1. Roman Catholic Diocese of Phoenix Parish Finance Forum September 16 th, 2010 Diocesan Pastoral Center, 10am – 12pm

2. Parish Finance Forum Agenda Corporate Management Update Parish Financial Report Update (New Database) 10 Tips for Business Contract Review Determining Worker Status ▫IRS Rules ▫Independent Contractor Agreement Other Business ▫Brief update on Capital Project Thresholds ▫Update on 403b Transition ▫Upcoming Meetings and Training

3. Corporate Affairs Update All 103 Diocese corporations submitted the annual report to the ACC on time – Thank You! Annual Board Meetings Please log onto to the ACC website to make sure all corporate information (name of corporation, name of pastor, addresses etc) is correct: – http://starpas.azcc.gov/scripts/cgiip.exe/WServic e=wsbrokerI/connect.p?app=names-report.p. http://starpas.azcc.gov/scripts/cgiip.exe/WServic e=wsbrokerI/connect.p?app=names-report.p – If any information is incorrect, please call (602) 542-3285 to make the necessary changes.

4. Annual Board Meetings – Rotation Program Rotation Program In 2010, parishes from the South and East Deaneries were chosen to hold Annual Meetings at the DPC. All other parishes and quasi-parishes will hold Annual Meetings at their Parish locations. 4

5. Annual Board Meetings - Process Schedule and Conduct Annual Meetings: – Set a date, time and location (between 9/1 and 11/30) – Prepare an Annual Meeting Notification letter and a meeting Agenda. Send these two forms to all board members at least 30 days prior to the meeting. – Conduct Annual Board Meeting (Quorum – at least 3 board members must be present). – Secretary must take minutes of the Annual Meeting. – Once the minutes are prepared and signed by the Secretary, place the original minutes in the corporate record book, and send a copy of the minutes, as well as the original Approval form signed by the Pastor to the Diocesan Legal Department. All of these forms, including a script for the meeting, are available in your Restructuring Manual and on the Diocese’s website, on the Corporate Resources Page: – http://www.diocesephoenix.org/inc/index.html http://www.diocesephoenix.org/inc/index.html 5

6. Annual Service Fee The Service Agreement between the Diocese and each parish corporation requires the departments and offices of the Diocese to provide a wide variety of services to each corporation in return for a nominal fee ($50). Each corporation will be invoiced annually for these services in the amount of $50. Payment will be due within 30 days of date of invoice. 6

7. Parish Reporting Database Thank you for your efforts in completing the financial report! 110 out of 113 reports completed. Still processing Pastor and Finance Council Chair authorizations. Based on Feedback, we’ve identified the following items as improvements for next year: ▫Remove controls over the order in which data is entered (allow user to access all segments at once) ▫Have a printable Activities Statement and Balance Sheet available – Done! (Example) ▫Provide more description and help content ▫Review program income section for effectiveness

8. Business Contracts – 10 tips 1)Read the contract yourself 2)Never hesitate to negotiate business terms Everyone is willing to negotiate these days – the first offer is never the best offer – it never hurts to ask Talk to other pastors and to Pastoral Center team regarding prices being quoted or terms being proposed (information is power) Mark Krysiak, John Kelly, John Minieri – all good resources 3)Make sure the contract is in Corporation’s name (not parish name) 4)Make sure that parish can meet all of its obligations under the contract (reporting requirements, shipping requirements, etc.) 5)Make sure that both parties have an equal right to cancel/terminate We always want the right to terminate a contract without cause on reasonable (30 days) notice 8

9. Business Contracts – 10 tips 6) Make sure contract is governed by Arizona law 7) Never agree to any Interest Rate above 10% (“Legal” rate in Arizona) (interest calculated monthly is a red flag) 8) Never agree to any automatic renewal of Contract/Lease or to onerous notice terms in order to cancel automatic renewal (common in copier lease contracts, parish bulletin contracts) 9) Make sure that you are signing contract as President of corporation 10) Let vendor know (if appearing on campus) of Safe Environment form (employees will need to have fingerprint clearance) 9

10. Corporate Resolutions Reminder on WHEN corporate resolutions should be used: ▫When entering into a construction project valued in excess of $100,000  Even if fully funded (Piper Grant) ▫When taking out a loan (even when loan is from GDP) ▫When change of pastors ▫When changing bank accounts or authorized signers ▫When entering into capital campaign ▫When selling, buying, or leasing real property ▫When involved in litigation ▫When opening or closing a school 10

11. Corporate Resolutions Where can exemplars of corporate resolutions be found? ▫On Diocesan website/Corporate Resources/Restructuring Manual ▫General Counsel’s office (usually a 24 hour turnaround) ▫Monika Daley – Corporate Management - can help as well Who signs corporate resolutions? ▫If Unanimous Consent form (no meeting), signed by Voting Members only ▫If Resolutions actually discussed and voted on in Annual Meeting or Special Meeting, Voting Members vote and Minutes record approval of resolution Where are signed corporate resolutions kept? ▫Parish’s Corporate Record Book ▫Bank ▫Copy kept in Pastoral Center 11

12. Determination of Employment Status Any individual providing services to your organization is either an employee or independent contractor Your organization is required to determine the status of a worker to ensure proper tax reporting and worker’s compensation The Internal Revenue Code provides definitions for employees and independent contractors

13. IRS Definitions Common Law Employee – Any individual providing services to your organization where the organization can control what will be done and how it will be done  The organization does not have to control the work, but it reserves the right to control the work Statutory Employees – Specifically Defined by Law: ▫Examples include some delivery drivers and insurance agents Statutory Non-Employees – Specifically Defined by Law: ▫Examples include direct sellers and licensed real estate agents Independent Contractor – Any individual providing service to your organization where the organization can only control the results of the work, not the work itself

14. IRS Definitions Key Point: ▫An organization can control how the employee performs his or her work (the methods and means of accomplishing the work)  Remember the organization does not actually have to control the work, the employer only needs to reserve the right to control the work  An organization cannot control how an independent contractor performs his or her work  The organization can only control the results of the work – this is where a contract becomes important

15. Workers (Service Providers) Note that we are concerned with individuals who provide services to your organization and who receive something in return for their service – Volunteers are not employees or independent contractors ▫It is important to remember that the IRS considers all forms of payment to be wages – not just cash

16. Examples of Non-Cash Wages Vacation Allowances Car Allowances Bonuses Food and Lodging (including leasing real or personal property from the employer at either no cost or below FMV) Some tuition discounts and waivers Other fringe benefits, such as paying an employee’s personal expenses These forms of non-cash payments can be made to both employees and independent contractors

17. Rules for Determining Worker Status To determine the status of a worker, you must look at all evidence related to: ▫Degree of Control ▫Independence Common Law Rules on Degree of Control and Independence: ▫Behavioral Control ▫Financial Control ▫Type of Relationship

18. Rules for Determining Worker Status Behavioral Control – Does the organization control or have the right to control what the worker does and how the worker does his or her job? Financial Control – Are the business aspects of the worker’s job controlled by the payer? ▫Examples include how the worker is paid, if tools and supplies are provided Type of Relationship – Are there written contracts or employee type benefits conveyed? Is the work a key aspect of the business? Does the relationship have a defined end date?

19. Differences in Worker Status EmployeesIndependent Contractor Employer pays half of S.S. and Medicare Taxes Wages reported on W2 and employer withholds income on behalf of employee Employer provides tools/supplies to complete work Employer controls work performed Employer may provides benefits e.g. pension, vacation time, health benefits Employer provides liability insurance, including worker’s compensation Contractor pays all S.S. and Medicare Taxes Payments reported on 1099MISC, no withholding if proper EIN is on file Contractor provides his/her own tools/supplies to complete work Contractor controls work performed Contractor does not have access to employer benefits Contractor provides his/her own liability insurance including worker’s compensation

20. What You Should Do Your Organization (Pastor, Finance Council, Finance and HR Staff) should review all individuals providing service to your organization to ensure proper worker classification Penalties for not properly classifying workers are severe A worker can file a petition to the IRS to have the IRS determine his or her status – you want to avoid this happening at your organization Call the Parish Administrative Services Group For Help!

21. Resources www.irs.gov www.usccb.org/bishops/dfi/layemployees.htm

22. Other Business New Thresholds for Capital Project Approval to be Implemented January 1 st, 2011 ▫Based on plate income 403b Transition – Location meetings start September 22 nd ▫Have verified with IOI that we can future date deductions, meaning we do not have to wait until November 1 st to enter new 403b deductions Upcoming Meetings ▫Worker’s Compensation Review  October 20 th and 21 st and the DPC – Times TBD ▫IOI End of Year Seminar  December 7 th at the DPC – Time TBD  December 10 th in Seligman – Time TBD