for your auditor or constituency (or for the IRS, etc.) can also efficiently flow via another "once a year" Set of Books as you comply with the "annual" GAAP reporting mentioned above. Please go to the content of 0127 for more information on this overall topic.
02 - Simplify your " BANKS" and/or your "CREDIT CARD" reconciliation process - (4)
As you know, it is essential that your records agree with the data appearing on your "BANK" and "CREDIT CARD" statements - or you at least monthly go through a reconciliation process. We maintain that you should at any time go Online via the Internet and access the equivalent of your "B A N K S" and "C R E D I T C A R D" statements. Please Go Here and learn about the eFINFAX accounting system as you seriously consider what follows:
- - - - - B A N K S - - - -
-- Option 1 --
For a "Small Ministry", especially, you go Online and obtain such bank transaction data via the Internet and "mirror", or place, such data within your set of books. . Such a "mirror" effort includes such things as:
Since you use this process, you do NOT have to manually post to your accounting system (computer or otherwise) from deposit & check data.
Rather the source of your origination of such transactions to your accounting system is from this Internet provided Bank Statement data
When such is available, you make full use of the automatic Online transfer from the Bank to your computerized accounting system -- or you do not have to manually enter the bulk of such data into your accounting system.
Since you are a Small Ministry you write all of your checks manually (you do NOT buy expensive checks and have your computerized accounting system "type" out the checks, etc).
You keep a duplicate copy of your manually produced checks for document attachment and appropriate filing, etc,
The weekly Bank statement balance at the Bank and the Bank balance per your set of books is always the same
Since you update your records weekly, unposted deposits or outstanding checks info is not that significant
There is no need to manually maintain any type of check stub or running balance since you get this info weekly via this source.
-- Option 2 --
If you are a "Larger Ministry", you weekly go Online and obtain such bank transaction data via the Internet and within context ---
You write your checks via your computerized accounting system (like Quickbooks-QBs)
Of course, all supporting document copies are coded and attached to the duplicate check copy and appropriately filed. etc.
Along with deposit information, these check entries appear in your set of books
Working from this weekly Bank Statement equivalent as obtained Online
You identify within your set of books the transactions that have cleared the Bank
All entered checks or deposits that have NOT yet cleared the bank are re-dated to the next day following this Online Bank statement
Plus you place the original transaction date somewhere within your set of books, etc
This process shows your weekly running Bank Balance per your set of book and that of the Bank to always be the same, plus
You can readily monitor those recorded checks or deposits that have not been processed by the bank and either timely replace or remove.
- - - - C R E D I T C A R D S - - - -
Please consider the process below rather than work from those small Credit Card purchase slips (some of you also require a ministry form or document involved in this process) as you enter the authorized transaction into the applicable expenditure accounts and update a Credit Card liability account that has a running unpaid balance. Then, of course, you reconcile the content of this liability account to the Credit Card statement data.
Below are suggested processes whereby you do NOT initially post and then laboriously reconcile such activity
-- Option 1 --
- You do NOT have a large number of vendor charge accounts -- like at the Christian Bookstore -- who send you a monthly transaction statement etc. Rather you "buy everything" possible via your Credit Card charge account.
- You weekly go Online and make a hard copy of the Credit Card transaction report
- Some Credit Card entities allow you to automatically place their transactions into your computerized (like QBs) set of books. Or you do not have to manually post the bulk of such info into your set of books.
- This weekly hard copy above goes to the person at your Ministry making the purchase for documentation attachment, authorization & expense Identification purposes.
- If the transactions automatically go into your set of books, you use these authorization reports for expense distribution purposes
- If not, you use this approved weekly report as the source for manually entering this data into your set of books, etc.
- Again, unless you go online each week as mentioned in Option 2 below, your weekly running Credit Card balance per your set of books and that of the Credit Card entity are always the same.
-- Option 2 --
- Or better yet, we further recommend a process whereby you weekly go online and pay off the Credit Card balance
- When you do this, there is no need to have a Credit Card Liability account to reconcile to within your set of books.
- The content of the above hard copy of your approved Credit Card activity is the source for Expense distribution of such weekly credit card Online payment, or check equivalent.
- Plus, by doing this, you gain the benefits of this overall process but you never have Credit Card debt
03 - Small Christ-Centered Ministries who are struggling financially (01)
We hope, as you go through the evaluation list below, that you do NOT have a number of "Yellow" or "Red" Flagable Financial Issues. But we are finding that a number of Ministries .... especially smaller Churches ... are struggling financially.
F I N A N C I A L I S S U E S:
There is not enough income for the Board authorized
expenses of the General Purpose Fund - GPFund.
The Ministry Finance Team is not functioning well
The financial record keeping is not good. Such info is not
timely nor is it understood by those who should know.
The GPFund. is borrowing from non discretionary funds
(especially donor designated Special Purpose Funds
SPFunds) in order to meet expenses.
There are few finance savvy people on the Board of Leadership
Staff members are not getting paid timely
The rent (or mortgage payment) is behind
The withheld payroll taxes are not paid timely
Unpaid bills are 60 to 90 days old
Perhaps operations are being funded by sale of assets
The Ministry "Mover & Shaker" (often a Pastor) has little expertise
in Ministry Finance matters.
If you have too many "red" or "yellow" Flagable items above here is a possible solution.
You utilize the eFINFAX accounting system to "Control your Spending" as discussed when you Go Here . It is a "PRIORITY" BUXBOX Receipts and Disbursements accounting method where money is placed into BUXBOXES and you "SPEND ONLY" when the applicable prioritized BUXBOX has a balance, etc. Of course, this "PRIORITY" BUXBOX system can be operated by someone locally or via the help of a remote HELPER. Please Go Here and discover more details.
04 - Automatic direct deposit of Net Pay (03)
As pointed out when you Click Here, I am an advocate of having the net pay of your staff go automatically to their Bank Account. The reasons include: No check to process; save costs of printing; save cost of checks; save check distribution/processing costs; save overall logistics re paper handling and/or processing; you do not have to get a piece of paper to the staffer; Staffer does not have to get a piece of paper/check to their bank; encourages all Staffer money going to their bank -- they do not cash checks etc. The staffer gets a hard copy of their pay details but this process is an overall savings to both the Ministry and each Staffer-Employee. I understand that some Ministries even charge the Staffer-Employee an administrative fee, if they work some 30 to 40 hr a week and they choose to NOT allow you to make an automatic deposit of their net pay.
Below is a recent slightly edited dialog within a Forum (let me know if you want details about this Forum) on this topic.
Onliner #1: Do any of you that have the automatic deposit of payroll require it?
Onliner #2: No, it's optional. Very few opt for a check.
Onliner #3: Yes, we require it of everyone who draws a paycheck.
Onliner #4: We require automatic deposit for all employees. It is not an option because of our software requirements.
Onliner #5: It is optional for us. Most folks take advantage of it. I believe that some of our employees (especially nursery workers) don't have a checking account.
Onliner #6: Yes ... when approaching our staff, it was presented as a "go" vs. "no go" to automatic payroll deposit ... to be determined based on a majority vote. For business office efficiency we did not want to have to print some checks and not others.
Onliner #7: Yes, we require it -- we only make exceptions for the first payroll or two if the employee is having trouble establishing a bank account
Onliner #8: Yes, we pay all employees by electronic deposit and have since about the year 2000. We do payroll once per month (25th). Our staff would not want to go back to paper checks and nobody has any problem with being paid once a month. Both reduce the workload for the finance office. Monthly payroll makes it easier to plan cash flow needs, making tax deposits and reconciling quarterly payroll tax forms.
Onliner #9: We would love to require it, it would be so much easier to have every one on the same process. However, Our State doesn't allow private employers to make it mandatory, except, ironically, for their governmental employers. You might check with your state's Department of Labor before requiring your employees to participate.
Onliner #10: It is required for all W-2 employees.
Onliner #11: We have most of our staff set up on automatic payroll deposit, but do not require it. I understood we are not legally able to require direct deposit. Anyone else know if there is a legal concern in requiring direct deposit?
Onliner #12: I am in agreement with comment above. It has been my understanding that you cannot require your employees to participate in Auto Deposit.
Onliner #13: In our state we must pay at least twice a month, and cannot require direct deposits. We make paychecks available in the Business Office after 3:00 p.m. on paydays. Those with direct deposits receive their pay advices at least one day earlier, often two. This provides enough incentives that nearly everyone uses and really appreciates direct deposit, even our student workers.
Onliner #14: According to our state's Department of Labor web site, any employer can require direct deposit of all employees as long as any fees associated with that process by the employee does not bring his/her pay below minimum wage. Of course, that only applies to churches in this state.
Onliner #15: The question that comes up is that we require two signatures on all checks at this time (the church treasurer -a volunteer- and myself). How do you all still maintain this checks and balances when using direct deposit?
Onliner #16: Keep a second person involved on this and any type of Online Payment, but change your process. The person who gets a copy of the statement checks online transactions against a copy of the payroll summary.
Onliner #17: We have 95% of our employees on direct deposit, but we do not require that you be on direct deposit.
05 - MIFI --- M)ost I)mportant F)inancial I)ssues --- (7)
I trust that you find following dialog of value,
You recommend that we concentrate on the important finance matters before us as a Ministry. Please elaborate, Jim.
Recently my wife wrote me a note; the words in the note contained 'i's and 't's. But, since I knew exactly her frame of reference, she did not worry about 'dotting' the 'i's or 'crossing' the 't's. My MFTeam analogy, Pat, is that sometimes we get lost in all of our financial report numbers and statistics (dotting the ;'i's and crossing the 't's) and we do NOT concentrate on the important 'stuff' they are telling us.
I agree, Jim, as a MFTeamate, I want to use these numbers as 'fodder' for making timely and good Ministry decisions. I believe I know what you mean, but remind me once again the use of the term "MIFI".
OK, MIFI stands for M)ost I)mportant F)inancial I)ssues in the life of the Ministry. It is imperative that the MFTeam concentrate on these MIFIs and not get side-tracked by the least important.
I hear you, Jim ..... and I agree. Please help me as a Ministry leader to do this. Please remind me again, from your perspective, just what are the major responsibilities of our MFTeam?
An excellent place for the MFTeam to start --- their responsibilities include at least the following:
Financial information MUST be timely and understood; MFTeamates must know appropriate Ministry Finance activity and status history in order to make rightful decisions. Much of this is accomplished by making use of efficient computer finance systems and/or tools. Please link to Sample Financial Statements. MFTeam meetings MUST contribute to effective Finance Communications. Prepare in advance; insist that finance issues be forthright, and that decisions are well documented and clearly understood.
Be certain that all MFTeam members understand and accept their specific finance responsibilities. Be sure nothing 'falls between the cracks'. Please link to Tasks for a laundry list of most of such tasks.
Finance Policies and/or Procedures
I believe that the MFTeam must conclude and write down Financial Policies. By the way, I like to define a "policy" by what you 'always do' or by what you 'never do', within a certain set of circumstances. When appropriate, such matters can be preceded by some written perspective or philosophy on the issue under consideration ----- hopefully all such policies end up in a 'Finance Policy Manual'. Please link to Sample Financial Policies for a means to initialize such an endeavor.
Operate within your Income
The MFTeam must see that Ministry Income is obtained in order to meet the necessary Ministry Expenditures. Then see that each Ministry "Dollar Accountability Group" lives within its income. Please link to a Sample Actual to Budget report. Please go to 0010 for more Ministry Budget info.
Keep financial promises with staff and vendors; plus have and maintain proper financial relationship with Ministry constituents. Know and honor the required IRS and other governmental requirements.
Provide Resource Enhancement/Safety
Fiscal resources should be protected. Establish and maintain appropriate financial internal controls. See that residual fiscal assets are prudently utilized and invested. Use credit advisedly, pay your debts as agreed.
Aha, if our MFTeam is going to be useful, it looks like we have our work cut out for us!!!
Thats true, but be sure and delegate as much as possible of the 'grunt work' and 'transaction processing effort' to the staff. Your MFTeam Chairman should learn to know what is most important. Further, in my judgment, your MFTeam minutes should clearly state and rank your MIFIs. Go to MFTeam meeting time allocation for an analysis that might assist you toward spending quality MIFI time at each of your meetings. Encourage your Board of Leadership to have periodic "Long Range Planning" sessions so you can integrate related financial aspects.
Thank you, Jim. Like you, I have attended Board/Committee meetings where we seemed to have a 'micro-manage' mindset and often did NOT view the current and anticipated "big picture". I trust we can use some of this material to 'jump start' our meetings so we appropriately deal with our MIFIs.
06 - Click below for potentially helpful Online Links for JIMs JRNL readers:
>> Who Spends the Church's Money
>> Records that need to be kept
>> ECFA - 3rd Qtr Publication
>> Recent Issue of "Christian Computer Magazine"
07 - Monthly Editorial - "For What It is Worth" as rendered this month- (10) Next Generation of Future Leaders
08 - Current "Ministry Finance" Truism
Below is one of my Ministry Finance precepts/beliefs/principles, or "rules of thumb". Please go to 0069 for a complete TRUISMS list.
All Christian entities (People and Ministries) must handle money - it is an essential part of our lives here on this earth. When it comes to stewardship of physical resources, it seems that money has the highest profile, We hope that you manage your finances via the appropriate use of Banks plus Debit or Credit Cards (Plastic) that you pay off weekly. You mostly buy via the use of Plastic because you then have a degree of security plus you have a written documentation --- which you do not have when you use "Green Stuff."
09 - Prayerful Thots :
Lord, "I need to be weaned off my addiction to the shallow pleasures of this world with the deep joy of knowing and meaningfully serving You." Help, Lord !!
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