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TO: Interested Onliners FROM: Jim Bramer, Auditor-CPA
RE: J I Ms J R N L for the month of March 2009 FILE: 0203-09/jrnl
(1) Ministry Finance "Ten Commandments": (7)
Below are issues that all "Christ Centered Ministries" should address. If you have been around for a while, you no doubt will benefit from grading yourself via the following Ministry Finance "Ten Commandments" . What is your 'THOU SHALT" grade as the Ministry is to:
GRADE
01> Be fiscally accountable with integrity and righteousness - no deceptive secrets from those who should know
______
02> Be a good steward of financial and physical resources
______ 03> Live within income and/or budget constraints.
______ 04> Use debt prudently; pays bills on time; manages money well
05> Have good internal communication of fiscal status and operations as represented by timely and understood financial reports
______ 06> Establish and maintain financial policies; monitors adherence thereto
______ 07> Be financially credible
______
08> Properly handle restricted monies.
______
09> Have a good finance system that includes needed financial internal controls.
______
10> Be auditable by applicable entities.
______
Take every step possible to correct any poor grades above ---
(2) My sharing with a CPA who is a new "Chief Financial Officer - CFO" at a Ministry (3)
You are a very capable "Certified Public Accountant - CPA" professional ..... you obviously have training, experience and people skills from which to build. You do a good job of expressing yourself and getting your point across. Since you are new to the staff there, my prayer is that this memo, from this 'old codger' fellow CPA, will encourage you to function effectively as a Ministry "Chief Financial Officer - CFO" with even further professional excellence as unto the Lord.
You guessed it .. this memo has the same theme that we discussed recently ---- namely, that you discover how to be less of a financial "transaction processor" and more of one who trains and delegates plus one who functions as a "result of transactions interpreter."
My definition of a "Ministry CFO" is the Ministry staff person is one who views the Ministry's financial "big picture." An emphasis is for you to be the needed corporate financial planner as you evaluate the financial impact of the immediate and probable future plans of the Ministry. This also means that you make financial system conclusions as you design and implement methods re:a> Accounting system infrastructure;
b> Periodic and annual reporting of ministry finances
c> For those who should understand and make fiscal decisions;
d> Appropriate computerization of any of the foregoing.Another way of saying all this is that I encourage you to - - - -
>> Focus on being an instructor/trainer of less qualified people than yourself as they do the processor/historian tasks so you can zero in on being the professional that you are. The emphasis is to train/delegate others and develop ways to be sure that things are done the way you want them to be done, but not do them yourself. Believe me, most of the time it is NOT efficient to do it yourself and "make sure it is done 100% right." For example, if three people were following your instructions and doing it just 95% "right", think of how much more is getting done by all of you.
>> Concentrate on being both a Communicator and as well as an Interpreter ---- granted you need to do a portion of the work to intelligently be of service, but, in my view, the real professional value of serving as a Ministry CFO is for you to help others understand what has happened financially (past history) and the financial consequences of projected plans (probable future).
>> Exercise the fine art of "this financial info does not look quite right ... let's look into that more deeply"; thereby insuring the decision makers of reliable financial reports for wise judgment and conclusions .
>> Adhere to the following truism, or principle: "Enter a verified number once, then the system replicate it in the appropriate manner." Too often, I find that numbers are inefficiently entered, posted, transferred, combined and reported. Use the many fine tools and resources (primarily computer systems) to maximize this and other Truisms
>> Know about and utilize contemporary tools (especially computer systems) that reduce the amount of paper that is processed in accomplishing your job as a Ministry Finance practitioner.I wish you well as you serve Him !!
(3) Testing by the Lord about a Ministry's finances (5)
Believe it or not during these difficult economic times, I know of a Church who has more money than anticipated. Or their annual "General Fund" has substantially more than what was expected. My personal belief is that the Lord is testing this Church as to this overall matter. Do they set some of it aside for a rainy day and then spend it only on internal matters there at the Church ? Or do they manage and use such resources with the following in mind?
>> First, they righteously invest their "Cash Pool" in ways that please the Lord. Such ways not only include earning more Interest Income from Daily Interest Bearing Savings endeavors, but they place such money in what I call "Replicating" organizations who take such investments like this and then turn around and prudently loan it out to other Christ-Centered Ministries -- usually for facilities, etc. Click Here for some details.
>> Are there some local folk and their Ministries that need some realistic financial help during these hard times? Maybe some local sister Churches or Ministries need some one-time financial help, etc.
>> They carefully get more money to the servants who serve the Lord. I am not talking only about the Church's Pastors and the staff, but also their Missionaries and those who serve them.(4) Budget Issues - Historical vs Original Plan (6)
This has to do with a your Ministry's operating costs and the annual budget development -- you need perspective when you prepare the budget for the upcoming year. You should compare what has actually happened (it is historical, or it is what has been spent) and you do NOT use last year’s budget (or the amount you planned a year ago to spend for that time period) for comparative purposes. I was recently part of a group who, I believe, erroneously, emphasized last year's budget when developing next year's budget. My belief is that you should take such steps as the following:
01> Let's say that you have an April 30th fiscal year, so in March or April of 2008 (last year) you came up with this year's authorized annual budget, or you converted your approved corporate plans to dollars for the period May 2008 through April 2009. Let's say that the annual budget for the year to end April 30, 2009 was $510.000 .
02> Then during your fiscal year beginning May 1, 2008 your plans changed and you adjusted your authorized annual budget. These changes may have either increased or decreased the amount of your original annual budget of $510,000 ($42,500 a month), but let's suppose that since your Income permitted it you changed as of November 2008 ($43,333 a month, or the annual budget for the May 1, 2008 thru April 30, 2009 was changed to $515,000.
03> Then, of course, history will show below that you have actually spent even a different amount than the budget approval amount in Step 02> above. Please note the following "11 plus 1" process in steps 04> and 05> that follow.
04> So you go to your March 31, 2009 General Fund "Income Statement" and discover that you have actually spent during this past 11 months the amount of $457,500 (see the detail below).
05> Then you estimate what will be spent during the one month of April 2009, or during the last month of this fiscal year. In doing this, you recognize that such expenditures during this month may be abnormal because, since your income and authorizations allows it, you are likely to buy more this last month of the fiscal year than normal. Let's suppose that you come up $47,500 for the estimated April 2009 only expenses; or you add $457,500 from the step 04 above (11 months of actual) to this $ 47.500 (1 month of estimated costs) and come up with a total of $505,000, or the twelve months of anticipated actual expenses for the year to end April 30, 2009. You will remember that I reference this as the "11 plus 1" process.
06> We go through the annual budget process and you plan to spend $575,000 for the new fiscal year beginning May 1, 2009 and ending April 30, 2010, Of course, it is important for you to know how these anticipated expenditures in 05> above compare to the previous year. So you compare the "11 plus 1" amount of $505,000 to the new year's Budget total of $575,000 and you come up with an increase of $60,000, or a percentage increase of 12%.
07> As you can see this planned increase percentage of 12% (per this "11 plus 1" 06> information above) is different than the comparison to the percentage of 14% coming from the planned information of the past year that comes from the 02> above.Again, while comparing revised annual budget amount of $515,000 in 02> above might be of interest, I believe the comparison to the "11 plus 1" amount of $505,000 in 06> above is more contemporarily significant and meaningful.
Planned or
Annual
History or
Annual
Month Nbr
Month Name
Budgeted
total
Actual
total
1
May 08
$ 42,500.00
$ 40,000.00
2
Jun
$ 42,500.00
$ 39,600.00
3
Jul
$ 42,500.00
$ 40,820.00
4
Aug
$ 42,500.00
$ 40,000.00
5
Sep
$ 42,500.00
$ 39,500.00
6
Oct
$ 42,500.00
$ 41,800.00
7
Nov
$ 43,331.00
$ 43,980.00
8
Dec 08
$ 43,333.00
$ 41,650.00
9
Jan 09
$ 43,333.00
$ 42,650.00
10
Feb
$ 43,333.00
$ 44,000.00
11
Mar
$ 43,333.00
$ 43,500.00
12
Apr 09
$ 43,337.00
History Sub Total
$ 457,500.00
12
Projected during Apr 09
$ 47,500.00
Annual Total
$ 515,000.00
$ 505,000.00
New Budget May 09
thru April 10
$ 575,000.00
$ 575,000.00
Dollar increase
$ 60,000.00
$ 70,000.00
New Budget's increase
-- to last yr's budget
12%
-- to Last yr's Actual
14%
PREMISE: Base your future plans on previous experiences and not on previous plans
(5) Alternative Scenarios to a Purchase Order (P.O.) System (4)
Which of the following scenarios do you think best accomplishes a Church's objective of not having the burden of a Purchase Order (P.O.) system and yet control your spending?
SCENARIO #1
The Authorized Buyer weekly gets a “Actual to Budget” report from the Ministry's Bookkeeper so that s/he knows if there is money available for applicable buying.
Let's say that there is money to spend, so the Authorized Buyer goes to the Bible/Book Store (or other applicable vendor) and charges their purchase to the Church’s “pay monthly balance account” at that vendor. Then the Authorized Buyer provides appropriate documentation to the Bookkeeper so this purchase is included in the next “Actual to Budget” report. This Authorized Buyer does this throughout the month at some four different vendors that allow authorized church charges during the month. Bookkeeper timely pays each of these four vendors based on their reconciled monthly statement.SCENARIO #2
The buyer 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 $100.00. PLEASE NOTE --- this is the Authorized Buyer’s decision, not the volunteers. This is the maximum amount by volunteers using their own resources for such purposes 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 (some volunteers consider this one of their donations, or the Bookkeeper writes a check to the Church and it is processed next week like other donations, etc). 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.
SCENARIO #3
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. Most Authorized Buyers have a Corporate Credit 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 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 Credit Card monthly statements -- please note that the bookkeeper does NOT has to write a number of checks to different vendors, or only one check is written to the Credit Card Company for all of these purchases.
(6) Policy or Administrative Manuals (8)
Each Ministry should have corporate administrative manuals. These could be a three-ring binder kept in the corporate office by the Chief Executive Officer (CEO) and include such material as:
ORGANIZATIONAL MATERIAL
By-laws; organizational structure; religious affiliation, if applicable; committee (standing or special); constitution; current board members and officers; CEO's scope of responsibility, clarity of who handles what - CEO or board,
MINUTES
Copies of board and committee minutes for at least the most current 12 months or year.
DECLARATIONS OR STATEMENTS
Statement of purpose; statement of fund-raising philosophy Doctrinal statement or statement of faith, etc.
PLANS AND/OR CALENDAR
Board, committee and staff goal sheets; annual calendar showing usual annual events, etc; immediate plans.
POLICIES
Financial policies covering at least such items as: fundraising, latest budget, methods of expense controls. Personnel policies to include such items as: position or ministry descriptions, organizational chart; hiring/firing staff reviews, etc. Any policies peculiar to your organizational structure. Please Click Here and Here for more information about financial policies at a Church.
I like the following definition of a policy:
" What you always do under the repetitive set of circumstances, or a standing plan of action which guides the making of decisions within normal limits toward reaching objectives."
All organizations, as do individuals, need clear purposes or objectives. Reaching purposes and/or objectives are the end result of our effort; polices are means of doing this. All such policies, regardless of your size, should be in writing and placed in a reference manual.
OLDER ORGANIZATIONS
If your organization has been in existence for some time, you already have developed some policies. These may be in someone's head and not written down, but your organization has some policies. Policies should be in writing and specifically authorized by the board; moreover, I recommend a method of cross reference in the policy manual to the specific dated board action.
POLICIES ARE IMPORTANT FOR THE FOLLOWING REASONS:
1. Encourages us to plan in advance; reduces "fire-fighting" or crisis management.
2. Provides continuity, focus and consistency; all with Board approval.
3. Greatly enhances the communication process.
4. Outlines norms, or standards, for the Staff and the Board - allowing objective evaluation.
5. Assists Staff in knowing what is normal and what is not that requires board attention -- thereby enhancing efficient management toward goals and objectives.R E C O M M E N D A T I O N
If you do not have your policies in one place and in writing, I suggest the following steps:
- - Understand the definition of a policy so you can recognize it.
- - Go through board and committees minutes for past 5 to 10 years.
- - Interview staff and Board Members for policies not written down.
- - Write down anything that meets above definition (e.g.; how to handle repetitive or routine issues) or anything which appears to need clarification.
- - Place in policy manual by categories.
- - Cross reference to board action (you may find some conflicting statements which need correction).
- - Obtain board action for your updated manual contents.
Committee Meetings do not have a good reputation -- this is especially true in a volunteer setting. With the "Finance Committee" in mind, make every effort to make meetings productive.
Perhaps the following will be of interest to you: DEFINITION: "A committee is a body that keep minutes and wastes hours". QUOTE --- "Of any of the Committees of a volunteer Ministry Board, an effective Finance Committee can make the most significant, and practical, contribution to the Ministry's overall health." AGENDA - this is essential to an effective meeting. It is a road map and often the glue to meaningful strategy and decisive action.BEFORE MEETING
Schedule such meetings during a specific day of the 2nd week of a month. This allows time for month end complete report completion. After reviewing the minutes of the previous meeting the leader should determine the current agenda -- and distribute it to members during the first week of the month. Be sure and leave time for thinking of the financial future; DO NOT spend all of your meeting time analyzing the past or present situation.
Members should come informed and prepared; so "likely asked questions" can be answered. Explanations of unusual fiscal activity will be needed. During the month, each member captures issues so the Leader can include it in the agenda. Be sure and include issues around Financial Policies; new ones may be needed or old ones may need updating. As much as practical, be provided with the following types of historical financial information: Cash/bank balances and who belongs thereto (Fund Balances); applicable aged listing of both money owed you and money you owe; and departmental operational/activity budgets, or budget equivalent data -- plus major budget deviation explanations.
Since it is "far" easier to articulate a proposed action before the meeting itself, members could come to the meeting with a proposed action in writing, subject to reading aloud, re-writing and ultimate finalization during the meeting.
Concentrate on declared Most Important Financial Issues - MIFIs. Please Click here and read about this topic.DURING MEETING
It is essential that each committee member:
·
Thoroughly understand the issues to be resolved;
·
Has
reliable financial information, or facts ;
·
Understands the financial data presented to them;
·
Fully
express their views;
·
Understand their issue assignments
Please resolve unclear financial policy applications. Sometimes staffers are unclear just how to handle a situation within existing financial polices and issues can unproductively be left "dangling," every agenda item is clearly either:
o Acted upon -- the issue has been resolved and assigned to someone for consummation
o Abandoned --- one reason; it is a non-issue
o Deferred -- an issue resolution is delayed -- not abandoned -- for reasons that include not having enough information for good decision-makingIssue resolution actions are captured in writing and repeated aloud during the meeting for clarity and finalization. Part of complete issue resolution might require final authorization by the Ministry's governing body. The meeting needs to have structure and the committee Chair moves it right along !!!!!
An ideal Finance or Ministry Finance Team meeting is divided up as follows:
A: VISION = Anticipate future needs; look ahead;
10%
visualize something big for the Lord; new idea sharing
B: PLANNING/GOAL EVALUATION = Recognize/
25%
define needs; establish goals; know when goals
are reached.
C: ORGANIZATIONAL MAINTENANCE = Routine
40%
matters; minor problem-solving and decision-making;
reports from staff; information-gathering and sharing
D: POLICY MAKING = Determining policy needs;
10%
developing criteria and setting forth policies;
insuring that policies are current/viable.
E: SOCIAL = necessary for board members to
10%
understand and minister to one another in
a controlled setting.
F: FIRE FIGHTING = Crisis decision-making;
5%
urgent problem-solving; resolve stressful
issues often with limited facts or resources.
Total
100%
AFTER MEETING
The person recording the approved actions needs to finish the job right away while the meeting content is fresh in mind. Then not only record issue resolutions, but to clearly indicate member assignment and then distribute to all ASAP.
(8) Christian Encouragements:
The" I Know Who I Am" Bell, but probably should be called "The Praise God Bell" ...
I KNOW WHO I AM
I am God's child (John 1:12)
I am Christ's friend (John 15:15 )
I am united with the Lord(1 Cor. 6:17 )
I am bought with a price(1 Cor. 6:19-20)
I am a saint (set apart for God). (Eph. 1:1)
I am a personal witness of Christ. (Acts 1:8)
I am the salt & light of the earth ( Matt.5:13-14)
I am a member of the body of Christ(1 Cor 12:27)
I am free forever from condemnation ( Rom. 8: 1-2)
I am a citizen of Heaven. I am significant ( Phil.3:20)
I am free from any charge against me (Rom. 8:31 -34)
I am a minister of reconciliation for God(2 Cor.5:17-21)
I have access to God through the Holy Spirit (Eph. 2:18)
I am seated with Christ in the heavenly realms (Eph. 2:6)
I cannot be separated from the love of God( Rom.8:35-39)
I am established, anointed, sealed by God (2 Cor.1:21-22)
I am assured all things work together for good (Rom. 8: 28)
I have been chosen and appointed to bear fruit (John 15:16 )
I may approach God with freedom and confidence (Eph. 3: 12 )
I can do all things through Christ who strengthens me (Phil. 4:13)
I am the branch of the true vine, a channel of His life (John 15: 1-5)
I am God's temple (1 Cor. 3: 16 ). I am complete in Christ (Col. 2: 10)
I am hidden with Christ in God (Col. 3:3). I have been justified (Romans 5:1)
I am God's co-worker (1 Cor.. 3:9; 2 Cor. 6:1). I am God's workmanship (Eph. 2:10 )
I am confident that the good works God has begun in me will be perfected. (Phil 1: 5)
I have been redeemed and forgiven(Col.1:14).I have been adopted as God's child (Eph 1:5)
I belong to the Lord .Click below for Potentially Helpful Online Links for JIMs JRNL Readers: (1)
1> ECCU's Ministry Banking Today 2> Building Better Budgets 3> Fund Accounting 4> Written Plans
5> IRS Rules to Remember 6> ECFA Contributed Services and Use of Facilities
7> When Your Church Needs a CPA 8> We've Been Embezzled!Current "Ministry Finance" Truism (2)
"Depreciation Expense" is a External GAAP required once-a-year accounting process for allocation of capitalized expenses of certain Land, Building and Equipment (LB&E), or Fixed Assets , and should NOT be budgeted or show up as a Ministry's monthly General Fund operational cost.
Please link to 0125 for more explanation and details as "Depreciation Expense " should NOT be confused with any voluntary assessment of the General Fund , or any "SetASide", for future LB&E purposes.
The only thing more fearful than fearful times is our fearsome God who works, wills, and orchestrates ALL things for his glorious glory." Help me , Lord, to apply it in all areas of my life. In Jesus' name, AmenOh Lord, thank you for the veracity of this statement shared recently by one of our Pastors. "
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 10 days 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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Click Here for information about earlier JIM's JRNLs - or contact me via Jim@bcidot.org
This document was updated last on: August 21, 2009
