2014 updated church financial guidebook 3-hour presentation

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:

"(c) www.Kluth.org used by permission

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:

15

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

19

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. .

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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

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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

"(c) www.Kluth.org used by permission"(c) www.Kluth.org used by permission

“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