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                                                            F i s c a l   Y e a r   E n d    M a t t e r s                                 ePage 10

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                                                                              NON  CALENDAR YEAR  ENDS -- 1001

        First,   I strongly recommend that Ministries should NOT have a fiscal year that ends on 12-31-xx, or have a Calendar Fiscal Year End. The finance Staff of a Ministry is "very"  busy during the months of December and January --- many Ministries derive a large portion of their Donations during December.   Holidays,  plus calendar year payroll tax accounting/reporting,  add to the 'hub-bub',  so why add more with having a Ministry Operations year end also. 
        But most importantly, one of the fiscal and Operational year end objectives is to "look back and then plan forward" so you can put dollars to your annual plans   ....  this is very hard to do during these calendar year end months.   Please consider Spring year ends for Churches; summer time year ends for Schools and early Fall year ends for other Ministries.
        Please ask us for more information along these lines.  The scope of calendar year end tasks for QuickBooks (QBs)  users as outlined within the following QUESTION AND ANSWER Dialog might also be of interest:

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                                                                       YEAR END CLOSING MATTERS --- 1002

                Below is a QUESTION AND ANSWER Dialog about the need for SPFund  balance carryovers to the new year via the use of QuickBooks (QBs)  software and the use of Method One

 QUESTION:

        Things have gone well with the QB Fund Accounting system per your recommended Method One during the past year, Jim , but how do I close out the books at the fiscal year end; especially how do I carry forward the balances of each SPFund?.

            ANSWER From  Jim@bcidot.org 

        Neat to hear from you,  was wondering how things (especially year end matters) were going. The first year end,  of your using QB Method One and this QB Class Balance forward method can be a challenge as the fiscal year end effort covers such issues as: 

   a>   Handling QB "Opening Fund Balance", if any;
   b>   Handling QB  Retained Earnings (QB has another unique name for this now)  and, as you mentioned;
   c>   Properly carrying forward the balances of each SPFund - especially when you use the QB Class features.  

    1> Let's suppose the Fund Balances as of 04-30/xx were as follows:

SPFund 'A"		$   300.00
SPFund 'B'		$1,000.00
SPFund-Prior Yr GPF Gain or (loss)		$     33.34
This Year's GPFund (Overdraft or loss)		(122.40)
Total		$1,210.94

        To remind you,  as indicated Here ,  SPFund stands for Special Purpose Funds and GPFund stands for General Purpose Fund.

        2> Further let's suppose that your 'two digit ' Bal Fwd' QB Class is "00"; 'Income by types' are "3x"; 'Payroll by types' are "4x"; 'Operating expenses by types' are "5x"; and 'inter-fund (you do business which yourself, etc.), transactions are "6x".

        3> You will need to set up a new QB  "MUST BE ZERO" Current Liability account.

        4>  Let's suppose that you have made all of your regular monthly and year end 'clean up adjustments' ... including any Funds that you close out etc (via the transfer Class "6x" code, of course) .... and everyone is satisfied with the present 04-30-xx year end balances and the QB reports. You then process all of the reports as of 04-30-xx that you desire .... especially those related to the QB Classes. Since you are now totally finished with last year, you make a year end backup copy --- this must be done before you take the next steps.     Also discuss with me at JIm@bcidot.org the possibility of using the 04-29-xx for year end status and reporting and restricting 04-30--xx for just this MUST BE ZERO process.  There is also the possibility of also restricting the 05-01-xx date  for this overall process -- or your new fiscal year ( May xx)  transactions start with the 05-02-xx date, etc.

       5> Working from final printouts/reports, you then produce the following QB Journal Entry as of the end of your fiscal year, or dated 04-30-xx:

Account Name		Debit	Credit	Memo		Class
Dated 04-30-xx
SPFund 'A'		$   300.00		Yr End Offset		Leave Blank
SPFund 'B'		$1,000.00		Yr End Offset		Leave Blank
Prior GPFund  Balances		$     33.34		Yr End Offset		Leave Blank
(1)Retained Earnings			$   122.40	Yr End Offset		Leave Blank
MUST BE ZERO (QB Liab Acct)			$1,210.94	Yr End Offset		Leave Blank
Leave the Class blank; it is no problems if reports show them as unclassified

   (1)  The QBs software system may use a different account title than "Retained Earnings" but it means the same thing -- namely;  a QBs automatically generated account on the 1st day of the new fiscal year (05-01-xx) that represents the difference between the QBs Income and Expenses of the preceding year.  

•         6>  Next, also as of 04-30-xx, you process and print out (as a year end reference report) a proof Balance Sheet .... this should clearly show the above 1,210.94 in the MUST BE ZERO QB Liability account area.
  
          7>  And,  since you use the Method One, you will notice the GPFund (QB Net Income) above shows a loss of $122.40.
  
          8> As of 05/01/xx (it is far cleaner to restrict this 05-01/xx date to this Bal fwd effort only  (GO HERE)  for QB date info plus see the comments within the 4b above paragraph )  it is desirable to change your new year tranx to 05-02/xx and beyond, etc.),   you make the following offset Journal Entry.

Dated   05-01-xx
SPFund 'A'			$   300.00	Yr End Offset		Class "00"
SPFund 'B'			$1,000.00	Yr End Offset		Class "00"
Prior GPFund Balances			$     33.34	Yr End Offset		Class "00"
(z)This Year's GPF Deficit		$122.40		Yr End Offset		Class "00"
MUST BE ZERO		$   1,210.94		Yr End Offset		Leave Blank

       (z)  This will be a new QB Equity account since we suggest that you not combine with "Prior year GPFund Balances".  Some like the idea of having a single annual QB Equity Account for tracking the GPFund result for each of your fiscal years.  

            REMINDER:  The year end balance forward amounts are carried forward to the new year for each SPFund.    Use of the above "00" Balance Forward QB Class identification allows you to show what you started with for this new year.   Of course, other QB Class accounts during the year help you identify why the SPFunds changed during this time and ultimately provides proof (see 9> report below) to the ending SPFund balance that appear within the Balance Sheet, etc.   This report, in essence is ultimately the overall Video (Income Statement) for only "SPFund" activity, etc..

          9> You then will process and print out as of 05-01-xx proof reports for reference....

 -->   An overall Balance Sheet  (Photo)  (please Go Here for a list of QB Samples)
 -->   A SPFund Income Statement (Video) Class report (please Go Here for a Sample) which shows only the Balance Forward Class "00" amount.

         10>   Please discuss with us the desirability of running a detailed transaction report that shows all transactions dated 04-30-xx and 05-01-xx

          11) Then proceed with your new year (see caution within 10> above re  restricted use of the 04-30-xx and 05-01-xx dates)  in the normal fashion.

     QUESTION:

                  But we want the above $122.40 GPFund overdraft amount to show up in the GPFund activity of the new year.  How do we do that?

                            ANSWER:

        I do NOT recommend that you do that.  The GPFund QBooks accounting area covers only the current year's Income and Expenditure activity as reflected by the QBs Income and Expense type accounts.
        Let's suppose that the SPFund "A"  $300.00 is comprised of unspent donor designations and the SPFund "B" balance of $1,000.00  is a result of charges made to the GPFund during past few years.  Or it was a part of a SetASide process - please Click Here  for details..    Remember ... the SPFund area is composed of two segments:

a>  The donor restriction/designations (SPFund "A") and
b>  That which is Board discretionary (SPFund "B" plus all of the prior year GPFund balances --  the $33.34 and $(122.40).        

QUESTION:

        Thank you, Jim, I will see if this makes sense, but probably the first year in doing this I will probably need to make full use of the  www.gotomypc.com  process whereby we both look at our set of QBs and go through much of this process together.   Of course, we can always process a QB report into a Excel doc and send it via Email.  

    ANSWER:

           The first year end of your using QB Method One and this QB Class Balance forward method can be a challenge.    Let's also discuss when you do NOT have a lot of Calendar year concerns (like when you outsource your payroll to QB/Intuit, etc.), a possible way, for a variety of good reasons, is to begin the year with a new QB company.  It is quite straight forward to export Chart of Accts etc from the old and import to the new.  Let me know if this seems desirable.  Please contact me at  Jim@bcidot.org if you have any questions on this topic.

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                                                 Physical and Dollar Accountability of Church (or Ministry)  Equipment -- 1003

                                                                   - - -  OVERVIEW - - -

        Ever before us is the need for accountability of all Ministry "Land, Buildings and Equipment- LB&E";  yea,  physical inventory of furniture and all types of stationary and mobile equipment.  Please Go Here  for more informtion on this topic.
        Some time ago a Church concluded that it needed to reflect the total amount that they believed that it had invested in "Equipment" up to that point in time.  This was needed for the "Land, Building & Equipment (LB&E)" financial statement reporting purposes and to meet the annual Depreciation Year End External GAAP requirements.   So they 'guess-timated"  a certain amount --- lets say $50,000 ---- and placed it within the overall LB&E accounting records.   Every year after that, as part of their fiscal year end finalization effort, they took Equipment purchased information from their GPFund and SPFund records and added it to the LB&E accounting records, or they capitalized Equipment that cost $500 or more during the past number of years.   Please  Click Here, and  Here for more on this overall topic. 
        Many of you have not given this priority down through the years, but in order to comply with   Year End External  GAAP  it is now necessary to show Depreciation as an expense for all Nonprofit Organizations. Plus it is desirable for more complete insurance coverage. This means you need greater documentation and accountability of these tangible assets.   Please consider the following:

                                                                        - - - -  INITIAL PHYSICAL INVENTORY - - - -

       But to have a complete "Physical and Dollar Accountability" of your Church Equipment,  you fundamentally need to have a "subsidiary" listing by piece of equipment that totals the dollars appearing in the Equipment portion of you LB&E records  --- which,  let's suppose, was $100,000 as of 12-31-X7.  Like at many Churches,  you really need to address these "Physical and Dollar Accountability" issues.  To care for this important matter, please consider taking the steps that follow:

     a>     You take a physical inventory  and place a permanent label on each piece of Equipment. This  label could include at least:
                    ---   Staff person (or department) responsible for that piece of Equipment
                    ---   Usual location at the Church 
                    ---   When it was acquired
                    ---   Some unique ID numbers/codes (that might cover the preceding issues)
                             and if  known                 
                    ---   The dollar cost
      b>      If possible, you locate the original purchase price of each item.  If you can not resurrect the original cost then you assign what you believe to be the cost equivalent.  Some that show up in the physical inventory were not capitalized because the price was less than $500.00.  So you simply assign $1.00 to each of these items within the Excel spreadsheet mentioned below so that it is listed and you can take an inventory as you care for the needed "physical"  accountability matters, etc.
     c>      You now have the data for an Excel spreadsheet that would now include the above label data and would ultimately have a "subsidiary" listing of the total dollars invested in your Equipment.
     d>      Let's suppose that this "subsidiary" listing via this spreadsheet that follows this effort totals $90,000.   You then make a one-time adjustment of  your $100,000 Equipment total that now appears at 12-31-X7 in your "Land, Building & Equipment-LB&E" accounting system.  In the future the Control account (Equipment Total - which is part of the LB&E accounting system) and the subsidiary (Total dollars via the Excel spreadsheet) MUST always be the same.  Of course, you continue to do your annual block deprecation effort but you use the revised $90,000.
     e>     In your Financial Policies manual you establish how often this is to be done (preferably annually during a slower time of year) and make sure it gets on the applicable staff member's task todo list, etc.  You arrange it so that the department responsible for the inventory can easily get a list via the "subsidiary"   spreadsheet document..   Some more ideas are: 

       01. Obtain a written record of some type (a card or ledger) for each item or group of like items. It would contain at least the following: I.D. number (see below regarding sticker); adequate description of item; approximate date of acquisition; cost or cost equivalent approximate life span; user and location information.
        02. Inventory the fixed assets and complete the record. We recommend that you place an I.D. sticker on applicable piece for future accountability and reference.
        03. This provides an excellent project for volunteers or when your staff is "caught up."

                                                    COST OR COST EQUIVALENT

        What did we pay for this item 10 years ago? We don't have any of those old invoices! Ugh!
        The emphasis in this process is accountability and the original cost is not absolutely necessary. Therefore, it is not crucial for you to dig up all those old records, etc. If you cannot locate the recent invoices, please use your best judgment of its original cost or obtain information from current insurance appraisals or property tax appraisals, etc. We recommend that you not inventory, for these purposes, items costing $100.00 or so (this amount may be different for larger organizations). Please bring on donated items at their estimated value when received.
        We recommend the term "Cost Equivalent" to accommodate the variety of "dollars" placed in this inventory.

                         DEPRECIATION - IS IT NECESSARY?

        Yes, as indicated above, it is now required for Year End External GAAP  at the end of your fiscal year, but it really isn't that difficult. We advise against laboriously accumulating the amount of depreciation since date of acquisition on each item in inventory.
        We recommend that they all 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	%	1998	1999	2,000	Total	Deprec	Deprec	Accum
Span								Deprec
5 yr	20	5,000	4,000	1,000	10,000	2,600	2,000	4,600
10 yr	10	1,000	300	3,500	4,800	250	480	730
15 yr	5	3,000	3,500	3,500	10,000	633	500	1,133
Totals		9,000	7,800	8,000	24,800	3,483	2,980	6,463

                      WHAT HAPPENS WHEN WE GET RID OF AN ITEM?

        Set up and use a "Gain/Loss on disposition of Fixed Assets" account, or simply use the existing "Net Investment in Fixed Assets" equity account. Remove the computed year to date (do not make partial year computation for the year of disposition) amount of previously accumulated block depreciation for that specific fixed asset and 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 a special place within your year end report.

                                    AT THE END OF THE FISCAL YEAR:

        Not only will you have to be sure of the foregoing entry, but you will need to also account for any "Fixed Assets" acquired during the year by any as an "Expenditure";  followed by balancing the Fixed Asset subsidiary (listing of each Fixed Asset, etc.) to the control accounts in the General Ledger. You would then compute the block depreciation for the current year.
        This includes some type of "capitalization level" --- like everything that costs $500.00 or more should be added to this depreciation schedule, or capitalized, etc.  In all of this effort, do not loose sight of the need for "tangible asset accountability" for such purposes as insurance coverage, etc.
         Please Go Here  for comments about reflecting such matters as a part of Fixed Asset Memo Accounting. 

     It seems that some ideal features of this process could include:

     1>    The label process takes place during the year at the time of acquisition of the Equipment.
     2>    You take a picture (the use of digital cameras today are so straight-forward) of each that includes the label contents
     3>    You make full use of "bar code" resources where you ultimately post the label info to the Excel spreadsheet

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                                                     EXTERNAL OR OUTSIDE AUDITOR ISSUES --- 1004
 

            A Christian Ministry MUST BE  fiscally righteous.  Part of this is accomplished by being a member of the Evangelical Council for Accountability - ECFA.     Please learn how they function  --- especially re the following per their Website:

     >>   An outside Auditor -  CPA Firm is annually involved as to Year End External GAAP  matters
     >>   ECFA has a list of known Ministry Savvy  External Audit - CPA firms
     >>   Smaller Christian Ministries can now afford to be Affiliated ECFA Members
     >>   It is ideal for you to regularly have the Audit firm provide you with Fiscal Status grades .... see the samples when you  Go Here

INTERNAL OR INSIDE AUDITOR AT A LOCAL MINISTRY ---  1005

            In addition to my Online "HELPS" efforts via  these web sites:  Ministry Finance Teams Helps ,  Spending Controls and Brad's Nest of Bees,  I have for some 10 years now been serving at a good sized local Church in such a capacity.   Let me know at  Jim@bcidot.org  if you would like to dialog with any of their leaders.  
           It seems to me that many qualified retirees could serve Christian Ministries  in ways like this as I report directly to the "Board Finance Committee"  and to the voluntary "Board Treasurer" (my boss)   --  not to any Church staffer.  My responsibilities include at least the following: 

�         >>     Function mostly as would an   "Internal Auditor"  or maybe an "Assuror"  with respect to this Church's  finance matters.
     >>    Contribute to their effective use of the  "QuickBooks (QBs) Pro"  software re Fund Accounting  as they care for their  Daily Internal GAAP  issues.
     >>    Contribute to the effective use of the accounting portion of their separate  DonaMail   software. 
     >>    Oversee how the  "Church Accountant"  uses the Church's overall-all accounting system (especially the above software) for meaningful reporting of their finances and for financial internal controls.
     >>    Contribute in seeing that the the Church has the applicable financial checks/balances.  �   
     >>    Contribute to the contents and compliance of their written "Finance Policy and Procedures Manual"
�    >>    Regularly interact with the "Board Treasurer"  and members of the  "Board Finance Committee"
     >>    Contribute to the identification and accomplishment of their  Most Important Finance Issues.
�    >>    Contribute to the hiring and evaluation of the ""Church Accountant" or any other staff or volunteer finance person, etc.
�    >>    Contribute to the church's  Year End External GAAP matters and  having the least expensive annual  Compilation  relationship with their outside  CPA - Audit firm.
�    >>    In general, assist in the goal of this church being a good  steward -- even a model --  of their finances.

• >>     Review at any time their current  "Internal Financial Statements" using Daily Internal GAAP

• >>     Identify or contribute to a variety of the Church's fiscal and/or related administrative special projects or assignments

• >>     Contribute to the proper handling of abnormal or odd financial matters or transactions.

• �>>    Usually help in establishing a relevant  Agenda   for the periodic "Board Finance Committee"  meeting

•  >>    Contribute to the understanding of the  "Internal Financial Statements" by all who should know

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   This is the last page of this eBOOK - Click Here and go to the "Table of Contents 
 

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ORIGINATED  November 2009                                                           UPTD:  March 09, 2012