2014 updated church financial guidebook 3-hour presentation
TRANSCRIPT
Church Financial
GuidebookResources for Ministers, Church
Treasurers, Financial Secretaries and Church Financial
Committees
Presenters InformationXxxxxxxxxxxxxxxxxXxxxxxxxxxxxxxxxxXxxxxxxxxxxxxxxxxXxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
CHURCH FINANCIAL GUIDEBOOKThis presentation is intended to provide church leaders and staff with timely and accurate information about the subjects covered. However, such information is not intended to be sufficient for dealing with a particular legal or financial problem, and the authors and distributors do not warrant or represent its suitability for such purpose. The reader should not rely upon this presentation as a substitute for the services of competent legal, accounting, or other professional advice.
But everything must be done decently and
in ORDER.
I Corinthians 14:40, HCSB
2014 Tax Updates
• 2014 Standard Mileage Rate- .56• 2014 Charitable Mileage Rate- .235• Housing Allowance Exemption
Challenged in Court• ACA Healthcare Exchanges
Church Financial Guidebook
• O – Overview• R – Receipts • D – Disbursements• E – Ethics: Safeguarding Church
Assets• R – Reports: Accounting & Record
Keeping
OVERVIEW
DEVELOPING A BIBLICAL CONCEPT OF MONEY:
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Whose money is it? (Ps. 50:10)GOD’s
What is our individual role?- (I Cor. 4:2)We are GOD’s trusted managers(stewards)
We are to return a portion to GOD’s organized family – Church (Mal. 3:10)
DEVELOPING A BIBLICAL CONCEPT OF MONEY:
1
• Stewards of Kingdom Promise• Stewards of Kingdom Power• Stewards of Kingdom Progress• Stewards of Kingdom Process
CONDUCTING AN ANNUAL STEWARDSHIP EMPHASIS
IMPACT
2-3
• Qualifications• Responsibilities• Length of Service
Prayerfully SELECTING A CHURCH
TREASURER
5
• Committed Christian • Dedicated to the ministry of the church (Tither)• Cordial & Fair Minded• Knowledgeable regarding the work of the church• Elected leader• Person of Integrity & Character• Fair and Trustworthy• Accounting knowledge or Willingness to Learn
QUALIFICATIONS
5
RESPONSIBILITIES:Principle Function
Receiving Disbursing
Accounting Safeguarding
The treasurer is responsible for the proper
of the resources that have been entrusted to the church
$
6
1. Long terms of service may provide stability & continuity
2. Church should decide3. Possible annual election or reaffirmation4. Guided by Constitution & Bylaw’s
RESPONSIBILITIES:Length of Service
8
Exempts the church from paying federal income tax
Allows the church to receive tax-deductible contributions
Sales & Use Tax – State Issue Property Tax Exemption – State Issue
UNDERSTANDING 501(c)(3) Tax Exempt Status:
9
OBTAINING 501(c)(3) STATUS:
Exemption Types
Automatic Individual Group
9
See IRS Publication 1828
No Contributions to Political Parties No Public Endorsement for/or against
Specific Candidates No Biased Voter Guides No Campaign Activities by Employees
within the Context of their Employment
RECOGNIZING IRS PROHIBITIONSOn Political Activity:
11
RECEIPTS
• GIVING RECEIVING COUNTING• CHARITABLE CONTRIBUTIONS• IDENTIFYING UNRELATED
BUSINESS INCOME (UBI)• WORKING WITH LIFEWAY• GIVING ELECTRONICALLY• ENCOURAGING PLANNED GIVING
RECEIPTS
“. . . it is more blessed to give than to receive” – Acts 20:35b
1. Individuals2. Groups3. Churches4. Businesses5. Others (Fundraisers, banquets, etc)
GIVING THE MONEY:Sources
12
GIVING THE MONEY:Channels
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• Worship Services• Sunday School• Small Groups• Mail - Postal Service• Online - Electronic• Special Gifts/Bequests• In Kind Gifts -Non Cash• Purchase Income
GIVING THE MONEY:Channels
13
• Implement Safe & Secure Procedures for immediate deposit(Secure Counting Room)
• Ensure Separation of Duties• Never require Treasurer to count
and deposit money • Enlist Counting Team (Committee)
RECEIVING THE MONEY:
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RECEIVING THE MONEY:
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• Comply with IRS Guidelines• Encourage stewardship by providing
giving statements• Give contribution credit
appropriately – “Church Control”• Manage benevolence requests/gifts
properly
CHARITABLE CONTRIBUTIONS:Guiding Principles
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1. Is it a trade or business?2. Is it regularly carried on
(Frequent and Continuous)?3. Is it substantially related to
furthering the organization’s exempt purpose
IDENTIFYING Unrelated Business Income (UBI)
QUESTIONS TO ASK
21
1. Most of work performed by VOLUNTEERS
2. Activity is carried on for CONVENIENCE of members
3. Activity consists of selling DONATED MERCHANDISE
IDENTIFYING Unrelated Business Income (UBI)
ACTIVITIES NOT CONSIDERED TO BE UBI
21
1. Customizable offering envelopes
2. E-Giving3. Contribution Statements4. Special Fundraising/Major Gift
Development5. Planned Giving/Estate Tithing
WORKING WITHLifeWay Envelope Services
22
• Electronic Giving continues to increase
• Church Considerations:– Fully evaluate administrative and
processing costs– Urge members to use Electronic Bill Pay– Potential increase in e-giving– Systematic/Consistent option for donors
ELECTRONIC GIVING:Considerations
23
1. Single Largest Act of Whole Life Stewardship
2. Partnering Together for the Sake of the Lost
3. Giving is a Reflection of our True Love and Loyalty
4. Leaving an Eternal Legacy
ENCOURAGINGPlanned Giving/Estate Tithing
24
ENCOURAGINGPlanned Giving/Estate Tithing
24
Resources to Remember
FAMILY FAITH
DISBURSEMENTS
• SUPPORTING MISSIONS & MINISTRY• EBRACING THE COOPERATIVE
PROGRAM VISION IN THE CHURCH• DISBURSING CHURCH FUNDS• MANAGING DESIGNATED FUNDS
DISBURSEMENTS
“. . each of us will give an account of himself to God” – Rom. 14:12b
• Obligations of church should be paid promptly
• Plan ahead for financial challenges(Financial Contingency Plans)
• Final responsibility and authority for disbursements belongs to the church
SUPPORTING MISSIONS & MINISTRY: General Funds
29
“Share with the saints in their needs. . .” – Rom 12:13a
• Send mission gifts on a timely basis
• Prayerfully consider church % giving to Cooperative Program and to local Baptist association
• Carefully budget planned mission support
SUPPORTING MISSIONS & MINISTRY: CP & Assoc. Miss.
29-31
• www.stewardshipdirect.comStewardship Development
Association “equipping churches to address
Biblical stewardship”
EMBRACING THE VISION : Resources
32
• www.stewardshipdirect.com• www.cpmissions.net
Southern Baptist: Cooperative Program Missions Resources
EMBRACING THE VISION : Resources
32
• www.stewardshipdirect.com• www.cpmissions.net• www.actsone8.com
Resources on becoming a worldwide mission center
EMBRACING THE VISION : Resources
32
• www.stewardshipdirect.com• www.cpmissions.net• www.actsone8.com• www.sbc.net
EMBRACING THE VISION : Resources
32
Official website: Southern Baptist
Convention
• Petty Cash– Minimal amounts– Emergency payments
• Check Payments– Majority of disbursements– Require 2 signatures– Ensure adequate documentation
DISBURSING CHURCH FUNDS
34
1. Establish a written policy for creating a new fund
2. Clearly defined Purpose, Governance, Disbursement, & Accountability Procedures
3. Inform members of the policy4. Keep a list of contributors
MANAGING DESIGNATED FUNDS: Establishing
35
MANAGING DESIGNATED FUNDS: Samples in Guidebook
36-41
Benevolence
Love Offering
Building & Grounds
Ministry
Memorial
Missions
DISBURSEMENTS: COMPENSATING CHURCH
WORKERS
• WORKING WITH PERSONNEL COMMITTEE
• MAXIMIZING TAX BENEFITS FOR MINISTERS
• HIRING CONSIDERATIONS• REPORTING REQUIREMENTS• WORKING WITH GUIDESTONE
COMPENSATING CHURCH WORKERS
Provide following information:1. Current staff compensation2. Breakdown of compensation3. Budgeted amount available for
staff compensation
WORKING WITH Personnel Committee
“. . . the laborer is worth of his wages” – I Timothy 5:18b 42
Identify Ministerial/Support Staff non-salary compensation:
1. Housing Allowance (ministers)2. Non-Taxable Fringe Benefits3. Accountable Reimbursement
Plans
WORKING WITH Personnel Committee
42-43
MAXIMIZING TAX BENEFITS:Housing Allowance
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Ministerial Classification Guidelines:1.Ordained, Licensed or Commissioned
(Required)2.Administers the ordinances3.Conducts religious worship4.Management responsibilities in local
church5.Considered a religious leader
MAXIMIZING TAX BENEFITS:Housing Allowance
43}
BALANCING
TEST
Steps to Designate Allowance:1. Adopt Initial Procedure (One time only)2. Receive Written Request of amount
from minister (annually)3. Provide Written Response to minister
designating amount of housing 4. Approve in Advance of payment
MAXIMIZING TAX BENEFITS:Housing Allowance
43
• Federal judge rules Nov 2013 that Ministerial Housing Allowance exclusion is unconstitutional
• Decision NOT Final . . . . Story developing . . . .
MAXIMIZING TAX BENEFITS:Housing Allowance
2014 TAX REMINDER
• Over the Counter medications require a written prescription
• Penalty tax up to 20% on improper distributions
• For 2014, Flexible Spending Accounts (FSA) limited continued at $2,500 per year
HEALTH CARE REFORM:Medical Reimbursement Accounts
45
IRS Requirements:
1. Involves a ministry connection
2. Requires employee to substantiate expenses
MAXIMIZING TAX BENEFITS:Accountable Reimbursement Plan
45
IRS Requirements:1. Involves a ministry connection2. Requires employee to substantiate
expenses3. Requires employee to return any excess
• Expenses substantiated within 60 days• Excess reimbursement returned within
120 days
MAXIMIZING TAX BENEFITS:Accountable Reimbursement Plan
45
2014 TAX UPDATE
• For 2014 the IRS has announced the following: (effective Jan 1, 2014)
– 56 cents per mile for business/ministry miles driven (Reduced from 2013)
– 23.5 cents per mile driven for medical or moving purposes (Reduced from 2013)
– 14 cents per mile driven in service of charitable organizations
MAXIMIZING TAX BENEFITS:Standard Mileage Rate
45
WHEN
WHAT
WHERE
WHY
WHO
Itemized Amount
Time/Date
Place/Location
Ministry Purpose
Ministry Relationships
MAXIMIZING TAX BENEFITS:Accountable Reimbursement Plan
46
2014 TAX REMINDER
• Provided for Substantial Business/ Ministry Reasons
• NOT Provided for merely Compensatory Reasons
• Actual Amount of the Expense is Substantiated
MAXIMIZING TAX BENEFITS:Cell Phone – NOT Taxable IF. .
47
MAXIMIZING TAX BENEFITS:SBC Annual Compensation Study
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• Assist churches in objectively compensating their staff
• Unique to Southern Baptists• Free comparison reports• Reports are available on Internet• Updated every two years• compstudy.lifeway.com
MAXIMIZING TAX BENEFITS:SBC Annual Compensation Study
49
• I-9 Form: Employment Eligibility Verification• W-4 Form: Employee’s Withholding
Allowance Certificate• W-5 Form: Earned Income Credit • State Income Tax Withholding Form• Mandatory New Hire Reporting Form• Social Security Number• Unemployment & Workers Compensation• Employee Federal Tax Reporting:
Forms W-2, W-3, 941 or 944
HIRING CONSIDERATIONS:For New Employees
51
TAX REMINDER
• Must use Electronic Funds Transfer• Subject to a 10% Penalty for failure-
to-deposit• Total Quarterly Tax Liability < $2,500
– File with Quarterly Form 941• May use Annual Form 944 if notified
by the IRS• See IRS Publication 15, Circular E
COMPLYING WITH FEDERALTax Deposit Requirements
61
2014 TAX UPDATE
• Tax rate applies to the first $117,000 of salary for 2014
• Consider updating taxwitholding and/or quarterly estimated payments
COMPLYING WITH FEDERALPayroll Tax Extended
61
2014 TAX REMINDER
• Less than 250 W-2’s - OPTIONAL• Over 250 W-2’s – REQUIRED 2014
– Report Cost of Employer Provided Health Care Costs
– Reported ON W-2, Box 12, using Code DD– Informational ONLY– NOT Taxable
COMPLYING WITH FEDERALW-2 HealthCare Reporting Rules
62
TAX REMINDER
• Expanded 1099 Reporting Rules REPEALED during 2011
• Continue to issue 1099 for payments to vendors of $600 or more
COMPLYING WITH FEDERAL1099 Reporting Rules
63
• Retirement Services• Investment Services• Life, Accident & Disability Insurance
Services• Medical & Dental Insurance Services• Property & Casualty Insurance Services• Mission Dignity• www.guidestone.org
WORKING WITH:GuideStone Financial Resources
66
ETHICS: SAFEGUARDING CHURCH
ASSETS
• ETHICS OVERVIEW• DEVELOPING AN EXAMINATION
PROCESS• INTERNAL CONTROLS• SUGGESTED POLICIES &
PROCEDURES• CHURCH FINANCIAL MODELS• RECORD RETENTION
ETHICS: Safeguarding Church Assets
• Obtain written statement of law• Notify proper church committee• Present law/guidance to staff or
church• Consider resignation if not properly
handled
ETHICS OVERVIEW
“For we are making provision for what is honorable . . .” – II Cor. 8:21a 67
Every church should have some type of __financial exam completed annually .
Ensures policies and procedures are being followed
Increases confidence in accounting system
Assures members their gifts are being used efficiently and effectively
Protects integrity of financial leadership
DEVELOPING A CHURCH:Financial Examination Process
68
EXTERNAL Financial Examination:
Full Financial AUDIT Financial REVIEW Financial COMPILATION Agreed-upon Procedures
DEVELOPING A CHURCH:Financial Examination Process
71
INTERNAL Financial Examination: Committee Selection : Active Church Members Duly elected by the church Independent from other financial duties Possess integrity and financial knowledge Give complete and open access Give clear task assignment
DEVELOPING A CHURCH:Financial Examination Process
73
CHURCH FINANCIALControls
• Internal Controls• Separation of Duties• Suggested Financial Policies and Procedures
• Church Financial Organizational Models
74-83
• Varies by Church• Varies by Record• General Guidelines
RECORD RETENTION
84-85
REPORTS: ACCOUNTING &
RECORD KEEPING
• WORKING WITH BUDGET COMMITTEE
• REPORTING TO STAKEHOLDERS• KEEPING FINANCIAL RECORDS• DOING IT RIGHT
REPORTS: Accounting & Record keeping
WORKING WITHBudget Committee
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“You must have accurate and honest weights and measures - Deut. 5:15a
1. Seek spiritual direction2. Consult with church leaders
– Budget Preparation
WORKING WITHBudget Committee
86
“You must have accurate and honest weights and measures - Deut. 5:15a
1. Seek spiritual direction2. Consult with church leaders3. Build congregational acceptance
– Budget Presentation
WORKING WITHBudget Committee
88
“You must have accurate and honest weights and measures - Deut. 5:15a
1. Seek spiritual direction2. Consult with church leaders3. Build congregational acceptance4. Encourage personal commitment
WORKING WITHBudget Committee
89
“You must have accurate and honest weights and measures - Deut. 5:15a
•Develop your church budget based on a biblical strategy to get your church from your
ENCOURAGE PERSONALCommitment
88
•Leave room for God to do something miraculous in the hearts of your people
MISSION VISION
1. Congregation2. Community3. Denomination4. Government5. Other Donors
REPORTING TO Stakeholders
89
• Annie Armstrong Easter Offering• Lottie Moon Christmas Offering• Individual State Missions Offerings• Associational Missions Offerings• Church Building Fund, etc.
KEEPING FINANCIAL RECORDS:Designated Mission Offerings
91
“. . . whatever you do, do everything for God’s glory - I Cor. 10:31b
• Keep accurate and detailed records• Follow established church guidelines• Maintain Bonding insurance• Accountability involves EVERYONE!
DOING IT RIGHT:Accuracy & Accountability
92
The Church Financial Guidebook and this presentation are provided for
you through the cooperative work of your Baptist State Convention and
the Stewardship Development Association
www.stewardshipdirect.com
Church Financial
GuidebookResources for Ministers, Church
Treasurers, Financial Secretaries and Church Financial
Committees