World Wide Missions.

World Wide Missions

36,756,666 (estimated) Population

Guiding Churches Through the Money Maze
Rod Wiltrout Church Finance Specialist Missions Advancement Group California Southern Baptist Convention Fresno, CA

Table of Contents Church Treasurer Church Record-Keeping
Better Budgeting Charitable Contributions IRS Issues Financial Procedure and Review Income

Table of Contents Professional Expenses Housing – Parsonage Allowances
Church Reporting Requirements Who is a Minister? Other

Things every church needs to know
Church as a Business Things every church needs to know

Here is What the IRS Says
You are a 501 (c) 3 business Focus of organization's purpose must be to benefit the community or society as a whole, not just the organization's members and their families or other select individuals. A §501(c)(3) organization may not devote a substantial part of its activities for lobbying (try to influence) purposes. (section 2A.1)

Here is What the IRS Says
If substantial lobbying activities exist, tax exempt status is forfeited. Lobbying activities may be found to be substantial in the ten to twenty percent (10-20%) range of total nonprofit activities. (section 2A.2) Any organization exempt from tax under §501(a) must nonetheless pay income tax on its unrelated business income. This refers to income derived from any unrelated trade or business regularly carried on. (section 3A) (990T income)

Qualifications and Duties
The Treasurer Qualifications and Duties

First, the Basics Funds must be properly managed
IRS does not tell the church how much to pay staff, but it does require that it be done in a certain and timely manner Church members want to know that the money they give is being handled properly They demand a greater accountability and have higher expectations of business operations

The Treasurer: One of the most time consuming jobs in the church
Needs to produce timely and reliable information Bills must be paid on time Tax requirements must be met May be responsible for financial decisions

Qualifications Willingness to work cordially with people and the ability to be fair minded Have knowledge of the working organization of the church Should reflect the highest Christian ideals Should have knowledge of accounting procedures or the willingness to learn accounting procedures Person selected to be church treasurer, tithes

Qualifications Possess a sense of calling from God
Be open and willing to receive training Be capable of managing details of financial matters Be persons of integrity (trustworthy) Be good stewards (managers) Be capable of maintaining confidentiality Have a good reputation

Duties Keep accurate records in appropriate financial journals of all monies received and disbursed. Reconcile monthly bank statements and correct ledgers as needed. Sign checks in accordance with church policies and procedures and verify the supporting data for each check request. (Policies & Procedures should be written)

Duties Make monthly and annual reports to the church. If the church has a committee to oversee the financial matters of the church the treasurer should also make regular reports to the committee. Keep church staff and appropriate committees informed of any trends or changes in fiscal matters. Instill and preserve a high financial confidence throughout the congregation.

Duties Submit accurate financial records for annual audit according to church policy REMEMBER : the money belongs to the CHURCH not the treasurer.

Trustee Duties

The Basics Accountable to the Pastor or Executive Pastor
Ministry Target: the Church Minimum Maturity Level: Stable, Mature Christian Spiritual Gifts: Administration, Giving, Service Talents/Abilities: Business and/or Finance

The Basics Personality Traits: Trustworthy, Honest, Sincere, Discreet, Levelheaded, Mature, Analyst, Dependable Passion for: Good Stewardship Length of Service in Office: 3-5 Years Time Commitment: 1-2 Hours per Week or Month as Needed Commitment: Participate in Meetings or Training – 1-2 Hours per Month

Responsibilities/Duties
Establish and Review Procedures for Church’s Financial Management Serve as Legal Guardians for All Church Property Represent the Church in Legal Matters Give Input/Financial Advice to Stewardship Committee and Pastoral Staff as Needed

Execute Bank Notes, Deeds, and other Legal Documents After Receiving Approval from the Church Decision-making Body Examine Quarterly Financial Reports to Monitor Financial Expenditures of the Church Fulfill the Laws of this State while Serving as a Trustee of the Church

Assist in the Process of Awarding Contracts for Work that Must be done to Improve or Repair Church Buildings and Property 2001 Gospel Light. Permission to Photocopy granted. The Big Book of Job Descriptions for Ministry

Church Record - Keeping

Just Part of the Job… Someone must be responsible for the stewardship of the church's funds. Keeping accurate financial records Preparing accurate and meaningful financial statements Budgeting and anticipating financial problems Safeguarding and managing the organization's financial assets Complying with federal and state reporting requirements

Preparation of Financial Reports
Comprehensible so that anyone taking the time to study them will understand the financial situation. Concise so that the person reading them will not get lost in detail. Inclusive so that all activities of the church are reported. Comparative with year to date spent or budget amounts. Timely, as soon after the end of the month as possible.

Accounting Methods Single Entry Double Entry

Counting the Money At least two counters in a secure room
Necessary tools-calculators w/ paper, red pencils, coin rollers, locking money bag Keep envelopes, or computerized record, for three years Loose offerings counted and verified Envelopes opened, amounts enclosed verified and marked on each envelope This is from my own experience and maybe yours. Talk briefly about the danger of people coming while counting is taking place; loss of attention, miscounts, misplaced monies, etc. ALSO, talk about the policies on p Spending limits are necessary for large expenditures. You cannot spend more that the account currently has until special permission is given by the church.

Total amounts taken out of envelopes should agree with total of all envelopes
Notations of designated offerings noted on count sheet Deposit of all monies is prepared Total deposit must be equal to coins, bills and checks, notes on count sheet Totals of envelopes, special gifts, and the loose offerings must also equal total deposit All money received should be deposited and have counters sign count sheet

Cash Management Internal Control Detect error or fraud
Check accuracy and dependability of financial records Encourages adherence to regulations and policies – should be in writing Keeps honest members honest by removing the temptation of dishonesty Basic Control Do not assign the same person responsibility for more than one of the following tasks: Counting the offering Writing checks Reconciling the bank statements Recording individual contributions No payments for services from offerings

What are Contributions?
A charitable contribution is the voluntary transfer of cash or property motivated by something other than "consideration". Consideration is something being received in return for a payment.

Gift Options: see page 15-16
Cash Securities Real Estate Life Insurance Bargain Sale Personal Property Charitable Gifts of Partial Interest Bargain Sale-As its name implies, a bargain sale occurs when a donor, who intends to make a charitable contribution, sells property to charity for less than its fair market value. Charitable Gifts of a Partial interest-For income tax purposes, a charitable deduction is generally not allowed for a gift of a partial (i.e., less than entire) interest in property, according to Sec. 170(f)(3)(A). However, Sec. 170(f)(3)(B) permits a deduction for a gift of an undivided portion of a donor's entire interest in property.

Gift Options Charity Auction-gift is only amount spent above fair market value Gifts made by an individual directly to a missionary are not deductible as charitable contributions. To be tax deductible contribution must be to or for the use of an IRS approved tax-exempt organization. If the gift meets the true definition of a gift, the missionary would not have to claim it as income. See page 21. Charity Auction-Donors who purchase items at a charity auction may claim a charitable contribution deduction for the excess of the purchase price paid for an item over its fair market value. The donor must be able to show, however, that he or she knew that the value of the item was less than the amount paid. For example, a charity may publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that will be available for bidding. Assuming the donor has no reason to doubt the accuracy of the published estimate, if he or she pays more than the published value, the difference between the amount paid and the published value may constitute a charitable contribution deduction.

What is Not a Tax Deductible Gift page 16
Service Use of Property Gifts made to Individuals – may not designate the recipient of the gift Private School tuition There can be no strings attached and the gift must be used for tax purposes in the year it was given The gift is given at the point of “irrevocable giving over” (Wave Offering)

Conditions for Gift Giving
Gifts in excess of $5,000 must be appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price. Receipt should not list value of the gift Receipt should list items on page 22 Donee (church) must keep sufficient records to validate gift Receipt must be given no later than January 31 of the year following donation

IR , Dec. 22, 2005 WASHINGTON — Internal Revenue Service officials today reminded taxpayers that they must obtain a charity’s written acknowledgment of their vehicle donation before they claim a deduction for the donation. For deductions of more than $500, the taxpayer is required to attach the acknowledgment to the taxpayer’s return for the year of the donation. Effective for vehicles donated to charity on or after January 1, 2005, the American Jobs Creation Act of 2004 provides that, generally, a taxpayer’s deduction is limited to the gross proceeds from the sale of the vehicle by the charity. The charity must provide a written acknowledgment within 30 days after the vehicle is sold that notifies the taxpayer of the amount of the gross sales proceeds. The IRS is aware that questions have arisen as to whether the charity must sell the vehicle in 2005 in order for the donor who donated a vehicle in 2005 to receive a deduction for The charity does not need to sell the vehicle in A taxpayer can take a charitable contribution deduction only for the year the vehicle is transferred to the charity, even if the vehicle is not sold by the charity until a later year. (Only taxpayers who itemize their deductions can take a charitable contribution deduction.) However, a taxpayer cannot take a charitable contribution deduction of $500 or more for a vehicle donation unless the taxpayer has received a written acknowledgment of the donation from the charity and attached the acknowledgment to the return. If the taxpayer receives the written acknowledgment after filing the tax return for the year of the donation, the taxpayer may, after receiving the acknowledgment, file an amended return for that year and claim the deduction on the amended return. The taxpayer must attach the acknowledgment to the amended return.

Restricted Funds These funds are used to account for resources received from donors or outside agencies, but are restricted to a specific purpose. (building fund, youth fund) The restrictions or guidelines for the fund should be in writing. Takes a church vote or letter from donor to un-designate or re-designate funds

Restricted Funds HOWEVER, donors cannot force church to adhere to their designation Violates irrevocable giving over of funds However, DA can and often does “Enforcing Donor Restrictions on Gifts to Charity” by Richard Hammer gives full treatment of this issue.

Discretionary Funds Used at the discretion of the party (s) who oversee it List of (written) restrictions on use of funds is required to keep funds from becoming income to recipient – monthly Adequate accounting of funds is required Ask for IRS Publication Or, you can download a copy on the IRS website, Page 54

Discretionary Funds (2) private benefit
In addition to the prohibition on inurement to “insiders,” a section 501(c)(3) organization’s activities may not serve private interests. The tax guide explains this limitation as follows: An [exempt] organization's activities must be directed exclusively toward charitable, educational, religious, or other exempt purposes. Such an organization's activities may not serve the private interests of any individual or organization. Rather, beneficiaries of an organization's activities must be recognized objects of charity (such as the poor or the distressed) or the community at large (for example, through the conduct of religious services or the promotion of religion). Private benefit is different from inurement to insiders. Private benefit may occur even if the persons benefited are not insiders. Also, private benefit must be substantial in order to jeopardize exempt status.

Outrageous salaries and benefits
All salaries and compensation amounts need to be "reasonable." The church should determine whether its salaries are in line with other churches and purchase salary surveys. Excessive benefits can include expensive cars, cellular phones, and the use of a limousine or airplane. The church should secure board approval for all compensation and benefits.

IRS Issues

Be Compliant with CA and IRS
Articles of Incorporation Bylaws Exemption from Franchise Tax Statement of Information Yearend IRS Regulations that Effect the Church

Forms You Need to File..\..\ABC's of Church Budgeting\CLT Conference\2010\Church Reporting Requirements.pptx

Church Reporting Requirements
44

Willful or Intentional Disregard Sec. 6672 - 100% penalty
“Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof,shall in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not collected for and paid over” 45

Code Section: 7201 Action: Willful attempt to evade or
defeat tax. Penalty: A felony, with a criminal penalty of up to $100,000 (up to $500,000 for a corporation), and imprisonment of up to 5 years (or both).

Code Section: 7204 Action: Willful failure to provide a W-2 to employees, or willfully including false information in a W-2. Penalty: A misdemeanor, with a criminal penalty of up to $1,000, and imprisonment or up to 1 year (or both).

Form W-2 Wage and Tax Statement W-2C if you make a mistake on the W-2 Form W-3 Transmittal of Wage And Tax Statement W-3C if you make a mistake on the W-3 SLIDE 1 Introduction Slide 49

Form W-2G Certain Gaming Winnings (Example Raffles) For more information on reporting requirements for gaming activities, see IRS Publication 3079, Gaming Publication for Tax-Exempt Organizations State of CA - 50

Form W-9 Request for Taxpayer Identification Number Before you pay someone you need their Federal ID # or their Social Security Number 51

Sales & Use Tax – Calif. David Rutledge will teach on this during the 2nd hour elective. Don’t Miss it! Know the difference between Tax Evasion & Tax Avoidance 52

Form 941 Form 941X - To correct mistakes
Form 941 Employer’s Quarterly Federal Tax Return Three types of taxes: Income taxes, Employee’s FICA, Employer’s FICA (non-ministerial) Taxes paid monthly if taxes are $50,000 or less in the lookback period Taxes paid bi-weekly if taxes are more than $50,000 File 941 Quarterly even if you have only ministerial staff See IRS Publication 15 ( - download a new one (use a payroll service and you will not have to deal with this) Form 941X - To correct mistakes 53

Penalties For Paying Late 2% - Deposits made 1 - 5 days late
10% - Deposits made 16 or more days late 10% - Deposits made at an unauthorized financial institution, paid directly to the IRS, or paid with your return. 15% - Amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. (See IRS Publication 15) (Use a payroll service and you will not have to deal with this) 54

Employer’s Annual Federal Tax Return
Form 944 Employer’s Annual Federal Tax Return Small employers that have been notified by the IRS to file Form 944 ($1,000 or less - see form instructions) may use that form; other employers required to file must use Form 941. 55

Form Annual Return of Withheld Federal Income Tax This form is used to report withheld federal income tax from nonpayroll payments Gambling winnings, backup withholding (28%) when you do not have the Federal ID number or Social Security number Form 945X - To correct mistakes 56

Form 990 & 990-EZ Return of Organization Exempt From Income Tax Form 990-N (electronic postcard), Electronic Notice for Tax Exempt Organizations Not Required to File Form 990 or 990-EZ CHURCHES NOT REQUIRED TO FILE ANY OF THESE 57

Business Income Tax Return Form is due when income is $1,000 or more
Form 990-T The Only One the Church fills out! Exempt Organization Business Income Tax Return For more information on unrelated business income, see Unrelated Business Income Tax (UBIT) IRS Pub 1828 Form is due when income is $1,000 or more 58

Form 990-W Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organization 59

I-9 Must be filled out by all employees and filed separately from employee file
All employees (new employees and those hired since Nov. 6, 1986) must fill out section of Form I-9 and churches must fill out section two Do not file Form I-9 with U.S. Immigrations and Customs Enforcement (ICE) or USCIS. Form I-9 must be kept by the employer either for three years after the date of hire or for one year after employment is terminated, whichever is later. The form must be available for inspection by authorized U.S. Government officials (e.g., Department of Homeland Security, Department of Labor, Office of Special Counsel). 60

1096 is the Transmittal form for 1099 misc
Issued to self-employed for income tax or non employees. Issued if paid more than $600 annually Not needed for a corporation or for anyone who will receive a W-2 from another employer for work done Name, address and SS needed before 1099 can be issued. Get the info before payment is made and have them fill out a W-9 1099 is corrected by reissue with the box at the top mark checked 1096 is the Transmittal form for 1099 misc 61

Form DE-542 (CA) Independent Contractors
WHO MUST REPORT: Any business or government entity (defined as a “Service-Recipient”) that is required to file a Federal Form 1099-MISC for service performed by an independent contractor (defined as a “Service-Provider”) must report. You must report to the Employment Development Department within twenty (20) days of EITHER making payments of $600 or more OR entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier. This information is used to assist state and county agencies in locating parents who are delinquent in their child support obligations. 62

DE-1NP (CA)– Employment Form for Non-Profits
An employer is required by law to file a registration form with the Employment Development Department (EDD) within fifteen (15) calendar days after paying over $100 in wages for employment in a calendar quarter, or whenever a change in ownership occurs 63

DE-34 (CA) REPORT OF NEW EMPLOYEE(S)
WHO MUST BE REPORTED: State law requires all employers to report all newly hired or rehired workers to EDD within 20 days of their start-of-work date. State and county agencies use this information to assist them in locating parents who are delinquent in their child support obligations. An individual is considered a new hire on the first day in which he/she performs services for wages. An individual is considered a rehire if the employer/employee relationship has ended and the returning individual is required to submit a W-4 form to the employer. 64

DE-6 (CA) - Quarterly Wage & Withholding Report
Can be done online www edd.ca.gov State version of IRS 941 65

DE-7 (CA) - Annual Reconciliation Report
66

CA Franchise Tax Every church or ministry that incorporates in the state of California has to pay a minimum tax of $ per year unless the church or ministry files for an exemption. The exemption is not automatic! Churches get these notices because they never filed for the exemption. In order to apply for the exemption, you need to file Form FTB-3500 or FTB-3500A. If you have recently incorporated (within the last 4 years), and have not filed for the exemption, consider doing it immediately. 67

Out of State Guest Speakers Withholding
Did you know that the state of California requires all churches and ministries to withhold 7% of all honorariums over $600 paid to guest speakers that live outside the state? (Prior to $1,500) Report to the state on form 592-B the amount of earnings and the amount of withholdings. The penalty for not withholding is at least 10% of the entire honorarium. This is a penalty against the church 68

Calif. Statement of Information
Updates your church office address Updates your Principal Officers; Pastor (CEO), Secretary, Chief Financial Officer (Treasurer in small church) Must be done biennially No cost Penalty for not doing so: possible Corporate Status Suspension To see your status 69

Form 5578 Annual Certification of Racial Nondiscrimination
If a church has a school, the Annual Certification of Racial Nondiscrimination must be filled out (form 5578) Form is due 15th day of 5th month after close of fiscal year This includes preschools through universities Church must have written nondiscrimination policy-known to community in newspaper 70

Contributions All cash donations less than $250 must be substantiated by either bank record (canceled check) or written communication from the charity All donations over $250 must be substantiated by written communication from the charity with name of donor and “the declaration” on statement Non Cash Property over $250 in value must have description No goods or services were received for contributions except that which was spiritual in nature. 71

Contributions Non Cash gifts in excess of $5,000 must be appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price. Receipt should not list value of the gift Donee (church) must keep sufficient records to validate gift-form 8282 Receipt must be given no later than date of donation or tax return due date 72

Other Forms to Fill Out Salary Reduction Form for 401k & 403b
Housing Allowance form (ministers) New W-4 73

Other Areas to Know About
Americans with Disabilities Act Political Activities of Churches Regulation of Charitable Solicitations Federal and State Securities Laws Copyright Law Zoning Law and Churches Building Codes Nuisance Eminent Domain 74

Where to Find Forms IRS – Mail or Local IRS office
IRS website – CA Franchise Tax Board – CA Board of Equalization – 75

For furthering Requirements.pptx
David Rutledge EA, CEP, RFC Stewardship Consultant California So. Baptist Convention Rod Wiltrout - Church Finance Specialist yourchurchmatters. com www. yourchurchmatters. Com www . Csbc. Com/financialmatters ..\..\ABC's of Church Budgeting\Volunteer Ministry\Capturing Community Volunteer Hours and Costs Holly edited.pptx 76

Review Committee

Financial Procedure and Review (Not an Audit)
The purpose of a review of the church’s financial records is to: Support the treasurer in his/her duties. Verify that the financial records area being maintained in an accepted accounting practice manner. Verify that disbursements and receipts are posted correctly and reconciled with the bank. Verify that the financial reports that have been given to the church agree with the official General Ledger and Balance Sheet of the church.

Review is to be performed when
The fiscal year ends. A new treasurer is elected. Misuse of funds is suspected. Any other time an appropriate governing board so requests.

Responsibilities of Review Committee
Spot-check the offering envelopes to verify the individual record of contributions Verify bank deposit slips with entry in financial records Spot-check disbursements for proper entry and distribution of charges to various budget accounts Check the accuracy of the total in all accounts

Responsibilities of Review Committee page 24
Determine if approved procedures have been followed in the handling of church funds Study the insurance program of the church to determine if sufficient amount is carried. Review Committee does not perform this task if the church has assigned someone else this responsibility, such as Properties Committee.

Review Committee should submit list of people to be bonded including: Treasurer Counting Committee Any secretaries handling monies Others who handle funds Blanket policies may be provided through church insurance company Study the retirement and employee insurance programs to determine if adequate protection is provided. Do not perform this task if another committee has this task. J. David Carter, Managing Your Church Finances…Made Easy, (LifeWay Press, 1998) p. 54.

For additional resources Call (800) for a copy of “A Financial Examination Guide” by Marvin Peters, D. Min.

Investment Strategies, Policies, and Procedures
Questions You Should Ask

Questions You Should Ask:
Which types of investments are acceptable risk to your church? Who will administrate the funds? A person or committee? What percentage of funds will be invested? Can the broker be a church member? Ethical standard – types of prohibited companies – pornography, tobacco, alcohol, abortion, gambling, etc.? Written policies and procedures.

Dynamic Church Budgeting
Hello, my name is ________________. I represent the Stewardship Development Department of the California Southern Baptist Convention. Today we are going to look through a process to help you develop a comprehensive budget that is based on your Mission, Vision and goals for this year. Along the way we will look at possible problem areas with possible answers to those problems. Let’s begin. Holistic Budgeting for the 21st Century

Better Budgeting A budget is nothing more than your church's plans expressed in numbers, an expression of what the church would like most to do

OBJECTIVES OF A BUDGET:
To be good stewards of the money with which the church has been entrusted. To develop a total church plan to guide planning and expenditure decisions during the year. The sharing of goals and budget needs among leaders of the church. The harmonizing of leaders goals with individual committee goals and church needs and concerns. To facilitate financial reporting to the church.

Types of budgets: Same as Last Year Zero Based Budget Capital Budget
Construction

Budget Preparation and Use
Ask the right questions page 13 Analyze future needs Update ongoing costs Determine amount of debt reduction Account for cash flow fluctuations Compare to previous year’s budgets Educate staff on the budget Who monitors the budget How often is it monitored How are over and under-budgeted issues handled Is the budget used as a mirror to reflect the church’s direction and emphasis

The Finance /Stewardship Team

Require all people on Finance /Stewardship team to:
Possess a sense of calling from God Be open and willing to receive training Be persons of integrity Be tithers and good stewards Be capable of maintaining confidentiality Mature believers-understand biblical principles of finances Ministry oriented J. David Carter, Managing Your Church Finances…Made Easy. LifeWay Press, Nashville, TN. 1998Page 12 Talk through briefly. Ask if there any other qualifications that should be added. Write them down on a white board if possible. Ask why they should be added. This will often reveal a prior issue. Talk briefly about the danger of reaction planning.

The Finance/Stewardship Team consists of:
Stewardship Education: communicates the various aspects of biblical stewardship through the church programs, activities and materials Mission Support: helps members understand how the church fulfills the Great Commission in the church, the association, the state convention, and around the world Consists of four functions Stewardship Education- 1)Communicate various aspects of biblical stewardship. Tells the how and why of managing everything God entrusts to us; 2) Determine and use the best avenues possible for communicating this message, including programs, activities, and materials for all group ages. ¨ Here we use all of the programs and ministries to teach on stewardship. How many of you have an annual stewardship emphasis in your church? (raised hands) I recommend four, but have at least one. ¨ You would have a month-long emphasis with the pastor preaching four stewardship messages, only one about money. The Worship Leader would select music and anthems that would emphasize each sermon the pastor preaches. The Sunday School would have at least one, maybe two, stewardship Sunday School lessons from older children up. You could teach a Partners with God Bible study followed by a Family Money Management Seminar. A Wills Seminar could also be offered. Mission Support- 1) To help members understand how the church seeks to fulfill its mission through ministries in the community, the association, the state convention, and throughout the world; 2) To plan a year-round emphasis, with special attention during the budget preparation period, to raise the congregation’s awareness of the church’s mission work through the association and convention. ¨ The stewardship committee would work with the WMU or Women on Missions to promote missions work.

The Finance/Stewardship Team consists of:
Budgeting: Guides the church to have the best budget that focuses on Purpose, vision, and ministries, rather than on how much it costs. Promotes involvement in and commitment to ministry Accounting: Encourages confidence in the church by being responsible in receiving, counting, depositing, disbursing, recording, reporting and auditing church funds Budget- 1) To lead the church to have the best possible unified, ministries-centered budget; 2) Involve a wide representation of the membership in the budgeting process, including understanding the ministries being planned and helping them make new commitments in giving. ¨ There are two types of budgeting, historical (looking at the past) and purpose driven (looking at the future and what God is calling us to do). Historical budgeting says, “We made the budget last year. Let’s add 10 percent and call it the budget this year. Or, we didn’t make the budget last year. Let’s take 10 percent out of the pastor’s salary and call it the budget this year. This makes the pastor and his wife REAL happy. ¨ The better way is to pray to see where God wants us to join Him and then write a budge that reflects that vision. The budget will always be larger than income we currently have. Now, you know God is involved with your ministry. Accounting- 1) To encourage confidence in the church by sound procedures for receiving, counting, depositing, disbursing, recording, reporting, and auditing area’s concern; 2) See that all persons who handle church finances or sign checks are bonded. ¨ People need to feel that their tithes and offerings go only for what the church has voted. You need to have a good accounting trail. The ushers don’t count the money; no relatives count the money on the same counting team; two people deposit the money; the treasurer is only one signer; two signers are needed on each check. Otherwise, the following story could be yours.

Accounting Questions You Better Ask
—Do we count and record offerings immediately after they are received? Every moment they sit around uncounted is a moment when they can be dipped in to. —Are offerings always stored in a secure or well-supervised area? —Do we count our cash and checks twice for accuracy? To err in addition is human. But the more we check our work, the more we develop careful accounting habits and avoid careless accounting mistakes. Just read the slide and move to next slide

—Do we place offerings in lockbags (money bags provided by the bank requiring a key to open) after counting? —Do we place the lockbags in a safe or a night depository until the bank opens? —Do we strictly limit who has access to the safe? —Do we change the safe combination when someone is no longer authorized to use it? Just read the slide and move to next slide

—Do we make sure that the same person is not involved in more than one of the financial procedures of the church (collecting funds, counting them, recording the giving, authorizing expenditures, writing the checks, auditing the account)? The more access a person has to the various procedures, the greater the ability to misuse funds. Just read the slide and move to next slide

—Are all persons authorized to write checks against church funds held responsible through an accounting/auditing system? —Do we provide the bank with annual updates of persons authorized to sign checks against any account associated with the church? Some banks are, surprisingly, not strict about who signs checks for a church or for a particular program of the church. They know we’re a volunteer organization with a high turnover in leadership. Just read the slide and move to next slide

—Do we issue annual receipts for giving? This is just another check on determining that what comes in has, in fact, been accounted for. Bergstrom, R. L., Fenton, G., & Pohl, W. A. (1992). Mastering church finances. Series statement from jacket. [Mastering ministry] (page 120). Portland, Or.: Multnomah Press; Christianity Today. These are issues that you need to address to close the possibly of fraud or stolen funds from your church. An ounce of prevention is a TON of cure.

The Budgeting Process We now begin the actual budgeting process.

What is a Financial Ministry Plan?
A plan for ministry built on a church’s values, mission and vision that helps a congregation remain focused upon ministries rather than money spent. This will help to guide the over-all mission and direction of the church!

Develop Your Church’s Values
Which convictions would your church die for? Which values drives your church’s focus and budget? Which opinions influence the way your church “does church?” Your church could have 8-10 values

Develop Your Church Vision Statement
Whom will your church reach? How many will you reach? How will your church develop those you reach? What kind of ministries will your church have? How will your church reproduce and how often? How will your church empower your people for kingdom growth? What will your church become?

Bringing Other Programs and Ministries into the Mix
Communicate the purpose and vision of the church to the Ministry Leaders Review the goals for coming budget year Let the ministry goals determine the needs Help them tie dollars to their goals Use the Ministry Proposal plan This most be done in clear, written and spoken language. It must be free of “Christian” so that the new believer can understand and grasp their part of the purpose and vision. The pastor needs to preach on purpose and vision every month, finding a different way to share it. He might preach it from overall vision, the “nuts and bolts” aspect, the process angle or some other way to help people understand what God is doing in their midst. Make sure that the goals are in line with the purpose and vision of the church. These two statements should guide all that the church does. Also look to make sure you are being involved in places where God is showing Himself at work. Having the leaders use a ministry proposal will help you to bring dollars and cents to the goals. It will also help your leaders determine their goals and articulate them in a manner that the membership can embrace.

Possible New Ministries or Building Programs
Where has God revealed that He is at work What building/parking/land limits will you experience this year Do you have a long-range plan to alleviate this constriction Will you build debt free or use a lending agency This question will help you, your leadership and the membership see where opportunities that God is showing your church. This question will help see the costs of a particular ministry or direction the church is taking. Additional building planning should start up to three years before you break ground, especially in “church unfriendly” communities or counties. Many cities and counties see the church as a deficit since it takes utilities, water, and sewer, but does not contribute to the tax base (pay for these services). You need to be involved with your community so that it sees you as a benefit in helping with teen gangs, etc. Some churches feel the need to build debt free. They The California Church Plan of Finance can help you if you want to build debt free or do a bond program to fund your building or improvements. They work with many denominations in many states.

Current Ongoing Debts and Expenses
What expenses do you currently have Upkeep of existing facilities/parking/ landscape What percentage of the budget to they comprise What upcoming expenses will need to be addressed in the coming year What is the plan for reducing or eliminating the debts You will want to factor in your current expenses in addition to your goals for the coming year. Putting your budget into a percentage per item will help you to stay balanced in your ministry. This can be adequately displayed through a spreadsheet slide inserted into your PowerPoint or other media display. It also helps your congregation to see how one particular ministry impacts the rest of the budget. You could show what the difference between previous year’s ending balance and the proposed budget ending balance to indicate how debts will be reduced or eliminated.

Staff Financial Support/New Staff
How do you determine compensation for your staff What type of evaluation tool do you use in determining staff compensation How do you assess staff needs i.e. insurance, retirement, salary, etc. How do you determine when new staff are needed The following slides will illustrate how many Southern Baptist churches determine compensation for their staff. The Mastering Church Finances book that I have referenced throughout this conference gives other ways to do so. You will want to look at this book as well. While the book is currently out of print, you can download a copy off the web at

Salary Housing Allowance
Personal Income Salary Housing Allowance ¨ The pastor only has to pay taxes on income and housing. Income tax does not include housing; SECA does include housing as part of his income. He does not have to pay taxes on insurance and other expenses if the church pays them. The IRS sees those expenses as “the cost of doing business.” 19 19 19

Determine How Much Salary
Church’s financial situation Location and cost of living Education and experience Inflation Performance ¨ Each church needs to reach as far as possible to care for their pastor. The scriptures are plain that the minister is worthy of his hire and is worthy of double honor. ¨ Each location has different cost of living. It’s much more expensive to live in a metropolitan area than a rural area. Those costs should be factored into the pastor’s compensation. ¨ Education and experience should also factor into his compensation. A Pastor with 10 years of experience should receive more than a pastor “fresh from seminary.” The same holds with pastors with education versus pastors without education. ¨ Performance is an area often overlooked in regards to pastoral compensation. Some years a pastor puts in extra hours, leads the church to exciting growth, guides the church in stewardship efforts that dictates an increase more than the cost of living raise he might otherwise have received. 20 20 20

Housing Allowance For ministers Designated in advance by the church
Must be done before January 1st of each year and then prospectively throughout the year as necessary. Legal limits This must be read into the minutes. It is not voted on, only noted. This computation comes from a worksheet the pastor fills out and submits to the personnel or finance committee. 21 21 21

If You Own or Rent The maximum amount eligible for exclusion is the least of: The designated amount The actual eligible expenses The fair rental value of the home including furnishings plus utilities ¨ Some churches have a set designated amount that they will pay a pastor for housing. However, I recommend that housing costs dictate what a pastor can claim as housing. ¨ There is a form that you can get from the Annuity Board to help you determine the eligible expense. You can designate as much income as you can verify as housing expenses. ¨ Fair rental value is no longer valid according to the courts. 22 22 22

If You Live in a Parsonage
The maximum amount you can exclude is the lesser of: The designated amount The actual eligible expenses Remember that a minister must still pay SECA on the value of a parsonage provided by the church. It is wiser to sell the parsonage and give the pastor an increase so he/she can buy their own home and build up equity for their retirement. Otherwise, where will they find the money to buy a home in their retirement? 23 23 23

Housing Allowance Can Include
Mortgage or rent Utilities Taxes Insurance Furnishings Repairs and improvements ¨ Allowance should be made in the housing allowance if there are plans to buy furniture, appliances or other durable goods for the house. You cannot deduct more for housing than you state in your housing form that the pastor gives to the church before the new church year. This form should be noted in the December business meeting. 24 24 24

Recommendations Designate housing allowances for ordained ministers
Consider cost-of-living increases Consider appropriate merit increases ..\..\ABC's of Church Budgeting\Dynamic Church Budgeting Link.ppt Just read and go to next slide 25 25 25

Budget Promotion and Stewardship Training
..\..\ABC's of Church Budgeting\Creating and Keeping A Dynamic Stewardship Focus in Your Church 2010.pptx

Income & Professional Expenses

What is Income to the Pastor?
It doesn't matter what you call it. According to Sec. 61, gross income includes all income, cash, value of property, value of services, from whatever source, unless it is specifically excluded by a section in the Internal Revenue Code. Employers are permitted to exclude from gross income (as a de minimis fringe benefit) the value of a gift that is given by an employer if the value is insignificant THERE’S NO SUCH THING AS A LOVE AS FAR AS THE IRS IS CONCERNED. IT’S INCOME!

What is Income to the Pastor?
Church members are free to make personal gifts to ministers, such as a card at Christmas with money in it. Such gifts may be tax-free gifts to the minister though they are NOT tax deductible by the donor. They are given out of affection, respect and admiration, not as a way to compensate the minister for his services.

Professional Expenses
Must be Accountable Reimbursement – no lump sum, spend how you please. Must be turned in every 60 days – on day 61 it’s income even if you filled out an expense report Travel or program advance must be turned in every 120 days – on day 121 it’s income even if you filled out an expense report

Some Things You Can Deduct
Travel Meals – business related Moving Expenses – with some exceptions Term Life Insurance – up to $50,000 Health Insurances with some exceptions Education – within limits Entertainment – business related Professional fees Subscriptions Convention Expenses Books and Supplies See pages 36,39-40

Some Things You CAN’T Deduct
Personal use of church provided car Property purchased from church at discount Forgiveness of debt Below market loans Trips to the Holy Land Commuting expenses Minister’s clothing – exception of Robes/collars “Guesstimates” on business mileage Social Security offset paid by Church Bonuses or gifts from the church Term Life Insurance premiums above $50,000 Retirement or farewell gifts

Failure to Claim Reimbursement Costly
Employees who fail to claim reimbursement for normal, reimbursable business expenses may not deduct the expenses on Schedule A even if they exceed 2% of AGI.

Outside Contracting vs. Internal Control

Issues at Hand Workman’s comp Income and Social Security Tax
Planning Financial Support p. 22 Benefits Oversight Qualifications-yours and theirs

Minister’s Housing

Minister’s Housing Allowance
Covered on pages 55-63 “Planning Financial Support,” a booklet written by GuideStone, gives a full discussion on this topic and are free for the asking (888) We will come back and discuss this if time permits

Church Reporting Requirements

Follow the Rules or pay the price
Covered on pages 65-81 You will receive reminders of when you need to send in these forms when you subscribe to Treasurer’s Alert (800) or

Who is a Minister?

Must Do Four of the Five Functions
1987, Tax Court, WINGO v. Commissioner, 89 T.C. 922 (1987): The tax court ruled that a minister is someone who – Administers sacraments (usually includes baptisms, communion, marriages, funerals, prayers for the sick). 2. Conducts worship services. 3. Performs services in the "control, conduct or maintenance of a religious organization." 4. Is "ordained, commissioned or licensed.“ – Mandatory 5. Is considered to be a spiritual leader by his religious body.

Tax Issues Employed for Income Tax No withholding by church
Receives a W-2 from the church by January 31st of each year Self-employed for Social Security Must pay 15.3 percent taxes Receive housing allowance until they die, not until they retire from their retirement board

Computer Software

Computer Software What do we want this software to do?
Do we want it to do just accounting or just church management, or a combination of the two? Can the software be networked with other computers? How many? (Not all do) How user friendly is the software?

Computer Software What is the cost? Some programs come in modules that can be added later as the need arises. Is there any telephone or online technical support? Is there any extra cost beyond the software cost for technical help? Can I get a trial version of the software to look at? Types of Software.

Websites & Resources to Assist You
Merrill, D., & Shelley, M. (1984). Fresh ideas for administration & finance. Carol Stream, Ill.; Waco, Tex.: Christianity Today; Word Books.

What Questions can I answer for You?
Okay, I’ve talked a lot. What questions do you have? After answering their questions, give the meeting back to the pastor or whoever is in charge. direct line cell phone

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