"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 December 2008 FILE: 0212-08/jrnl
(1) YELLOW AND RED LIGHTS as to Ministry Finances (1)
Maybe you can identify with this: our friend knew where to go to some sort of Church related off campus business meeting so we were trailing him. We frequently tease him because he went through the last part of a "YELLOW LIGHT" and left us behind - not good (we were late as is) because he had to stop and wait for us anyway. Let's face it, we all too frequently learn about bad things when people are careless about "YELLOW LIGHTs" or they do NOT stop at "RED LIGHTs."
Please put such matters within context of your leaders identifying and caring for "YELLOW LIGHT" "Ministry's Finance" situations before they turn into a "RED LIGHT" calamity. Be sure everyone understands the issues and terms used, but we suggest that during your annual session with your CPA-Auditor that each one in attendance independently fill out and compare their grades to that of the CPA-Auditor. Be sure any poor grades of the CPA-Auditor are understood by all.
Self-Examination matters are covered within the following links:
- Self Evaluation re Ministry Finance Issues http://www.bcidot.org/all/0005-01.html
Self Fiscal Exam Grades http://www.bcidot.org/all/0075-01.html
Self Examination re Ministry Finances http://www.bcidot.org/fwi/0901-03.html
Fiscal Fitness Exam http://www.bcidot.org/hlp/0129-06.html
Evaluation of Ministry Finance Concerns http://www.bcidot.org/hlp/0025-01.html
Accounting System Essentials http://www.bcidot.org/all/0031-77.html
Below are links to Financial Exam by type of Ministries Information:
Plus this Financial Exam & Grade Reports for Christian Family Units http://www.bcidot.org/env/BookkeepingSelfExam.html
It is our prayer that these Self-Examination tools help you and your Ministry timely identify and care for such identified "YELLOW LIGHTs" and maybe even "RED LIGHTs" matters.
(2) A Ministry Savvy Tax Preparer shares some common Clergy Tax errors (02)
Since I am retired, I do NOT do any Personal Income Tax returns, not only might you find these link contents of value when you CLICK HERE , but I thought you would appreciate what this Ministry Savvy Tax Preparer shared with me:
"Another tax season has come and gone and I wanted to share some of the things that came across my desk that have to do with incorrect reporting of Ministry or Clergy income. Please see the specifics below:
1) Minister W-2's which had FICA (Social Security) and Medicare withholdings. Ministers are ALWAYS considered self employed for Social Security purposes and should NEVER have FICA (Social Security) and Medicare withheld. Ministers pay their Social Security and Medicare tax through filing their tax return and paying Self Employment tax.
2) Minister had W-2 issued PLUS a 1099 which contained income from auto allowance and bonus - both from the same church where he was Pastor. A minister that works for a church is a common law employee for all purposes except Social Security. Therefore, income and allowances ideally should be reported on a W-2 and not on a 1099.
3) Minister's housing allowance was included in Box 1 of the W-2, taxable wages. Fortunately, this one was caught in time so that an amended tax return could be filed and the Minister got some money back. I wonder how many other Ministers incorrectly paid income tax on their Housing Allowance?
4) Minister was paid for half of his Self Employment tax by the Church. But the Church did not include this payment in the Minister's taxable wages. Almost anytime a Minister is provided compensation (except housing allowance and reimbursement) it is taxable income.
Well, those are some of the things which may be of interest to Churches and their Finance Committees. I spent considerable time providing information to Churches so they could get their reporting in order and would be glad to help anyone who has a question."
(3) Committee Meetings and the use of Colored Paper (03)
The use of colored paper hand-outs at committee meetings is very helpful.
For example, recently I was part of a committee meeting where we were reviewing the recommendations of a consultant. We were looking at a lot of papers; i.e., our written policies, copies of Email, our documents, this person's documents, suggested written methods and procedures, etc. We found that a colored paper group on the same topic was extremely helpful as the seven of us referred to various documents, etc. You know: "Within the yellow colored paper group, let's talk about so and so on page xx", etc.
(4) Keeping Current with Ministry Staff and Financial Policies & Procedures: (3)
Having up-to-date written Staff and Financial Policy manuals are quite important for a Ministry --- as you know things change and such things need to be documented. One way of doing this is to have them in a format like that found in the Church Sample Financial Policy manual found at 5005 and you re-affirm a section of such a document at virtually every Finance Committee meeting. Or you would read out loud the written section and you would ask if it is currently relevant, or if the Ministry is complying with the policy, and proceed accordingly. It usually takes very little time and attention of the Committee as you keep things current and, of course, it reminds the group about the whole issue, etc.
(5) Weekly Plastic Payment (7)
Let's suppose that you are just now attempting to follow the TRUISM that you pay no Credit Card charges (Interest Expense) since you monthly pay off the total due to your Plastic or Credit Card company. At least in the beginning of this process, you might find that you are more comfortable doing this weekly via an Online Payment rather than monthly, etc. Incidentally, you might find of interest more info along these lines when you GO HERE. Factors in doing this very fine process include at least the following:
a> You make use of only the weekly Buffer - Float Factor described when you CLICK HERE
b> You do not have to establish a Credit Card account within your COMPASS (Internet and QBs accounting system) and weekly post each purchase thereto since -
c> You go Online each week and print out a hard copy of your unpaid Credit Card transactions and the unpaid total.
d> Hopefully you have retained all of your Credit Card purchase slips and you attach them to this hard copy. If such slips are lost (as we all know, they are so small and they are so easily mis-placed, etc.) and since it has only been a week, you likely can verify the purchase even though you can not locate the signed copy etc.
e> Each Wednesday of the week, you process a weekly Online payment (check equivalent) to the Credit Card Company as you pay off what is due to them. See below as to what happens on each Thursday.
f> You distribute the amount of each purchase by Credit Card into the applicable BuxBox (per your Chart of Accounts as shown by QBs (QuickBooks) Equity Account) and possibly to QBs Class Account process for tax deductible items.
g> This includes posting the purchase date and vendor name in the Memo area of the QBs Bill Payment system for future buying reference and information.
h> The Online Payment System shows this transaction as the equivalent to a distributed weekly check within your Online Bank Statement - probably on that Wednesday or no later than the next day, or Thursday.
i> Each Thursday you go to your Online Bank Statement and make sure that this distributed weekly payment is there.
j> So both the above Online Check and other checks that show up within your Online Bank Statement get into your COMPASS (Internet and QBs accounting system)
k> And you render the applicable CHART (Financial Status and Activity reports) so you know how much you can spend by pre-approved category (BuxBox) for the upcoming week.
m> Some Online Bank Statement systems (See www.eccu.org, for example) allow you to electronically transfer these transactions to your COMPASS (Internet and QBs accounting system). Then you simply reclassify the activity to the applicable categories, etc.
n> You might also find of value the Expenditure Category ID System etc found within the www.eccu.org Online Bank Statement system.
(6) Alternative Scenarios to a Purchase Order (P.O.) Method (6)
Which of the following Scenarios do you think best accomplishes a Church's objective of NOT having the burden (quite awkward in a non business setting like Ministries) of a Purchase Order (P.O.) process and yet control its spending?
The Authorized Buyer gets a weekly “Actual to Budget” report from the Ministry Bookkeeper so that this person knows if there is money budgeted for said purpose. Let's say that there is money in the budget, so the Authorized Buyer goes to the Bible/Book Store (or other applicable vendor) and charges their purchase to the Church’s “pay monthly charge account” at that store. Then the Authorized Buyer provides appropriate documentation to the bookkeeper so this purchase is included in the next “Actual to Budget” report. Authorized Buyer does this throughout the month at some 4 retail stores that allow authorized church charges during the month. Bookkeeper timely pays each of the four retail stores via their reconciled monthly statement
The party is a volunteer who gets verbal approval from the Authorized Buyer to make a purchase from their own resources (cash or credit card) up to $80.00. PLEASE NOTE --- this is Authorized Buyer’s decision, not the volunteer's decision. This is the amount for such transactions per the Church’s Finance Policy. See sample at 5005. This transaction is approved by the Authorized Buyer who processes a check request (with related documentation) so that the bookkeeper routinely reimburses the volunteer. Of course, this transaction is reflected in the next “Actual to Budget” report. Approved petty cash transactions also flow through this means. Usually a petty cash purchase is for some $10.00 or less.
The preferred process is that a volunteer needs to buy something --- so this person goes to the Authorized Buyer who determines from the “Actual to Budget" report that this is OK. Authorized Buyers have a Corporate Credit Card (like VISA or Master Card) that includes their name. The Authorized Buyer fills out and signs the appropriate "Credit Card identity Form" that the volunteer can provide the vendor as it includes the statement that it is OK to use my corporate Credit Card to make this purchase, etc. The volunteer takes the Form and the Credit Card to the Vendor and makes the purchase. The volunteer returns the Plastic and the purchase docs to the Authorized Buyer who codes and OKs it and processes it on to the bookkeeper for applicable “Actual to Budget” reporting.. Like in the above Scenario, this happens at 4 different retail stores. The bookkeeper reconciles and timely pays the one Credit Card monthly statements -- please note the need to write only one check for all of these purchases from the 4 different vendors.
(7) Christian Believer (BLVR) and Personal Finance Philosophies/Policies (07)
The objective here is to help the BLVR conclude and write down their "Righteous Personal Finance - RPFin" philosophy and related policies. We recommend that the husband and wife do this exercise separately and later compare. Please go HERE for more RPFin resources. By the way, I like to define a "philosophy" as 'what you believe'; and "policy" by what you 'always do', or by what you 'never do', within a certain set of circumstances.
The ideal is for you to analyze your understanding of Scripture and conclude the matters that follow. By following this format, you can document your "Righteous Personal Finance" philosophies/policies by the indicated answers.
Do you Agree:
T O P I C S/ I S S U ES
I believe that the Lord owns
everything ... I am simply temporarily
in charge of certain resources like
money and of what money can buy.
Much of my money involvement
is based on my life style. I want
my life style to honor Him; and I
will keep my financial promises.
My earnings are a provision
of the Lord and, as part of my
worship and thanksgiving, I want
to preferentially remit to my local
church in one of the following
1> A tenth (tithe) of my income
before any withheld taxes.
2> A tithe of my income after
taxes have been withheld.
3> I believe a tithe is only
a benchmark... And not the
11th commandment. I give
generously as unto the Lord.
I borrow money and pay
interest expense to buy investments
or acquire assets like real estate
I prudently use Plastic or
Credit Cards to make purchases;
1> I pay for these purchases
regularly so I do NOT pay PLASTIC
2> I sometimes pay Plastic
interest expense when I buy
equipment or other long
SAVINGS and/or INVESTMENTS:
I believe financial resources
should be prudently set aside
for a 'rainy day' and/or for an
appropriate purpose or event.
I have a specific strategy for
BUDGET: (Righteous Financial Plan)
As a manager/steward of
money, I need to prayerfully
plan ahead and determine what
money will be required; or I
need to have a formal budget.
Then as money comes in, I
need to use it within that context.
If you agree, then ....
1> I measure actual to
2> I measure actual to
3> I do not have a budget,
or a actual to budget plan, but
I will within the month.
I believe that I should
judiciously have insurance for
such things as health and
tangible holdings. I am
adequately doing that.
Using the financial resources
that belong to the Lord to gamble,
or get something for nothing,
is not good.
It is my responsibility to
see that my known assets (What
I own as a steward) are as safe as
possible. One security example
is that I use bank accounts and
handle as little cash as possible.
As I understand God's Word,
I am to pay my just taxes to the
applicable government authority and
comply with their regulations.
I am married and our
stewardship of money, and what
assets money can buy, is to what
degree a Husband and Wife team
effort. Please give your team an
"A to F" grade.
Click below for Potentially Helpful Online Links for JIMs JRNL Readers:
01 2009 Charitable Contributions Bulletin Inserts Tax, Donations, Giving, Deduction 02 Feeling the Financial Pinch -- What to Say to Supporters 03 Sommerville Non Profit Articles 04 IRS - Independent Contractor (Self-Employed) or Employee 05 Sommerville Sample Policies 06 Church Metrics
Current "Ministry Finance" Truism (2)
Below is one of my Ministry Finance precepts/beliefs/principles, or "rules of thumb". Please go to 0069 for complete TRUISMS list
The IRS allows a donor to "Tax Deduct" charged donations on the date the credit card is charged. In all other situations the Ministry must have the Donation in their possession (regardless of the date on the check, etc.) in order for it to be a "Tax Deduction."
Bible Verse and/or Prayerful Thot :
Lord, I am reminded that not too long ago we had a very special newborn in our family. It really rocks my socks to think of what Mary must have thought as she breast fed the very God and Savior of mankind. Wow !!!! Thank you, Lord Jesus, for the Christmas season time of the year and what you have done for me personally !!!!!
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.
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
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