"JIMs JRNL" Edition
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TO: Interested Onliners FROM: Jim Bramer, Auditor-CPA
RE: J I Ms J R N L for the month of February 2009 FILE: 0202-09/jrnl
(1) More Information about the eFINFAX System: (21)
From: Pat (A Small Ministry Founder):
When I read the content of Brad's dialog with Alex found HERE , I am not sure I understand what you want to accomplish via this eFINFAX system , Jim ---- please be more specific.
The purpose of this Web Page is to do the following:
Encourage/assist a Small Ministry in their use of applicable Internet resources
Include all transactions, or your Ministry is on the Accrual Basis of Accounting
Within the eFINFAX method/system as set forth as you to do your transaction processing/accounting
And reporting per the examples shown
So you have the needed complete weekly information
Plus perhaps do the desirable year end reporting from such resources
And be externally accountable/responsible via the outside Entity so described
Then, of course, I am interested in your personal perspective, Pat, of the envisioned usefulness of this system (with, of course, an Internet emphasis) which includes such features as the following:
The eFINFAX system has a weekly thrust.
The buying is mostly done via Credit Cards (Plastic)
As the unpaid Plastic balance is paid off or "zeroed out" weekly
The ATF (After the Fact) financial transactions are captured Online and
Downloaded directly to an older version of the QuickBooks (QBs) Pro software.
Reduce the need to originate transaction entries within QuickBooks (QBs) Pro
These external Bank (and any Plastic) balances and such balances within QBs are the same
Or there is no need for the usual Bank Reconciliation or Plastic Reconciliation process
The probable use of a remote Online "Finalizer" (Ideally a retired accountant volunteer)
Who ties all of this eFINFAX system together
And provides the weekly reports etc
And possibly does most of the needed fiscal year end effort, etc.
This helps a great deal, Jim ..... I understand it better now and can see how helpful it is for Ministries like ours who handle less than $500,000 per annum.
(2) Discussion about "Block Depreciation" at Fiscal Year End (22)
From: Fran (the Computer Bookkeeper/Accountant)
I understand, Jim, that we do NOT get involved with the non-cash "Depreciation Expense" in our General Fund accounting process during the year, but I am struggling to understand the "Deprecation Chart" you present when I Go Here and do my year end GAAP effort.
The column that stumps me is the "Accumulated Deprecation". Is it safe to assume that a figure like $82,955 is from prior years, and this year's "Depreciation Expense" is added to this total? I just want to be sure of things before I start shuffling things around. If I reorganize the assets on our Balance Sheet (i.e., lumping things together in categories instead of individual items), how would I go about this process?
This is understandable, Fran ---- I trust that the following example is helpful. Let's suppose the following:
>> The Church's year ends April 30, each year
>> As of 04-30-XXX7, or a year ago, there hypothetically existed the following self balancing accounts -- or this could be a set of books by itself or shown as Memo accounts as set forth when you Click Here. The Land Building & Equipment - (LB&E) accounts appear below:
Land $ 25,000
Building - 20 yr life 234,877
Equipment - 5 yr life 53,798
Equipment - 10 yr life 85,735
Total $ 399,410
Possible accumulated Depreciation thru
04-30-XXX7 (using the old way of computing
annual Depreciation - which you would
NOT go back and change, etc.) $ 82,955
LB&E Equity as of 04-30-XXX7 $ 316,455
>> You will notice that I have NOT reduced the above $316,455 LB&E Equity as of 04-30-XXX7 by including any Mortgage or any type of property liability in this example. Such matters can be covered at another time.
>> Let's further suppose the following during the subsequent year that ended 04-30-XXX8.
The GPFund acquired $3,877 " Equipment - 10 Yr" stuff ---- you used the three pronged method by adding it to authorized GPFund Budget expenditure item plus increasing (debit) the above - "Equipment - 10 yr life" that started with $85,735 account total -- as well as increasing (a Credit) a new LB&E acct that we will call "LB&E Annual Changes" by this $3,877.
The Board also authorized a SPFund project in order to buy a new piano for $9,566 that was added to the "Equipment - 5 yr life" account. This, of course, was charged to this SPFund account and ate up all of its balance. When you paid for it you also used the three pronged method by adding $9,566 (debit) to the "Equipment - 5 yr life " account as well as increasing (credit) the "LB&E Annual Changes" account by $9,566.
The Church also threw away a "10 Yr piece of Equipment" item that cost $500 and had been depreciated for a total $300. Of course, you removed (credit) the $500 from the "Equipment - 10 yr" account - plus removed (debit) $300 from the "Possible accumulated Depr thru 04-30-XXX7" -- and , of course, added $200 (debit) to the "LB&E Annual Changes" account
Finally the Church sold the old piano for $1,000 and you placed this into a Board Discretionary SPFund . It was in the "Equipment - 10 Yr" account for $6,000 and there was $4,500 of accumulated depreciation in the "Possible accumulated Depreciation thru 04-30-XXX7" account that pertained to this old piano. The $1,000 went into the "LB&E Annual Changes" account as a credit; then
1> You removed the $6,000 from the "Equipment - 10 Yr account" (a credit) ---
2> You removed the accumulated Depreciation by a debit of $4,500 to the "Possible accumulated Depreciation thru 04-30-XXX7" account --
3> Leaving a $1,500 debit entry to the "LB&E Annual Changes" account.
>> If interested, please ask me at Jim@bcidot.org for a sample of these General Ledger tranx.
>> Using the Block Depreciation method described when you Go Here shows an annual "Depreciation Expense" for the year ending 04-30-XXX8 of $32,728 as computed below.
Building - 20 yr life 234,877 5% = $11,744
Equipment - 5 yr life 63,364 20% = $12,673
Equipment - 10 yr life 83,112 10% = $ 8,311
Total 381,353 32.728
>> Of course, the above $32,728 would be debited to "Depreciation Expense" account and Credited to "Accumulated Depreciation" account within the above set of books
>> The above changes during the year ended 04-30-XXX8 went into the "Annual LB&E Changes" account and the details would be fodder for annual/year end reporting and would ultimately be closed out to the "LB&E Equity" account. At the appropriate time we can discuss how to handle the $1,000 appearing in the "Due from SPFund" account.
Very helpful, Jim.-- thank you -- I will be in touch if I have further questions.
(3) Information about the "Virtual Debt Servicing" process (23)
FR: LEE (the Board Treasurer) -
To remind you, Jim, we are a church with an annual operating budget of well about $750,000. Our present facilities are paid for, but we need more room and are gearing up for a new building construction in the near future.
Thank you for providing information about Church Debt at 0126. We anticipate getting a mortgage for part of the costs as we expect to not only make monthly payments of Principal and Interest, but also make payments on the Principal only as Building Fund designated gifts come in, etc. Via a Financial Stewardship campaign we will be asking our people to make 'over and above' donations to this special Building Fund project. Do you have any finance and accounting observations?
FR: JIM -
That's neat, Lee -- it sounds like the Church is healthy since you need more room. Let me place this hypothetical information before us -- the Church's fiscal year flows from May 1st to the following April 30th
Anticipated new Facility costs
Construction costs from available money
accumulated within the Building
Amount to finance via a mortgage
Possible monthly mortgage payment
of principal and interest expense
FR: LEE -
Our actual numbers, of course, are quite different, but that's OK as they should serve our purposes here.
FR: JIM -
For the applicable period of time, the church should take an approach of what I call VIRTUAL DEBT SERVICING. I define this as:
The Church increases its General Purpose Fund budget to include the amount of anticipated Mortgage payments (Debt Servicing) that it will need to borrow in order to complete its Building/Facility Construction project. This Board Discretionary money is transferred into your own Building Fund. We take these steps because the weekly giving must ultimately be enough for such an actual Debt Service payment.
Initial Sample Scenario Considerations:
1> The May xxx7 through April xxx8 budget includes $48,000
($4,000 times 12) as the VIRTUAL DEBT SERVICING
2> In May xxx7 and every month thereafter the
3> Church writes a check to itself for $4,000 and
4> Places it in the Building Fund
FR: LEE -
It may take a while before the weekly offerings to the General Purpose Fund are enough to fund the Monthly VIRTUAL DEBT SERVICING amount. What do we do then?
FR: JIM -
The leadership needs to monitor this very closely since the long term goal is to make the actual Debt Service payment from the weekly giving to the General Purpose Fund. Plus be able to reduce the amount borrowed by the donations designated for the Building Fund.
However, in the initial stages of the VIRTUAL DEBT SERVICING effort the General Purpose Fund might run a deficit. See Sample Year End Scenario below:
General Purpose Fund:
Total Annual Income
VIRTUAL DEBT SERVICE
All other approved
Total Annual Expenditures
Year End (Deficit)
In this case, the above $12,752 would come back from the Building Fund, since there really is no construction, etc at this time, and eliminate the General Purpose Fund deficit. Why --- because the $48,000 was Board Discretionary inter-fund transfers (the Board made this transfer voluntarily) and now it can be sent back, etc.
If the $12,752 deficit amount comes closer to $48,000, the Church obviously has problems with any type of actual future Debt Servicing by the General Purpose Fund. There may need to be cuts in future Operation costs.
FR: LEE -
What difference would there be if we no longer will be spending some $3,000 monthly ($36,000 for the year) for Facility or Building Rental?
FR: JIM -
The major difference would be the relationship between the annual $36,000 and the VIRTUAL DEBT SERVICING annual amount of $48,000. Or the Church would need to annually fund as VIRTUAL DEBT SERVICING within the General Fund only the difference between $48,000 and $36,000, or $12,000. CAUTION: Be aware of some additional Facility Operating costs that the Church will also have because of your own Building that you may not have had at the place you were renting..
FR: LEE -
Thanks, Jim -----I think I 'get the message'. I will take all of this up with our Church leadership and probably be get back to you with further questions.
(4) Endowments at a Ministry (24)
In order to get a grasp of Endowments, please CLICK HERE and HERE to obtain some perspective from these link contents. When a Ministry has Endowments it involves at least the following:
- They are financial resources that can not be spent now ..... they are "Nest Eggs."
- They are prudently invested so that a yield is available for understood Ministry operational purposes.
- Some Endowment resources come from either alive or deceased Donors and must be managed and the yield used as requested by the Donor.
- Quasi Endowments come from Board discretionary financial resources.
- The "nest egg," or Endowment corpus, or principal, is sometimes invested in areas that often substantially change in value ---- be prudent.
One time I was at a board meeting where Endowment topics were discussed --- especially voluntary Quasi-Endowment issues. One savvy Ministry conscious business man board member voiced some "philosophical" concerns. This person's thinking included:
- This Ministry is attempting to meet urgent needs and there never seems to be enough money to do the job.
- The Lord's return is imminent --- we must use every resource we now have to reach as many unsaved now as possible. We need to have a "now" ministry mentality and not dwell on the future.
- So all Board discretionary monies should be spent now for ongoing Ministry purposes and not "nest egged".
Church and non local member Ministries like Schools, Mission Agencies and Camps are not alike. Their Ministry targets are different; some are more oriented to discipling/training the saved, while others are more pointed to evangelizing the lost. Obviously, such differences will contribute to your philosophy on this topic as Ministry funding takes place.
Some of you have "earned income,", or non donation, aspects of your Ministry. It is entirely possible that such board discretionary "net earnings" can be utilized to fund applicable Quasi-Endowments.
(5) "SPENDING CONTROLS" and Record Keeping Issues: (25)
One of our objectives is to convince you Christ Centered Entities (Small Christian Ministries and Christian Family Units) to have God enabling "SPENDING CONTROLS" --- or it is our goal that you can answer "YES" to these questions:
01> Do you know if you have money to righteously spend in the upcoming week for said pre- approved purposes?
02> Do you do a minimum amount of buying with Cash and a maximum amount of prudent buying via Plastic?
03> Do you go online and pay off you unpaid Plastic Balance during the month (weekly or semi-monthly) ?
04> Have you maintained meaningful weekly financial records and reports in order to CONTROL YOUR SPENDING?
Finance record keeping is a fundamental need ..... how can you be a good steward if you do not know the essential up-to-date financial facts. The emphasis is current available status --- not historical by type of expense data per se.
A way to do this is to use the BuxBox method/system or structure which enables you to buy only if you have a balance in such a BuxBox account as demonstrated via the use of the eFINFAX accounting method.. Thrust --- the essential info is NOT the amount of money in the Banks but the available balance in a specific pre-approved BuxBox
05> As a Computer/Internet user, are you making full use of Contemporary Resources, etc to CONTROL YOUR SPENDING?
Using software like older versions of QuickBooks, per the full use of a Laptop - or desktop computer; maybe have web based approach; make full use of paying repetitive bills Online and making full use of automatic downloading to your software of Bank and Plastic transactions.
06> Are you making maximum use of remote HOMERs to assist you to answer "YES" to the preceding questions?
(6) What are "FUNCTIONAL EXPENSES" at Non Profit Organizations (NPOs) or Ministries (26)
The intent of Functional Expense categories is to inform the reader of Non Profit Organization (NPO) 's "YEAR END" reports of how much money was spent for direct Program Expenses in carrying out its exempt purpose plus the two types of essential overhead costs of Management/General and the needed Fund Raising Some of my personal views within this context are as follows:
This is annual expense classifications as applicable to mostly "Publicly Supported" NPOs
Within the context of fiscal year end only requirements of EXTERNAL year end "General Accepted Account Principles GAAP "
Such Functional Expense information is also needed for applicable annual filing to the IRS and to their State.
I do NOT believe that Churches need to provide annual Functional Expense information. Even if the Auditor finds it necessary to state in the their language something like the following: "Everything is okay except for the reporting of functional accounting expenses in the areas of Program, Management/General and Fund Raising." Ask me at Jim@bcidot.org for more reasons for my position, etc.
Further, Since Ministry Fund Accounting is complicated enough, I believe that a Ministry should NOT have a "during the year" Functional Expense structure as your Ministry Fund Accounting system concentrates on timely providing the essential finance information set forth when you GO HERE
Please contact me at Jim@bcidot.org for more written material on this overall subject.
Helpful Declarations for a Christian
Seven day Prayer Cycle for your MFTeam; When a Christian shuns fellowship with other Christians, the devil smiles. When he stops studying the Bible, the devil laughs. When he stops praying, the devil shouts for joy. -- Corrie Ten Boom
Click below for Potentially Helpful Online Links for JIMs JRNL Readers: (1)
01 College President's Statement about Our Economic Times 02 Church Administration Resources and helps 03 ECCU's Publication re Audits 04 New IRS Withholding Tables 05 QuickBooks and Internal Controls 06 Internal Controls Can Keep Cash Secure 07 Write Things Down
Current "Ministry Finance" Truism (2)
Make full use of the Online Internet means to weekly get copies of your Bank Statements and your Credit Card Statements . Then you do NOT wait until the end of the month to do your Bank and Credit Card reconciliations --- or we make sure weekly that your records agree with these external sources.
Prayerful Thots (3):
What about this scenario, Lord --- "In an orchestra a violinist will not go around checking what a trombonist is playing, nor will an oboist worry about whether a trumpeter will come in on time. That is the business of the conductor. These people play their parts and the conductor puts it all together." My prayer, Lord Jesus, is that I will follow Your "conducting." For example, Lord, please provide me with wisdom and understanding about the best way to provide for Searching on this www.bcidot.org web site as explained HERE.
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 9708 and 9709
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: April 20, 2011