2012

INCORPORATED SYNOD OF THE DIOCESE OF OTTAWA

PARISH FINANCIAL & FIDUCIARY RESPONSIBILITIES

2012

MANAGING FINANCES IN THE PARISH

What’s in the Manual?1. Cash Management

2. Accounting and Bookkeeping

3. Budgeting

4. Reporting Finances

5. General Information

6. CBR’S (Canons, Bylaws & Regulations)

7. Resources

8. Appendices – Diocesan Forms, Information

2012

INTERNAL CONTROLSREF: Section 1.4, Appendix 8

PROVIDE ASSURANCE TO STAKEHOLDERS THAT ASSETS ARE PROTECTED FROM WASTE, FRAUD, AND THEFT

ENSURE ACCURATE AND RELIABLE ACCOUNTING INFORMATION FOR THE PROVISION OF REPORTS TO PARISH COUNCIL, VESTRY, THE SYNOD AND C.R.A.

AVOID SITUATIONS THAT COULD DAMAGE THE CHURCH’S REPUTATION

2012

PRINCIPLES OF INTERNAL CONTROL

REF: Section 1.4 and Appendix 8

RESPONSIBILITIES SHOULD BE CLEARLY

ESTABLISHED

ADEQUATE RECORDS SHOULD BE MAINTAINED

RECORD KEEPING AND CUSTODY SHOULD BE SEPARATED

RESPONSIBILITY FOR RELATED TRANSACTIONS SHOULD BE DIVIDED

ASSETS SHOULD BE INSURED

2012

INTERNAL CONTROL FOR RECEIPTSREF: Section 1.4 Appendix 8 & Section 2.5

THREE BASIC PRINCIPLES SHOULD ALWAYS

BE OBSERVED:

1. SEPARATION OF DUTIES SO THAT THE PERSONS HANDLING RECEIPTS, HAVING CUSTODY, DEPOSITING, AND KEEPING RECORDS ARE DIFFERENT PEOPLE

2. ALL RECEIPTS SHOULD BE DEPOSITED INTACT ASAP

3. ALL PAYMENTS SHOULD BE MADE BY CHEQUE

(ONLY EXCEPTION IS PETTY CASH FOR SMALL DISBURSEMENTS)

2012

DISBURSEMENTS AND SIGNING AUTHORITY

ALL CHEQUES PRENUMBERED & SHOULD REQUIRE TWO AUTHORIZED SIGNATURES

CHEQUE REQUISITION FORM WITH ATTACHED INVOICES PROVIDED WITH CHEQUE FOR SIGNER’S REVIEW AND AUTHORIZATION

A PERSON SHOULD NEVER AUTHORIZE OR SIGN A CHEQUE WHERE THEY ARE THE PAYEE

NEVER SIGN A BLANK CHEQUE

2012

THE AUDIT REF: Section 2.3

ALL PARISH ACCOUNTS MUST BE AUDITED ANNUALLY (Ref: B5.02)

IN ONTARIO, GOVERNMENT REGULATION STATES THAT IF AN AUDITOR IS PAID FOR AUDIT SERVICES, THE AUDITOR MUST BE AN APPROPRIATELY QUALIFIED ONTARIO ACCOUNTANT, LICENCED TO PERFORM AUDITS IN ONTARIO

DOES NOT APPLY TO “PRO BONO” AUDITS

THE AUDITOR’S ROLE (Ref: R.5.06)

2012

PARISH TRUST FUNDSREF: Section 2.4

FUNDS RECEIVED AND RETAINED IN THE

PARISH FOR SPECIFIC PURPOSES, e.g.FUTURE MAJOR BUILDING REPAIRSCHRISTIAN EDUCATIONNEW OUTREACH PROJECT

ALSO RELATES TO FLOW-THROUGH FUNDS, e.g. PWDRF, CHARITIES, etc.

ENSURE THAT SUCH TRUST FUNDS ARE MAINTAINED & USED SOLELY FOR THE PURPOSES DESIGNATED

2012

BUDGETSREF: Section 3.1

RESPONSIBILITY OF THE CORPORATION

ESSENTIAL TOOL IN THE MANAGEMENT OF PARISH FINANCES

INCLUDES SETTING PRIORITIES AND OBJECTIVES OF THE PARISH

BUDGETED AMOUNTS SHOULD BE REALISTIC AND ACHIEVABLE

TREASURER PLAYS A KEY ROLE IN PROVIDING ACCURATE INFORMATION ABOUT THE TRENDS IN INCOME AND EXPENDITURES

REFERENCE CBR’s at Bylaw 5.05, Regulations 5.02 and 5.05

2012

REPORTING REF: Sections 4.1 to 4.8

REPORTS REQUIRED BY CHURCH AND

REGULATORY LAW:

FINANCIAL STATEMENTS AT LEAST

QUARTERLY TO PARISH COUNCIL

ANNUAL AUDITED F/S TO VESTRY

DIOCESAN STATISTICAL RETURN (March)

CHARITY INFORMATION RETURN TO CRA (within 6 months of year end)

REFERENCE CBR’s at Regulations 5.02 and 5.06

2012

REPORTING - BEST PRACTICES

PROVIDE PARISH COUNCIL (PC) WITH COMPARITIVE YTD STATEMENT OF INCOME AND EXPENDITURES AT EACH PC MEETING

PROVIDE PC WITH QUARTERLY TREND ANALYSIS OVER 3-4 YEAR PERIOD FOR KEY INCOME CATEGORIES

PROVIDE PC WITH PROJECTIONS OF CURRENT YEAR INCOME/EXPENDITURES AGAINST BUDGET IN OCTOBER, NOVEMBER

2012

PARISH FAIR SHAREREF: Section 5.1, Appendix 3

Synod's operating budget is funded from various sources, e.g. investment income grants fees contributions from all parishes

Contributions from parishes are called "Parish Fair Share" or PFS

PFS takes into account the ability of each parish to pay

When parishes report income at year-end, the figures are reduced by allowable deductions to give an assessable income (A.I.)

A.I. for each parish is the basis of the proportional percentage of the total of all parishes' A.I.s

2012

PARISH FAIR SHARE(PFS)

THE KEY COMPONENTS OF PFS ARE: ASSESSABLE INCOME (A.I.) DEDUCTIONS FROM ASSESSABLE INCOME AVERAGING OF LAST 3 YEARS A.I.

THERE IS A PFS APPEALS PROCESS

- PRIOR TO THE CALCULATION OF PFS, A REQUEST CAN BE MADE TO THE FAIR SHARE REVIEW COMMITTEE FOR A REVIEW OF MAJOR ANOMALIES IN INCOME

2012

PARISH FAIR SHARE(PFS)

The PFS calculation is based on the average of the parish's assessable income for the most recent three years

Purpose of averaging is to even out anomalies that create significant swings in some parishes' apportionment figures from one year to the next

Once the PFS percentages are known, the Synod's budget is proportioned out to each parish

2012

PARISH FAIR SHARE(PFS)

PARISH’S 3 YEAR NET INCOME x DIOCESAN BUDGET

ALL PARISHES’ 3 YR NET INCOME

=

YOUR PARISH’S CONTRIBUTION TO THE DIOCESAN BUDGET

2012

PARISH FAIR SHARE “THE FORMULA”

Current Year total parish income (statistical return) $320,000 Less: Flow-through to outreach/appeals $(14,000) Allowable capital exemptions (35,000) ECOPS (56,000) Fair Share Review Subcommittee adjustments 11,000 $(94,000)Equals: Parish’s assessable income $226,000 Add: Assessable income for previous two years: Year 1 220,000 Year 2 240,000 Equals:Parish’s 3 year total assessable income $686,000 Parish’s 3 yr. average assessable income (A) $228,667 All parishes' 3 yr. average assessable income (B) $9,300,000 Parish’s 3 year average (A) expressed as a % of (B) = (C) 2.458%

2012

PARISH FAIR SHARE “THE FORMULA”(cont.)

FAIR SHARE CALCULATION:

Diocesan Budget (D): $2,047,300

The parish’s 3 year average % (C) times the 2011 Diocesan budget (D)

This results in the parish’s Fair Share: 2.458% X $2,047,300 = $50,323

2012

PARISH FAIR SHAREYOUR CONTRIBUTIONS COVER:

> BISHOP'S OFFICE AND ACTIVITIES > COORDINATION OF DIOCESAN-WIDE INITIATIVESSTEWARDSHIP

> H.R. ACTIVITIES PLANNED GIVINGCLERGY APPOINTMENTS STRATEGIC PLANNINGCLERGY PAY & BENEFITSCLERGY EDUCATION & TRAINING > SUPPORT TO COMMUNITY MINISTRIES

UNIVERSITIES/COLLEGES> POSTULANT TRAINING & SUPPORT HOSPITALS

WOMEN'S SHELTERS> SUPPORT TO PARISHES & CLERGY DROP-IN CENTRES

ESTABLISHMENT GRANTSSUPPORT GRANTS > ADMINISTRATIVE SUPPORTMOVING COSTS PAYROLL FOR PARISHESCOORDINATION OF DIOCESAN-WIDE PROGRAMS INSURANCE PROGRAM

E.G. YOUTH, MARRIAGE COUNSELLING, PROPERTY MANAGEMENTSCREENING IN FAITH, ETC. INVESTMENT MANAGEMENT

> ANNUAL SYNOD > ETC……………

2012

SUPPORT GRANTSREF: Section 5.2

SUPPORT GRANTS PARISHES IN FINANCIAL DIFFICULTY FUNDED IN PART FROM TRUST FUND

INCOME & SYNOD BUDGET

MUST APPLY BY NOVEMBER 1ST FOR NEXT YEAR ON SPECIAL FORM

APPLICATIONS CONSIDERED BY FINANCIAL AFFAIRS COMMITTEE

2012

ECOPS (REF: Section 5.3) EQUALIZED COST OF PRIESTLY SERVICES

Parishes are no longer wholly responsible for the costs of a particular clergy(s), but pay a fair share of a total COPS pool, which is the total cost of all

stipendiary clergy in the Diocese (excluding housing)

2012

ECOPSEQUALIZED COST OF PRIESTLY SERVICES

ORIGINAL CONCEPTS

To make individual clergy gifts accessible to all parishes

To make COPS proportional to a parish’s ability to pay

To improve on the Equalization Assessment and Grant systems previously used

To create a more stable year-to-year system, allowing for better long-term planning

2012

ECOPSEQUALIZED COST OF PRIESTLY SERVICES

With ECOPS the costs of all stipendiary clergy are pooled and then distributed according to the ECOPS Formula = Base COPS + Equalization:

–Base COPS = base stipend on stipendiary scale, travel allowance, and benefits (excluding housing); for 2012=$49,081

–Equalization = Equalization Total (i.e. Total COPS minus Total Base COPS) x PFS%

2012

ECOPSEQUALIZED COST OF PRIESTLY SERVICES

STIPENDS PAID $2,600,000

TRAVEL ALLOWANCES PAID 600,000

COST OF BENEFITS 1,100,000

TOTAL OF ALL CLERGY COSTS $4,300,000

TOTAL OF ALL BASE AMOUNTS (3,300,000)

DIFFERENCE = EQUALIZATION AMOUNT $ 1,000,000

2012

ECOPSEQUALIZED COST OF PRIESTLY SERVICES

Implementation is being done gradually over a maximum five-year period

A 2% per year ceiling on ECOPS increases over the implementation period, calculated in addition to the regular annual increase to clergy stipend, travel, and benefits

Equalization Assessments are no longer being charged to parishes = savings

Gives a parish a reduction in Base COPS for the newly ordained assistant curates for 3 years

PFS calculation now exempts the costs of all stipendiary clergy from parish assessable income

2012

PARISH INSURANCE REF: Section 5.4 and Appendix 1(a)

DIOCESAN INSURANCE COVERS:Property and Contents (Replacement Value)General Liability ($2 million) - covers all employees including voluntary workers while engaged in activities on behalf of the parishUmbrella Liability ($8 million) Boiler CrimeAbuseEmployment PracticesDirectors & Officers Loss of Income

2012

PARISH INSURANCE REF: Section 5.4 and Appendix 1(a)

It is important to note that, in order to keep

premium costs at an affordable level,

deductibles at the parish level are set at

$2,500. The Diocese covers deductibles

between $2,500 and $25,000 from its

Insurance Reserve Fund

2012

3RD PARTY LIABILITY INSURANCE REF: Section 5.5 and Appendix 1(b)

Why 3rd party liability insurance? Because of facility users’ operations or actions, parishes

and the Diocese are open to possible suit from third parties.

This Policy covers legal liability for bodily injury to, or damage to property of, participants and others.

Diocesan insurance does not cover the actions of 3rd parties.

Essential that appropriate insurance be obtained if outside users of parish facilities cannot provide proof of insurance – this can be arranged through the Synod Office

2012

3RD PARTY LIABILITY INSURANCE REF: Section 5.5 and Appendix 1(b)

•When a person or group not associated with your parish is about to rent or use your facilities (indoor or outdoor) for an event that your church is not sponsoring, you ask if they have "third party liability insurance"•If the answer yes, request a copy of their insurance certificate, for your file •If the answer is no, you should provide relevant details in the User Group Program Overview and Rates document www.ottawa.anglican.ca/Insurance_Property_Liability_Other.html

•Collect the appropriate premium•Complete the Third Party Liability Insurance Form, requesting basic information about the event •Mail the form and premium cheque to the Synod office

2012

CONSOLIDATED TRUST FUND(CTF) REF: Section 5.9

Established in 1970 to assist parishes in task of managing & investing sums received in trust, a bequest or a sale of property (usually a rectory)

The Financial Affairs Committee (FAC) responsible for the day-to-day activities of the CTF; its Investment Subcommittee helps meet this responsibility

Each time a parish makes a contribution to the CTF, it is credited with a certain number of units of the fund based on the unit value at the end of the quarter in which the monies are received

2012

CONSOLIDATED TRUST FUND(CTF)

The unit values of the CTF can fluctuate in the short term depending on market circumstances

The "total return" combines the annual change in value of the units as well as the annual dividend received

This reflects the total benefit that the benefit holder has gained by holding units in the CTF

CTF has consistently paid annual dividends even during down markets - enables parishes to rely on a steady flow of income

2012

CONSOLIDATED TRUST FUND(CTF)

A dividend is paid to the unit holder (parish), based on the number of units held in the CTF

The Investment Policy Statement outlines the objectives of the fund as well as specifics regarding its asset mix

This policy guides the money managers in investment of the assets

The portfolio is invested to provide income as well as to preserve the capital for the long term, taking inflation into consideration

2012

CONSOLIDATED TRUST FUNDREF: Section 5.9 Appendix 4

SECURITIES AND MONIES RECEIVED BY WAY

OF GIFTS OR BEQUESTS ARE TO BE

DEPOSITED TO THE CTF IN TRUST FOR THE

PARISH

EXCEPTION: IF FUNDS ARE REQUIRED WITHIN 18 MONTHS OF RECEIPT, AND APPROVALS HAVE BEEN

GIVEN, THEN: INVEST LOCALLY – GIC, ETC.AVOIDS POSSIBLE DOWNSWING IN CTF VALUE IN THE

SHORT TERM

See CBR’s Bylaw 3.21(4)

2012

RECTORY TRUST FUND (RTF) POLICY REF: Section 5.12

PARISH MAY EITHER WITHDRAW OR BORROW FROM ITS RTF

WITHDRAWAL IS NOT SUBJECT TO PARISH FAIR SHARE (10% CONTRIBUTION TO CHURCH EXTENSION FUND INSTEAD)

BORROWING – SINCE FUNDS BELONG TO PARISH THERE IS NO INTEREST CHARGED

APPLICATION TO FAC AFTER APPROVAL FROM VESTRY

ALLOWABLE USES – CAPITAL or PAY DOWN CEF LOANS – NOT FOR OPERATING EXPENSES

2012

CHURCH EXTENSION FUND LOANSREF: Section 5.13, Appendix 5

THE FUND PROVIDES LOANS TO PARISHESFOR NEW BUILDINGSEXPANSION OR RENOVATIONS OF EXISTING

BUILDINGS

RATES ARE REASONABLE & BASED ON CURRENT BANK RATE LESS UP TO 3%

NEVER BELOW 4% OR HIGHER THAN 12%

2012

FAC (Financial Affairs Committee) SUBMISSIONS

Parishes must obtain the approval of FAC for: withdrawing any significant amount from the CTF undertaking any mid- to large-size capital projects withholding a gift or bequest applying for a loan from the CEF permission to sell properties approvals of leases

FAC also responds to other specific finance-related requests from parishesIt meets 2nd Wednesday of each month (summer excluded)

2012

FAC (Financial Affairs Committee) SUBMISSIONS

Before making a submission, be sure to review the Application Form instructions and

the Decision Rights details

(Manual Sections 5.18 & 5.19)

Copies of the Application Form and the Decision Rights Matrices are shown in

Appendices 5(a) & 5(b)