"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 months of September and October 2010 FILE: 2010/0910-10
01 - Do you weekly know how much money that you can righteously spend? (01)
Hopefully your answer is YES to the question above. But, if the answer is NO, then prayerfully consider the following:
>> If you are authorized to spend Ministry money, then you must timely know how much is available for applicable
purposes. As explained when you Go Here. I do not mean the amount of money that is in your Bank accounts.
>> The absence of such weekly information indicates that you are not likely being the fiscal steward that the Ministry
>> If interested then please contact me at Jim@bcidot.org so we can discuss resources that could provide you each
Tuesday/Wednesday with a report like that displayed below which shows that --- yes, you have $ 4,744.48
in your Bank Accounts --- but more importantly, it pertains to the indicated areas of the Ministry.
Restricted and/or “Spoken For” Monies
Missionary Jones – Support 28.53
Missionary Smith – Support 405.57
Board Project A 800.00
Board Emergency Fund 3,067.59
Sub Total 4,301.69
Discretionary Monies that are
assigned by the Board below:
(a) For “Fixed Operating Expenditures” 272.70
For Operating Depart #02 28.65
For Operating Depart #03 59.06
For Operating Depart #04 37.30
For Operating Depart #05 44.88
Sub Total 442.79
Total available balances 4,744.48
(a) “Fixed Operating Expenditures” examples are: Existing Salaries/Benefits or other such commitments; Required Rent/Debt Servicing; Essential Operating expenses like utilities and phones etc.
02 - The prudent use of Plastic (Credit Cards) at Christ-Centered Ministries (02)
It is our view that such a Ministry should do the bulk of their authorized buying via a controlled and safe “Plastic” process. By doing so the Ministry does NOT have numerous vendor charge accounts – like at the local Christian Bookstore and elsewhere---- since they do all of their applicable buying via this single process.
Please note below within this edition how we discuss the “eCHECK” “Plastic-Debit Card” activity as it functions as if your agent was writing a Ministry’s authorized check. If the vendor allows either the “Plastic-Debit Card” or the usual “Plastic-Credit Card” buying process, then you want it to be subject to as much “Financial Internal Controls” as needed. Of course, the “Plastic-Credit Card” balance is timely paid off. The “Plastic” processes at the Ministry should be as “Internet Friendly” as possible. This is demonstrated by the Bookkeeper going Online and the Plastic transactions are moved electronically from the “Plastic Provider” to your Computer accounting system -- preferable QuickBooks Pro (QBs). Obviously this reduces the manual data entries into QBs and, since these Plastic transactions are mirrored therein, it concurrently reduces the need to do any reconciliation of manual QBs entries to what the “Plastic Provider” has.
The preferred overall “Plastic Management” process further involves the following internal steps:
>> Each authorized Ministry representative is provided with their own Plastic BUYER’s card, etc. This would apply to both staff and applicable volunteers. Do not have too many cards out there – make full use of the BUYERS agent process below.
>> The BUYER makes authorized Online or in-person purchases.
>> The BUYER’s agent makes authorized in-person purchases; this involves temporarily giving this agent the BUYER’s plastic card with a clear written document indicating that this agent has the authority to buy this one time as if this agent was the BUYER, etc. The intent is to respond to the request by Vendors for BUYER’s identification, etc.
>> These BUYERs make their purchases and they retain the “Buying Document” as the BUYER awaits information from the Bookkeeper – see below.
MINISTRY BOOKKEEPER OR ACCOUNTANT
As indicated above, this person could weekly go Online and electronically move the Plastic (Credit Cards) transactions from the “Plastic Provider” to the Ministry’s applicable BUYERs “Pending” account within software like QuickBooks Pro (QBs). The Debit Card transactions are captured weekly as part of their electronic BREC-SWEEP effort and the transactions are placed within the applicable QBs BUYER’s “Pending” account.
Throughout the month (like weekly) the Bookkeeper makes a hard copy of the applicable QBs BUYER’s “Pending” account showing the transaction details and gets it to this BUYER.
Working from the above hard copy of the QBs BUYER’s “Pending” account, the applicable BUYER approves each purchase – made either via the BUYER alone or via their agent. The “Buying Document” (usually a very small piece of paper) has been placed into their wallet or purse and they ultimately get attached to this hard copy. See below as to process when “Buying Documents” are NOT retained, etc.
Assigns their applicable Departmental “Chart of Accounts” number to each purchase appearing within the above hard copy of the BUYER’s "Pending" account . See below about the “Ministry Plastic Supplies & Expenses” account where all such purchases are charged to this one account, etc. Perhaps make a hardcopy of BUYER’s “Pending” account for their own department files and finally, returns the properly completed original BUYER’s “Pending” account hard copy to the Bookkeeper
MISSING BUYING DOCUMENT
BUYER goes ahead and authorizes – remember this is a weekly process so the BUYER surely would remember incurring such an expense etc. Per the method below, some Ministries penalize the BUYER if they do not have the BUYING DOCUMENT.
MINISTRY BOOKKEEPER OR ACCOUNTANT
Working from the completed hard copy from the BUYER they can now:
>> Clear out the applicable BUYER’s “Pending” account as each Plastic transaction is re-assigned to the indicated BUYER’s accounts per the Ministry Departmental Chart of Accounts structure.
OBSERVATION: Some Ministry’s have a common Departmental “Chart of Account” line item that says something like: “Ministry Plastic Supplies & Expenses”. This way the BUYER does not have to assign an account number, etc and there might not be a need for the above BUYER’s Pending accounts per se. Or the Plastic transaction can originally go to that Department’s “Ministry Plastic Supplies & Expense” account. The BUYER may want to charge the purchase to some accounts other than this “Ministry Plastic Supplies & Expense” account. If so, the BUYER clearly indicates that on the approved hard copy that goes back to the Bookkeeper,
>> Make the applicable charges to the BUYER for any missing BUYING DOCUMENT. Some Ministries charge $1,00 for each missing BUYING DOCUMENT and they take it out of the BUYER’s pay and credits their Department with this expense offset.
>> Ultimately prepare the applicable “Department Spending Control” report that includes the “Plastic Purchase” transaction details (Date; Vendor; description of items purchased: dollar amount) .
>> Weekly Go Online and pay off any unpaid “Plastic-Credit Card” balance.
Ask me at Jim@bcidot.org about the details of discounted repetitive buying done via a Scrip “Prepaid Plastic” process.
Church Credit Card/Plastic “Five Step” Process - (aa)
Recently I learned that a Church Credit Card is in each Official's name, but, as mentioned above, a particular official was NOT providing mandated Credit Card information to the Church Business Office. The Credit Cards was taken away from this person and they used their own Credit Card for approved Church purchases. However, the mandated requirements were still NOT followed so the Church's expenses on their personal Credit Card were not reimbursed. I believe that following the "Five Step" process below would alleviate most of these undesirables:
01> This official (either staff or applicable volunteer) does in fact have a separate Church Credit Card in their name
02> This BUYER makes all approved purchases only via this Church Credit Card means. This person would NOT pay for such Church expenses personally (via any of these means: own cash, check or Credit Card, etc.) and seek reimbursement from the Church.
03> The Church's Bookkeeper would weekly go online to this buyer’s Church Credit Card account and print it out showing the transaction detail and the unpaid credit card total.
04> This buyer then takes this weekly print out and determines if said charges are OK, etc and does the applicable Chart of Accounts coding and, at the same time, attach any existing Credit Card slips. These small slips can easily be lost so they are a preferred, but maybe they are NOT a required, part of the process. Since it has been within the past week, this person can normally go to their calendar and determine if the Credit Card charge appearing on the weekly statement is proper. Reminder: such charges are not a business tax deductible issue by this tax exempt Church -- or having the Credit Card slip is not a required tax matter.
05> After the BUYER takes the preceding steps, this weekly print out, as approved by the BUYER, MUST then go to the Church Business Office. The total is then paid via a weekly Online (or a “eCHECK” ) payment as the detail is posted to the applicable Church Departments. Via this process, not only is the Church placed on the Accrual Basis by reporting all of the NOW expenses, but it is also not necessary for the Church Bookkeeper to enter the Credit Card purchase detail in advance into a liability account, and then go through the time consuming effort of reconciling each transaction to the periodic Church Credit Card statement itself, etc.
If the Church's Bookkeeper still did not know what Department (or account therein) was involved in the transaction then it was placed into a type of Suspense Account until the buyer informed them of where this approved purchase belonged, etc.
Answering “Debit” to vendor’s question when you make Credit Card (Plastic) purchases. - (bb)
When your Qualified Buyer at your Ministry contributes to the positive aspects of our ‘cash less society' and makes purchases via your Credit Card (Plastic) process the vendor often asks this question: “Is this “Debit” or “Credit”?” Go Here for more information about this. If your answer is “Credit” then this purchase is added to your unpaid Credit Card balance and then you ideally go Online each week and pay off the total unpaid balance.
But if you have the option to answer “Debit”, and you provide another code, this purchase functions as if you had written this vendor a check. This “eCHECK” process has the following desirables:
>> You rightfully use Credit Cards (Plastic) but you incur no debt.
>> Plus you do NOT have to manage/account for any unpaid Credit Card transactions per se.
>> This process is paperless
>> You do NOT have to write; get signatures and process any paper checks
>> You do NOT have to buy such checks for either the hand written option
>> Or for the more expensive option for checks that your Computer system writes
>> Since this happens electronically, you do NOT have to mail or physically get the Check to the payee
>> Plus, of course, there are no postage costs
Possible undesirables in using this “eCHECK” process might be:
>> You are in essence making your Qualified Buyer and Plastic User the Ministry’s check writer/signor/processor.
>> You probably should limit the size of each “eCHECK” transaction to something like $200.00 or less.
>> You do not have a cancelled check copy for transaction documentation/record keeping or verification purposes
>> Which might contribute to the Buyer being careless about not providing such needed purchase supporting
documents and distribution info.
>> We are told that Credit Card/Plastic “eCHECK” users do NOT get Credit Card incentives like free Airline miles
>> When you process the transaction you can not include desirable information like what/why you made the purchase
plus the applicable acct ID, etc.
We are convinced that Ministries should make prudent use of this “eCHECK” process.
03 - Internal GAAP and "Expenditures" -- Not Expenses (05)
As most of us know per the detail when you Go Here, GAAP is an acronym for Generally Accepted Accounting Principles that we accountants must adhere to. Please Go Here and learn about unique finance matters (shall we say GAAP issues) at Christian Ministries as they manage Special Purpose Funds – SPFunds and their General Purpose Fund – GPFund.
Or some overall GAAP matters are unique to these Non Profit Organizations (NPOs). We further maintain that such organizations also handle finance transactions during the year that we reference as Internal or Daily GAAP matters as apposed to Year End or External GAAP issues. Please note how it is addressed within our WebBOOK when you Go Here
Such Ministries should use the term "Expenditure" for such transactions rather than the term "Expense" per se. As detailed below, this is done because some of their GPFund operational costs of doing their unique type of operation are different and use of the term "Expense" can be misleading.
Operational "Expenditures" include payment of such obligations as monthly Mortgage payments that include both Principal and Interest, but the total obligation is funded from the operations income or the GPFund. Therefore, we recommend that this budgeted "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. Please Go Here for a discussion about a "Three Legged" accounting entry whereby the principal portion could reduce the liability now, etc.
Furniture and Equipment
Operational "Expenditures" sometimes include the cost of buying Furniture and Equipment. Sometimes such transactions will be made from monies gathered specifically for that purpose via one or more of the SPFunds . But what we often find is that the cost for such items flow through the GPFund as a budget Expenditure line item.
All Furniture and Equipment costs should be added to the Fixed Assets at least annually. Please Go Here for more information about Land, Building and Equipment and related accountability issues. As mentioned above, please Go Here and see the discussion about a "Three Legged" accounting entry which enables you to capitalize such transactions at the time of the transaction.
Sometimes a vendor requires the Ministry to pay for something in advance; examples are Insurance Premiums and/or a deposit for a future event. The usual accounting procedure is to place such transactions into what we accountants call "Prepaid Asset Accounts" and then you allocate the cost to the respective future periods involved. But to accurately report how a Ministry uses its liquid resources during the year it is best to report this as another budgeted "Expenditure" of the current fiscal year. Then, if material in amount, you care for this "Prepayment Asset" accounting matter only at the end of the fiscal year.
Operational budgeted "Expenditures" might also include internal transfers, or SetASides, from current GPFund. operations to the applicable SPFunds for future needs. Ask us about such funding for certain anticipated major facilities repairs and maintenance -- or even replacements.
Depreciation --- not
Depreciation is NOT a budgeted "Expense" or "Expenditure" item at a "Ministry"-- or this is NOT an Internal GAAP matter and is only reflected at the year end as part of the External GAAP process.
04 - Self Funded Activities - (04)
A Ministry collects money to offset a portion of the costs of an event or activity. Church example are Men's; Women's; Children's events like Vacation Bible School. We recommend that you report only real Income and reflect such Special Purpose Fund - SPFund activity receipts as "Defrayments", or as expense offsets (contra expense accounts) and not income per se. Our experience is that such activities are best managed by them having their own "SPFund" that may be partially funded from the "General Purpose Fund - GPFund" budget. Please Click Here and Here for more information about such activities -- also Click Here for more info from Brad on this topic.
Some Ministries buy specific "General Purpose Fund" event material in advance and then seek "Defrayment" reimbursement --- especially in small Church settings. We believe the material costs should appear as an expense and the "Defrayment", appear, not as income per se, but as an expense offset. Having both flow through the same "GPFund" expense account and then show net expenses does NOT fully report what has happened.
05 - Click below for Potentially Helpful Online Links for JIMs JRNL Readers: (1)
Busy Times for Ministries and their Financial Cooperatives Tax matters at Churches Accounting System Essentials Churches Reeling from Declines in Donations per ECFA ECCU Blog re Security and Essential Aspects of Online Banking
The Top Seven resources to combat Church Embezzlement Where is your Church’s money Church Finance Resources
06 - Current "Ministry Finance" Truism (2)
Below is one of my Ministry Finance precepts/beliefs/principles, or "rules of thumb". Please go to 0069 for the complete TRUISMS list
MORE THAN THE BANK BALANCE - Expenditures should be booked when incurred and income should be shown when earned; otherwise the Ministry does NOT have all of the financial facts. Please Go Here for more specifics.
07 - Bible
Verse and/or Prayerful
Thots: Dear Lord -- I sincerely appreciate this
reminder that came to me recently:
"God is so big
He can cover the whole world with his Love and so small He can curl up inside my heart." Thank you, Lord ! In Jesus' 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 9708 9709 and 9710
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 QBs = Quickbooks Pro; RPFin = Righteous Personal Finance , SPFunds or SPFs = Special Purpose Funds
ABOUT US | OUR PURPOSE | TABLE OF CONTENTS | SPECIFIC SEARCH MATTERS | HELP DETAILS | FUND ACCTG VIA COMPUTERS | GLOSSARY
Click Here and go to a list of earlier JIM's JRNLs - Contact Jim@bcidot.org
This document was updated last on: July 09, 2011