Faith-Based Accounting

All about the Benjamins…

How can a Church do an excellent job of protecting itself, and do so inexpensively? The Church can do much in house to protect the provisions it has received. Let’s think specifically about Cash Receipts:

First, a Church must have written procedures for how money is received and handled. This is the starting place for assessment. Moreover, once compiled, the Church needs to actually follow the procedures! Questions to consider when reviewing your Church’s procedures (or creating them):

• Is the offering count team composed of independent individuals (not the pastor or the Church Treasurer)?
• Does the count team rotate? Do at least two individuals accompany the offering until it is deposited into the Church’s safe or the bank?
• Does the Church ensure that funds are deposited intact (i.e. no expenses are paid from the offering before funds are deposited)?
• What about offerings received during the week? Has the Church established procedures to separate the counting, depositing, recording, and receipting of such contributions, and therefore protect both the donor and the Church office employees?
• What about those funds restricted by the donors? Does the Church have adequate processes to ensure that these funds are 1) in line with the Church’s mission before the Church chooses to accept them and 2) recorded and spent according to the donor’s wishes? 

Money and Church—the temporal object, money, is a current necessity for the eternal entity, the Church. Money is often a difficult area of discussion for Churches, but it can’t operate without it. The Church’s goal should be to protect its integrity, while at the same time the hearts of the givers. What are you doing to protect the Church the Lord has placed you at?

Keep close tabs on your cash

You can’t always just look at your bank statement for the balance because there are outstanding checks and deposits; looking at the GL doesn’t always capture recurring payments, fees, and other transfers.  A thorough bank reconciliation process can go a long way toward detecting fraudulent cash activity and helping your organization know just how much cash is available for operations.  The basic process typically includes comparing outstanding items with the next month’s bank statement, ensuring both the book and bank balance agree to the rec, and reviewing the rec for old outstanding items (>90 days) that should probably be written off and potentially reissued. 

A second set of eyes is essential.  A reviewer can be a business administrator, your Church’s CPA, or you can even ask a savvy volunteer review the bank rec to ensure someone outside the process is able to help keep the train on the tracks.  When your Church receives its bank statements, how much time passes before they are reconciled to the general ledger?  We recommend that our clients reconcile their cash accounts within ten days of the month end to properly follow up on cancelled checks, unexpected fees, etc.  Furthermore, many banks require fraudulent activity to be reported within 24-48 hours, so a daily review of transactions is also recommended.  Finally, we recommend a weekly reconciliation of online donations to properly match them to donor records and respective bank deposits. 

So what does your process look like?  Is it working?  What’s the hardest part of reconciling your bank statement?  Who reviews your bank reconciliation?

Having a third party review of the reconciliation is a big fraud prevention step and one of our firm’s recommended best practices when it comes to segregation of duties.

Lions and Tigers and FRAUD - Oh My !!!

Many churches think that an external audit is the best way to prevent fraud from occurring, or at least to detect fraud once it has occurred. I’m an audit partner, so I don’t encourage churches NOT to have financial audits! Financial audits are important and I believe most churches/ministries should have one. But the primary purpose of an audit is not to detect fraud, and there are more effective ways to protect your church from fraudulent activity.

The Association of Certified Fraud Examiners (ACFE) says that a much higher success rate exists for those who take matters in their own hands, doing some of the work themselves, rather than farming out fraud prevention to their auditors.

Management review and internal audit steps account for more fraud detection that anything else! These are steps that church leaders (finance committee, elders, board members, etc.) can perform.

In this blog, over the next couple of months, we’ll discuss a variety of concrete ways you can examine yourselves to see how your church might be susceptible to fraud – and what you can do about it!

And don’t forget our website dedicated to Church Fraud – http://weedsinthegarden.com/

Question #4 – “should our childcare workers be treated as employees or independent contractors”?

I can answer this question with one word:

EMPLOYEES!

The determination of employee/contractor status revolves around one word:

CONTROL!

The more control a church exercises over an individual the more likely they are an employee.  Conversely, the less control exercised over a worker the more likely an independent contractor relationship exists. 

So if a church is paying those with the responsibility of guarding their children’s welfare as independent contractors it is as much as admitting the church is exercising little control over its childcare program.  Not a good idea…

If our answers only raise more questions (which is typical for CPAs) feel free to post a question on the blog or email me at verne.hargrave@pskcpa.com

Question #3 – Why is it not a good idea to move dollars between budget line items to make the budget look better?

Two answers to this question come quickly to mind.

• First, this technique in essence is untruthful.  In order to make good financial decisions a church MUST provide accurate financial reports.  Implicit in the word “accurate” is the assumption that “We are telling the truth”.  In the handful of times when I have seen this become an issue in a church, the loss of trust that was experienced turned out to be devastating.
• Second, a budget is intended to be a tool that must be used properly.  I am no handy man, so I generally leave the use of hand tools to others who are proficient in their use.  But, I have enough handy man sense to know that if I use a hand saw improperly, I might cut the board badly. (Or worse, myself!)  Likewise, a church budget should be used properly so that no one gets hurt. 

A budget should be used to guide the church through its fiscal year.  When things don’t go according to the budget plan, that’s OK.  The budget’s role is to tell the church when it is time to make mid-course corrections.  It cannot perform its role, if it is monkeyed with repeatedly.

If our answers only raise more questions (which is typical for CPAs) feel free to post a question on the blog or email me at verne.hargrave@pskcpa.com

Question #2 – Do we have to maintain a separate bank account for EACH restricted/designated fund our church maintains?

It’s all up to the donor…  If a donor makes no stipulation to set up a separate bank account, then you don’t have to.

In fact, our advice is usually to not set up separate accounts.  Here’s why.

• First, maintaining multiple bank accounts means multiple bank reconciliations increasing the workload of the church’s administrative staff.  We have repeatedly seen this type of situation result in late or incomplete monthly financial reports.
• Second, the administration is further complicated by the presence of multiple bank accounts.  Church members making donations to both the budget funds and restricted purposes seldom split their contribution between two or more checks.  Instead, they write one check with instructions on the check or offering envelope on how the gift is to be allocated.  This requires the staff to make transfers from one account to another.  Excessive transfers can lead to multiple journal entries and often multiple confusion!
• The final reason why we discourage multiple accounts is related to the previous warning.  Multiple bank accounts, along with multiple journal entries can turn out to be “embezzler heaven”.  In the interest of security (making sure funds are safe by placing them in their own bank accounts) the establishment of multiple bank accounts creates just the opposite – a huge smokescreen (or shell game) where a thief can take what is not his and not get caught.

If our answers only raise more questions (which is typical for CPAs) feel free to post a question on the blog or email me at verne.hargrave@pskcpa.com

Question #1 – What is the best way to handle expense reimbursements?

Without question, this is the most frequent question of all.  It is also one of the most important because it involves one of the current “hot-button” issues as far as the IRS is concerned.  If a church or exempt organization is not careful, it can stumble into some very significant IRS penalties (often called Intermediate Sanctions).

The answer to how these transactions should be handled is fairly simple – adopt a written accountable reimbursement plan which establishes the processes by which employees and volunteers will be reimbursed for expenses they incur on behalf of the church.

To avoid problems, the church should make sure that its policy conforms to IRS regulations by:

• Establishing the business purpose of the transaction
• Adequately substantiating the expense with expense reports and vendor receipts
• Requiring that any excess be returned

Also, the church’s policy should dictate that all of the above be accomplished in a reasonable amount of time.  The most common method is to require that:

• No advances can be paid to individuals more than 30 days in advance of an event
• Substantiation must be presented within 60 days of the employee’s incurrence of an expense
• Any excess advanced over the amount spent on a project be returned within 120 days

If our answers only raise more questions (which is typical for CPAs) feel free to post a question on the blog or email me at verne.hargrave@pskcpa.com

Busy Season FAQs

Our busy season is winding down.  Although many churches have changed their year-ends from December 31^st, the vast majority are still locked into the calendar year.  This results in a “crunch time” from March 15^th to April 30^th around PSK.

During the course of this heavy load of engagements our auditors are asked many questions by our church clients.  Interestingly, most of the questions have little to do with auditing or accounting rules but instead are concerned with basic issues that church business administrators face on a day-to-day basis. 

Rather than let our answers help only the ones who asked them, we have decided to share this information with our blog readers.  Over the next few weeks we will discuss a variety of issues from accounting processes to IRS compliance issues.  Hopefully, this will prove helpful. 

But, if our answers only raise more questions (which is typical for CPAs) feel free to post a question on the blog or email me at verne.hargrave@pskcpa.com

Health Care Bill Provides Money For Small Churches

Does your church have 25 or fewer full time employees?  If so, the government wants to give you some money.  The recently passed health care bill included a tax credit for small businesses that provide health insurance for their employees.  Although churches do not typically file income tax returns, they are still eligible for the tax credit.

You are correct, there is a catch!  There are three primary factors that would qualify your church:

• The church must pay for a portion of its employees’ health insurance
• The church must have less than 25 full-time employees
• The average wage of a full-time church employee must be below $50,000

If your church meets the criteria above, the church could be reimbursed up to 25% of the health insurance costs that were paid by the church.

As of now, the credit is good for 2010 to 2013 and then the maximum rate increases to 35% (good news).  This could be money in your church's pocket!  Let PSK assist you in determining if your church qualifies for the health care tax credit.

When the cat’s away, the mice will play

            Finally, church revenues can be broken down by date.  When are your cows fat and when are they lean?  Tithing patterns for some dates are predictable.  For example, Easter Sunday and the week of December 31 are fat cows with plenty of money rolling in.  But, on the other hand, in the summer the cows are pretty sleek.  Most churches are aware of these trends and have provided for these business cycles in their budgets.

             But others are not quite so obvious.  For instance, few churches look closely at their revenues when the senior pastor is not in the pulpit.  In a perfect world this should make no difference but the fact is that when the Cat’s away, the mice will play.  Regardless of planning and pleading, the tithes fall off when the pastor is away, especially for periods of longer duration. 

            Knowing this can help the church in future planning.  For example, the church can create an emergency cash reserve, or review its insurance policies to protect itself in the case of extended illness or unexpected death of the senior pastor.  This information would also be useful in determining the true cost of granting a sabbatical to the pastor.  A starting point would be to list out the church’s tithes per week for the last several years, spotting weeks when the tithes dipped below average, and conducting an investigation to see if the causes of the dip can be determined

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

2 Tips Related to Employee Allowances

Some churches give pastors (or other employees) monthly expense allowances in their paycheck. The allowances provide a way to advance cash to employees so that they can purchase items needed for the church or to carry out their role within the church.  There are two important things to keep in mind if your church does this. 

1.  The church needs to be aware that the expenses must be substantiated under an accountable plan, the same way a reimbursement would.  Among other things, proper substantiation includes a receipt as well as a documented business purpose. Otherwise, the allowance is taxable income.

2.  Further, some churches will allow the employee to keep the portion of the allowance that wasn't used and call it a "bonus". Taking this action would not only cause the "bonus" to be taxable income, but would also cause the entire allowance to be taxable (even the portion that was properly substantiated). This is not recommended and can cause church employees heartache come tax time.

Expense allowances are one of many ways to allow pastors to purchase items for the church.  Purchase orders, expense reimbursements and credit cards are a few others.  Each have their own advantages and pitfalls.  Which methods work well for your church?

Is Your Church Exposed?

David Middlebrook, partner with the Church Law Group, recently spoke at our monthly church breakfast on the topic of intellectual property.  He made some very interesting comments regarding employment agreements.  Here are a few things that I learned.

Employment agreements within churches are frequently overlooked, but are one of the least expensive measures a church can adopt to help protect itself. Although churches are subject to the higher calling and authority of the Scriptures, churches must still comply with and are subject to the worldly laws that preside over them. Employment agreements allow churches to hire with confidence, and terminate with less fear of legal repercussions. As part of the human resources process, all church employees should be under an employment agreement. In addition to matters included in a standard employment agreement, such as those common in for-profit entities, a church’s employment agreement should include:

1. A statement expressing that the church is a religious employer.
2. Guidelines for the required Christian code of conduct for employment (for example, specific behaviors that the church considers acceptable and unacceptable). The church may reference the Bible as a general guide for defining acceptable behavior.
3. A statement outlining the conditions of employment:
   1. Statement covering intellectual properties – absent a written agreement to the contrary, all works made for hire belong to the church.
   2. Statement mentioning that in the event of any dispute over employment, the church has the right to take the employee to Christian arbitration/mediation/dispute resolution. Additionally, the statement may mention that the employer will pay its portion of the fees and the employee will be responsible for his or her portion of the fees.
4. A confidentiality statement that outlines the expectations the church has for its employees.

PSK frequently consults with the Church Law Group in this area.  The Church Law Group specializes in legal matters for churches and nonprofit organizations, and can provide additional information regarding employment agreements.  

Beware of members bearing gifts (with strings attached!)

            Examining designated or restricted gifts helps the church understand who is giving how much and to what causes.  It also helps determine the spirit of unity of the congregation.  While receiving gifts is usually a good thing, unrestrained designated or restricted giving can cause significant problems.  These types of gifts can be used by disgruntled members to “circumvent the budget”.  They can create a situation where the church could be cash rich but unable to meet budget needs because too much of the members’ gifts are going to their “special” causes.  And, excessive restricted gifts increase the workload of the administrative staff.

 

            Most church management software generates all the information needed to conduct a proper evaluation of this area.  But, few churches take the time to seriously examine what is happening in this “non-budget” area.  Periodically, each church should closely examine its restricted accounts and ask the following questions about EACH designated account:

 

• Who established the restriction?
• How long has the account been on the books?
• Have any accounts gone dormant?
• Will the church ever be able to use the funds to accomplish what the donor wanted to do?
• Does this activity conform to the mission church’s mission?

 

        The answers to these questions can help the church develop effective charitable giving policies. It also could serve as an alert informing the church that it may need to focus stewardship education not simply on the church as a whole, or even groups within the church, but to specific individuals.

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

 

Location, Location, Location

            Tithes and offerings can also be analyzed geographically breaking dollars given down by zip code.  This technique has proven very useful to churches whose primary mission is outreach to the un-churched and who rely heavily on mass mailings. 

 It has been used effectively in two ways. 

•  First, significant presence of gifts from a certain zip code indicates that the church is ministering effectively to people in that geographic location.  To reach out to more people likely to have an affinity with this church, mailings can be targeted heavily toward this zip code. 

 

• Conversely, the absence of contributions from certain zip codes can be a way of identifying significant mission opportunities.  The church could target mailings to areas not being reached and conduct community out-reach events in neighborhoods in the targeted zip code

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

Accounting for Short Term Mission Trips

Participants in short term mission trips are often called upon to help raise their own funds. In almost every case, churches want to know how much a specific mission trip participant has earned toward his/her trip. Additionally, they want to take donations online to help each participant reach their mission trip goals.

The easiest way to get the proper reporting out of church management software like Fellowship One is to configure a "sub fund" for each trip participant. This is simply a mechanism to understand how close/far each participant is from the mission trip goal. However, many churches see this as controversial and risky. They don't want to "officially" track this information for fear of compromising the charitable veracity of the gift, and they steer clear of any solution that involves a formal tracking of the contributions. However, this fear is not warranted and is usually driven by a lack of understanding of the real issues.

From a tax perspective, the important things to consider are:

1. In order for the contribution to be tax deductible, the short term mission trip must be an approved effort by the church.  Occasionally we run into circumstances where the church collects funds for a church member who is doing their own mission work, as opposed to participating the a mission effort of the church.  For example, a church member wants to go on a mission trip that’s sponsored by another church or another organization. 

2. Donor’s can designate funds for a specific individual, but in order for the contribution to be tax deductible, the church must have ultimate control/discretion as to how the money is spent.  A simple solution is to include a note or paragraph in the user document that specifically states that if an individual receives more funds than needed, the excess will be used by the church to support the mission.  This is important language.  Donors can’t expect to get their money back if the individual they are contributing towards exceeds their individual funding requirements, or even if that individual decides to back out of the trip. The gift is made to the church, or specifically towards the trip, but not the individual. That is the key.

From an accounting perspective, the considerations are different.

1. We advise church’s to have a separate GL account (not fund!) for each program’s revenue and expenses.  Churches often net receipts and disbursements together so the only thing that shows on their trial balance is the net amount.  This method is not in accordance with the accounting rules, but more importantly, the church needs to be able to see how much a program truly cost as opposed to only knowing the net result.

2. Sub accounts provide another alternative. If a church does not want to have a separate GL account for the revenues and expenses, then there is reporting power in the utilization of sub-accounts. A church can have a GL department for "Haiti Mission," for example, and then have a sub account for the receipts and another sub account on the GL for the disbursements. 

3. Lastly, subsidiary ledgers can provide the detail needed for internal reporting, without necessarily tracking that detail at the GL level. Church management software (like Fellowship One) is a good example of how a subsidiary ledger can help track the contributions for the individual participants.  Sub accounts on the GL for each individual participant is not practical or advisable, but subsidiary ledgers help meet this need effectively.

The rules for benevolence are a bit stickier than missions.  But that's a another topic...

Does your church struggle with the accounting rules for mission contributions? What other problems have you faced?  Join the conversation by commenting below.

Don’t put all your eggs in one basket

            A second way for a church to answer the question “Who gave us the money?” is to determine if the bulk of the tithes and offerings are concentrated within a small group of individuals.  This is a simple process and is accomplished by generating a list of the top ten to fifteen contributors.  If the percentage giving of this small group is too high, action needs to be taken.

 

I was told of one church that had two individuals providing seventy percent of the income!  This type of situation calls not for the focused steps discussed in my previous post, but for a much broader approach in two primary areas:

 

• The church should use extreme caution in budget planning being careful not to make significant commitments too far into the future.  Church leadership must keep in mind that their church is only one death, divorce or bad sermon away from financial disaster! 

 

• Also, this situation would be a clear signal that it is time to implement a broad-based stewardship education program directed to all age groups of the church.

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

990-N Filing Threshold Increased

Great news for the small nonprofits.  The filing threshold has finally increased from $25,000 in gross receipts to $50,000 in gross receipts for tax years ending on or after December 31, 2010.  This means if the nonprofit’s gross receipts are normally $50,000 or less you can file the simple 990-N e-postcard as opposed to the more detailed 990-EZ or 990 forms.  To read more about how to determine if you gross receipts are considered $50,000 or less, check out the IRS's website.

It is simple to file an 990-N.  Simply go to the IRS's website and follow the instructions.  The process takes less than 15 minutes.

The increase in the filing threshold for 990-N is part of the 2006 Pension Protection Act of 2006 which mandated most tax exempt organizations file an annual return.

Age Demographics

“”The secret of staying young is to live honestly, eat slowly and lie about your age.”-Lucille Ball  

 

One way to answer the question “Who gives the money?” is to analyze giving according to age groups.  Two methods of analysis can be used: Computing the total dollars given by each age-group and/or computing a per capita giving average within each age group.  These calculations allow the church to identify giving patterns within the church and determine if any of its member groups are lagging behind.  With this information the church would then be able to engage in strategic, focused stewardship education.

 For instance, if the younger groups in the church are lagging in giving, (which is often the case) the church could provide personal financial management programs aimed at young families (Dave Ramsey for instance) rather than conducting a church-wide “Stewardship Emphasis Sunday” (which is the usual approach.)

On the other hand, if the largest giving seems to be coming from the Boomer generation a different strategy may be called for.  As this group approaches retirement it may be time to implement a planned giving campaign.

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

 

Cash in the Attic

Getting Value out of Your Church’s Financial Data

             One of my wife’s favorite television shows is “The Antique Road Show”.  Each week, people bring all kinds of antiques and assorted junk to an exhibit hall where experts tell them what they have and more importantly what it is worth.  I have to admit that the show has a certain appeal to me as well.  I particularly enjoy the scenes where people bring in some object they thought was at best sentimental junk only to find out they possessed an item with immense value.

             For instance, one man had an old sampler in what he thought was a very nice frame.  He had decided to throw the old sampler away because he needed the frame for another picture.  On a whim, he took “the frame” to the Road Show only to learn that he had an early 19^th century sampler worth more than $50,000! 

             When it comes to financial reporting and analysis many churches resemble this lucky man.  They sit on a wealth of financial information never realizing its tremendous value because most churches focus all their energy answering three questions: “How much money did we bring in?”  “How much did we spend?” and “How much is left?”

 While the answers to these questions are indeed important, they are concerned with where the church has been.  But, by digging deeper into the financial and statistical information it already possesses, a church can not only know where it has been, but also spot trends and determine where it is going.

             One way of digging deeper is to combine financial data with other information.  Most churches, particularly the larger ones, have sophisticated church management software that captures significant non-financial information such as names, addresses, ages, zip codes, and contribution history to name a few.  Combining accounting information with this information greatly enhances a church’s planning abilities.

             To illustrate let’s focus on the revenues of a church.  The process is begun by adding one question to the ones mentioned above.  In addition to asking how much money the church has brought in, we also need to ask, “Who gave the money?”      

             In the next series of posts I will share several ways churches can dig deeper in order to answer this question.

Verne Hargrave is the Church and Ministry partner at PSK LLP and author of the book, Weeds in the Garden.

New Changes in Payroll Taxes

The Tax Relief, Unemployement Insurance Reauthorization & Job Creation Act that was signed into Law in December 2010 has made changes to the way you calculate your social security deductions on your employee paychecks for 2011.

Social Security tax rates will be reduced by two percentage points. The employee-portion of Social Security taxes will be reduced from the current 6.2% to a temporary rate of 4.2% for 2011 only. The employer-portion remains the same at 6.2%; and the Social Security wage base remains the same at $106,800 for 2011. Medicare tax rates are not changed: remaining at 1.45% each for employees and employers. Freelancers, farmers and other self-employed persons will see a corresponding reduction in their self-employment tax. The total 15.3% self-employment tax rate is temporarily reduced for 2011 to 13.3%. Self-employed persons will still be able to deduct the full amount of the employer's portion as an adjustment to income.

You have until January 31, 2011 to make sure you are calculating your employee deductions correctly and until March 31, 2011 to correct any payroll in January that might have been calculated using the old 6.2% deduction rate.

Please give us a call if you have any questions.

HEALTH CARE TAX CREDIT FOR SMALLER CHURCHES

Millions of small employers received postcards from the IRS last Spring that alerted them to the new small business health care tax credit and encouraged them to check their eligibility. Perhaps your church did not receive this notice because it does not file a tax return. Even if you didn’t receive a postcard, your church still may be eligible.

Eligibility Rules

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.

• Church size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).

• Average annual wage. A qualifying employer must pay average annual wages below $50,000.

Amount of Credit

• Maximum Amount. The credit is worth up to 25 percent of a church’s premium costs in 2010. On Jan. 1, 2014, this rate increases to 35 percent.

• Phase-out. The credit phases out gradually for churches with average wages between $25,000 and $50,000 and for churches with the equivalent of between 10 and 25 full-time workers.

The church will use new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the health care tax credit. It will then include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T (draft available for viewing) will be revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– to claim the health care tax credit.

This could be money in your church’s pocket! Let PSK assist you in determining if your church qualifies for the health care tax credit.  www.pskcpa.com.

OOPS!

My previous blog gave the wrong website address for ECFA (the Evalgelical Council for Financial Accountability) - the correct address is www.ecfa.org.  Sorry about that - unless you're interested in the Ethan Cohon Fine Arts Center in NYC!

ECFA and Commission on Financial Accountability

Just finished listening to a webcast of the Evangelical Council for Financial Accountability (ECFA) - www.ecfa.com - on the commission it's been asked to set up by Sen. Charles Grassley (R-Iowa).  For several years, Grassley's been pushing hard on some high-profile tele-evangelists on some big questions.  Now, he's asking the ECFA to be an independent group and offer suggested solutions to some key issues.  A couple of the areas to be examined:

1. Should churches be required to file an IRS form 990, like other nonprofits?

2. Should the ministerial housing allowance exclusion be modified/limited?

3. Should the prohibition against political campaign intervention by churches be repealed?

4. Sould there be tighter requirements related to "love offerings"?

I think the ECFA is very much on our side, so they'll protect the interests of churches in general.  Still, because it is a long-standing advocate of financial accountability by churches, the ECFA will probably advocate some tightening up in certain areas.

PSK is planning on being involved with the commission, at least in providing input.  Thoughts anyone?

One additional principle - Don’t push your luck!

“They did not require an accounting from those to whom they gave the money to pay the workers… (2 Kings 12:15)

 

            Well, I guess the only thing that can be said is that nobody’s perfect! 
We have no way of knowing if they lived to regret this lapse in accountability.  I do find it amusing that in spite of their exhaustive planning, they left a fairly significant loophole; not requiring an accounting of how the money was spent.  Perhaps they overlooked it, or more than likely, they became overconfident.  With all of the good folks doing so many good things, there was no need to mistrust anyone.  And in their case, it apparently worked out.  But if I were pastor of a church, I wouldn’t follow their lead.  It’s far too dangerous to push your luck.

The Bottom Line

             Like it or not, pastoral leadership of a church includes financial abilities as well as spiritual.  Pastors who ignore this fact do so at their own peril.  However, those who embrace this leadership role enhance the likelihood that their church’s ministry will not be derailed by financial catastrophes.  Here is a little exercise you may want to employ to make sure your church’s finances do not end in chaos.  Periodically, perhaps quarterly or semiannually, get out a tablet and write your thoughts on the following questions:

 

• Do you have a financial mentor?
• Are you paying attention to what is going on with your church’s finances?
• If receipts are down are you sure it is not the result of loss of faith in the administration of the church?
• Are you actively seeking ways for your people to participate in giving?
• Have you reminded yourself lately that financial matters of the church are spiritual matters too?
• Do you have security measures in place to protect the church’s assets, the most important of which are its employees and volunteers?
• Have you distributed the financial tasks among several people?
• Are your records and reports helping you do ministry?
• Do you have established processes that are understandable and repeatable?
• Is your church playing by the rules when it comes to the IRS?

 

           Taking just a few minutes to ask and obtain answers to these questions can help a pastor avoid   wasting enormous amounts of time putting out fires.  The ultimate bottom line? He can then spend more time doing what he was called and gifted to do, shepherding his flock.

The Church’s Accountability Extends to the Government

“When they had finished, they brought the rest of the money to the king…” (2 Chronicles 24:14)

 

            After implementing their processes, significant funds were raised.  The money was paid to the masons and carpenters and the work was begun.  Eventually, the temple was restored and services resumed.  And they even had a surplus!  The surplus was returned to the king.  Once again, I must confess that this next illustration is quite a stretch and ask the reader to remember I am not attempting to interpret Scripture, only sharing points this passage brings to my mind.  Because this topic is not very pleasant I will keep it short!

            Key: What I was reminded of, when I read that the surplus was returned to the king, was that like it or not, in some respects the church is accountable to the government.  In spite of our nation’s long held and cherished belief that the government should not interfere in the affairs of the church, the church does have a few responsibilities to government it must comply with. 

            Unfortunately, churches and ministries are coming under increasing scrutiny by the federal government.  A discussion of why this is taking place is beyond the scope of this discussion as is any treatment of church and state issues.  Key: However, to avoid unnecessary conflicts that have the potential to cripple a church’s ministry, each church should be diligent in three areas which in recent years have become hot button issues.

 

• First, be very careful to establish salaries and benefits that are reasonable.  One way to insure that salaries are reasonable is to have senior level salaries set by an independent compensation committee that keeps minutes of its decisions and relies on compensation comparison data to insure that the church’s salary is consistent with the market.
• Second, be aware of two types of IRS non-compliance by churches and ministries that frequently make the news.  If a church reimburses its employees for business expenses incurred on behalf of the church, it should do so using a written reimbursement plan that complies with IRS regulations.  Also, if a church issues credit cards to its employees, expenditures should be governed by a credit card usage policy as well as the reimbursement plan. 
• Churches should also exercise caution in soliciting and accepting gifts from donors.  All gifts of cash and property must be substantiated in the form of a written statement that is prepared in accordance with specific guidelines issued by the IRS.