Financial Policies and Procedures

Sample Baptist Church, Effective Date: ____________

Article I. General

Section I.01 Scope and Intent

a. This set of policies and procedures is intended to be broad in scope and is meant to address all policies and procedures for the receipts and disbursements of cash and property by church members, staff, and personnel related to the Church and its general operating accounts, Sample Baptist Church designated funds, the Sample Baptist Church Children’s Day Out program, and any other ministry areas whose funds are handled by the Church’s financial office.

b. In general, the practice of the Church in handling all donated monies and properties will be consistent with the best practices of all IRS 501(c)(3) organizations.

c. The practice of the Church will also be consistent with the biblical principles set forth in 2 Corinthians 8:19 (“. . . which we administer in order to honor the Lord himself and to show our eagerness to help” NIV), as well as in Matthew 25:29 (administration) and 1 Corinthians 9:11 (payments to Christian workers).

Section I.02 Finance Committee Authority, Conflicts and Approvals

a. The Sample Baptist Church Finance Committee (the “Finance Committee”) is generally responsible for developing, implementing, and monitoring these financial policies and procedures, along with the other specific duties and responsibilities set forth in Exhibit A and any other authority given in this policy statement.

1. From time to time during its history and prior to the creation of this full set of policies and procedures, Sample Baptist Church has approved certain financial policies by church action and/or by specific committee action.

2. This document is intended to be initially approved by Church motion and to address all financial policies and procedures, including those previously approved, and in the case of any conflict this document will supersede any previously approved policies.

3. In any case where there may be conflict between these policies and the Church’s bylaws, the Church’s bylaws will supersede.

4. Current descriptions of the Finance Committee, Audit Committee and the Counting Committee are attached as exhibits herein, along with their Principal Function, Responsibilities and other key information.

5. Any changes to these committee makeup or function per the Church’s bylaws shall be reflected in the attached exhibits.

Section 1.03 Amendments

a. Any future amendments to these policies shall be made by the Finance Committee in properly called meetings and approved by the Church to the extent required in its bylaws.

b. This document will be updated as necessary to reflect any such amendments, along with the Effective Date.

Section 1.04 Disclosure

a. This Financial Policies and Procedures document shall be kept on file in the Church office and made available to any Church member during normal business hours.

Section 1.05 Preparation and Release of Financial Information

a. The Church’s financial books and records shall be maintained, to the maximum extent practicable, in accordance with Generally Accepted Accounting Principles (GAAP) as applied to tax-exempt and church-related organizations.

1. Monthly Financial Statements shall be prepared and presented to the Church at

each regularly scheduled business meeting.

i. The Church Treasurer shall be ultimately responsible for the level of account disclosure and accuracy of the financial statements, and the Monthly Financial Statements shall be prepared in sufficient detail to at least show comparative information to the budget approved by the Church at the beginning of such fiscal year.

ii. The Church shall also prepare a year-end statement at the end of each Fiscal Year in the same comparative format.

iii. All monthly financial statements, along with the current fiscal year budget and the prior year actual financial statements, shall be kept on file and made available electronically or in hard copy form to any person upon request.

2. Annual Contribution Statements shall be prepared and made available to all individuals and other legal organizations making contributions of cash to the church.

i. All annual contribution statements will be made available by January 31st following each calendar year end.

b. Requests for Additional Financial Information

1. Any special requests for additional detailed financial information surrounding the Financial Statements shall be submitted in writing to the Finance Committee, who will act to approve or deny such request within 10 business days.

Section 1.06 Fiscal Year

a. For all financial reporting purposes, Sample Baptist Church shall have a fiscal year beginning on April 1 and ending on March 31 of the following year.

Section 1.07 Record Retention

a. The Church shall maintain all historical financial records for at least 7 years.

b. The Church shall maintain all contribution records and make such records available at least on a monthly basis upon a donor’s electronic request.

1. The Church shall be under no obligation to maintain such records longer than 3 years from the year of contribution.

Article II Contributions and Receipts

Section 2.01 General Internal Controls

a. The Sample Baptist Church Counting Committee is established to collect contributions from offering boxes, count and record contributions received and prepare the bank deposit for such contributions.

1. Other than any specific requirements for the Counting Committee set forth in Exhibit B by Church approval, the Counting Committee is authorized to establish its own guidelines for collecting and depositing all cash and checks given to the Church each Sunday and coordinating the reporting of such receipts with the Business Manager.

2. The specific committee responsibilities are set forth in Exhibit B. As a part of its periodic audit procedures, the Audit Committee will review the Counting Committee procedures and report any suggested changes to the Counting Committee and the Finance Committee.

Section 2.02 Solicitation of Contributions

a. Any church-wide solicitation of funds must be approved by the Finance Committee

Section 2.03 Tax-Deductible Charitable Contributions

a. Neither the Church nor the Finance Committee shall be responsible for determining whether contributions meet the IRS guidelines for tax deductibility.

b. Neither the Church nor its staff will be responsible for estimating a fair market value of items donated to the Church.

Section 2.04 Acceptance of General Funds

a. Unless noted as for a designated purpose (see “Acceptance of Designated Gifts”), all monies collected by the Counting Committee during sponsored Church activities shall be counted and deposited per Counting Committee guidelines.

b. Other gifts of cash or checks collected during other times by any Church staff or personnel will be identified as a Designated Gift or not and forwarded as soon as practicable to the Business Manager for proper accounting and deposit.

Section 2.05 Acceptance of Designated Gifts

a. General Operating Budget or Approved Designated Gift items:

1. Contributions received which are designated for specific purposes in accordance with the General Operating Budget or for previously approved Designated Gift accounts (e.g., Deacon Benevolence Fund) shall be recorded as a receipt for such budget item and expended as per Church policy below.

b. Non-Operating Budget items

1. Contributions received that are designated for a purpose that is not included in the General Operating Budget, is in conjunction with a specified Church-sponsored event, or for which no prior Designated Gift account has been established, must be approved by the Finance Committee before acceptance.

Section 2.06 Acceptance of Non-Cash Gifts

a. All proposed gifts of non-cash assets (public and private securities, real property, automobiles, etc.) shall be presented to the Finance Committee for approval, who will approve the acceptance of such gifts and establish the proper guidelines for administering or liquidating such gifts.

1. All decisions to maintain or administer, or to enter into 3rd-party maintenance or administration of such assets, will be approved by the Church Treasurer.

b. Any contributions of non-cash property accepted by Sample Baptist Church

shall be acknowledged in a written letter by the Business Manager.

Section 1.07 Bank Deposit and Investment Accounts

a. The Church shall maintain all deposits with federally or state-chartered banks with branches located in ________________ County, Texas.

1. The Finance Committee shall be responsible for the opening of such accounts and the related signature authorities (see “Check Signing Authority” below).

b. The Finance Committee must approve the creation of any time deposits or other investment accounts, and will authorize the Church Treasurer to execute such instruments as are necessary with the deposit or investment institution.

c. Any investments of Church funds other than bank demand or time deposits must be in open-end mutual funds which purchase only investment-grade rated, taxable, money-market instruments.

Article III. Disbursements

Section 3.01 Check Requests/Authorization of Payment

a. Paying obligations of the Church in a timely manner not only produces confidence in the Church's fiscal responsibility and procedures but also serves as a testimony to the business community.

b. Proper internal controls will be followed to ensure that only valid and authorized payables and services are recorded and paid.

c. The current year General Operating Budget will serve as the guide to determine the availability of funds when a financial commitment or cash disbursement request is made.

1. Any financial commitment or cash disbursement request exceeding the current fiscal years’ Annual Department-Level Expenditures Budget in the General Operating Budget must be approved in writing by the responsible staff member.

2. Any commitment or disbursement request which would cause the overall Ministry Budget to be exceeded shall be approved in advance by the Finance Committee.

d. Every check that is written must be accompanied by a source document (i.e. receipt, invoice, check request, etc.).

1. In the case of regularly scheduled payments such as payroll, taxes, and debt retirement, the General Operating Budget may serve as the source document.

2. Every effort must be made to ensure that payments are in line with prior agreements or contracts, and that funds used are deducted from the appropriate fund (e.g., a designated gift) within the church budget.

Section 3.02 Finance Committee General Authority.

a. In consultation with the ministerial staff, the Finance Committee shall be authorized to withhold any discretionary ministry expenditures at any time based on the Committee’s view of the Church’s current cash balances, liquidity needs and anticipated giving.

Section 3.03 Designated Gifts

a. All cash received for designated purposes will be expended within the current fiscal year to the extent possible.

b. If the designated gift is for an item within the General Operating Budget,

1. All expenditures for that budgeted item will first be made with funds available in the Designated Account

2. After the exhaustion of the specific designated gift, all remaining expenditures for such item will be made with funds from the General Operating Budget as outlined in Section 1.2 above.

Section 3.04 Check Signing Authority

a. Bank Account Signatures.

1. The Finance Committee is responsible for approving check signers on all Sample Baptist Church bank accounts.

i. The Church Treasurer and at least two members of the Finance Committee will have check-signing authority.

ii. A minimum of three check signers shall be approved at all times.

a. Check signers shall never be related to each other by blood or marriage.

b. The Finance Committee shall review and update bank account signatures annually, adding any new check signers and removing any who are no longer check signers.

Section 3.05 Endorsements

Authorized check signers shall never:

a. Sign checks made payable to themselves or to family members, with the exception of regular payroll checks.

b. Pre-sign blank checks for future use. c. Sign checks payable to "bearer" or "cash." d. Alter checks in any way.

Section 3.06 Dual Signature Requirement

Any check in the amount of $10,000 or more shall require two authorized signatures.

Section 3.07 Payroll Documentation/Pay Periods

a. Exempt employees, including ministers and some staff members, are paid semi-monthly at a salary rate determined by the Personnel Committee each Fiscal year budget period.

b. Non-exempt employees such as childcare employees, custodial staff, secretaries, and musicians, are paid biweekly at a salary rate determined by the Personnel Committee each Fiscal year budget period.

1. These employees are required to turn in a time sheet for the prior two weeks’ work hours.

c. All employees will be given W-2 information in form, substance and timing consistent with IRS regulations.

d. Any contract workers will be insured as per Sample Baptist Church Insurance Committee guidelines and be paid at a rate established by a specific staff member.

1. The staff member will document such contract arrangement and will provide a copy of such arrangement to the Business Manager.

2. The Business Manager will be responsible for preparing IRS Form 1099 information for such contract persons and delivering such form per IRS regulations.

Section 3.08 Accountable Expense Reimbursements and Advances

a. Federal income tax regulations currently provide that an employee "need not report on his tax return" expenses paid or incurred by him solely for the benefit of his employer for which he is required to account and does account to his employer and which are charged directly or indirectly to the employer. These regulations further provide, "adequate accounting means the submission to the employer of an account book, diary, statement of expense, or similar record maintained by the employee in which the information, as to each element of expenditure (amount, time and place, business purpose, and business relationship), is recorded at or near the time of the expenditure, together with supporting documentary evidence, in a manner which conforms to all the 'adequate records' requirements" set forth in the regulation.

b. To establish an "accountable" expense reimbursement policy pursuant to current IRS regulations, the following terms and conditions will be followed by all Sample Baptist Church employees:

1. Any employee of the Church shall be reimbursed for any ordinary and necessary ministry and professional expenses incurred on behalf of the Church,

if the following conditions are satisfied:

i. The expenses are reasonable in amount;

ii. The employee documents the time, place, ministry purpose, ministry relationship, and amount of each such expense with the same kinds of documentary evidence as would be required to support a deduction of the expense on the employee's federal income tax return;

iii. Each expenditure must be supported by a receipt. If a receipt is not practical to obtain (i.e. cash tip to baggage handler at airport), substantiation of the expense must be thoroughly documented on the expense report; and

iv. The employee documents such expenses by providing the Church financial office with an accounting of such expenses within 60 days of the expense.

a. This condition will be fulfilled by the completion of a Sample Baptist Church Ministry Expense Report.

i. Each report entry must contain a clear and concise statement indicating the expenditure’s ministry purpose (e.g. counseling meeting).

ii. If the expense is entertainment or meals, there must be a disclosure of the ministry relationship (i.e. name of individual(s) entertained).

2. All requests for reimbursement by individuals who are not employees of the Church should be first approved by the individual responsible for the specific account area (i.e. staff member, committee chairperson, etc.).

3. The above conditions are necessary for every reimbursement in order for the Church to maintain its accountable reimbursement plan.

Section 3.09 Petty Cash

a. The Petty Cash Fund is established to assist staff in making minor ministry purchases and obtaining reimbursement for minor out-of-pocket expenses.

b. The Business Manager is responsible for the oversight of this fund.

1. Transactions into and out of the Petty Cash Fund shall be handled by the Business Manager only.

2. The Business Manager’s responsibilities shall only be delegated to the Minister of Education and Administration (or other staff member that is the direct report of the Business Manager).

c. All cash draws from this fund must be documented on a Petty Cash Voucher form.

1. The information on this form is to include i. The amount of the draw, ii. The date draw was given,

iii. The reason for the draw, iv. The budget account number to charge expense to, v. The appropriate staff person’s approval (based on the expense

category). vi. The name of person receiving the draw.

2. A receipt must be obtained from the employee in the exact amount of the draw.

i. This receipt will be stapled to the back of the petty cash form.

d. Under no circumstances shall these funds be used for

1. Personal purchases. 2. To make advances of a personal nature. 3. To cash personal checks. 4. To make personal IOU's.

Article IV. Handling of Bank Statements

a. Monthly statements from the bank should be reconciled on a regular basis.

b. The monthly bank reconciliation should be done by an individual who has no responsibility for signing or issuing checks.

c. Mailed bank statements are opened by church administrator, not the financial staff who has responsibility for reconciling them.

Article V. Benevolence Disbursements

Section 5.01 Our Responsibilities to Those in Need

a. It has always been the function of the Body of Christ to give assistance to the needy. “If anyone has material possessions and sees his brother in need but has no pity on him, how can the love of God be in him? Dear children, let us not love with words or tongue but with actions and in truth.” (1 John 3:17-18).

b. These Benevolence Guidelines are intended to provide a framework for meeting the needs of people physically, emotionally, and spiritually.

Section 5.02 Non-member Requests

a. Non church members may receive assistance by church staff. This assistance is

funded by the local Benevolence budget in the General Operating Account, and may include non-perishable food, grocery gift cards, overnight lodging, or gasoline.

1. Cash is never to be given, and requests for larger needs such as rent and utilities should normally be referred to local helping agencies shown on the Benevolence Resource List.

2. These organizations are best equipped to assess need and focus assistance where most needed.

3. The procedure for handling non-member requests is as follows.

i. Walk-ins requesting assistance may be asked to make an appointment at a later time depending on availability of a staff member to fully discuss their needs and give assistance.

ii. An Emergency Assistance Form will be completed for each request, and a staff member will interview the applicant to determine need. The staff member shall attempt to verify the need independently by calling a personal reference and/or vendor as appropriate.

iii. Assistance will be limited to $500 per budget year to any one “family unit,” based on immediate blood relatives or individuals living in the same dwelling.

a. The staff member giving assistance should be aware of the current balance and potential future needs from the budget when determining the amount of assistance to be given.

b. Any assistance beyond this limit would be considered unusual, and requires the prior approval of the Deacon Benevolence Team.

Section 5.03 Church Member Requests

a. Church members may be given assistance by the Deacon Benevolence Team.

1. This assistance will be funded by the Deacon Benevolence Fund, which is supplied through a special offering taken annually at the Maundy Thursday and Christmas Eve services.

2. Limited funds are available for rent, rent deposits, and utility deposits. Income, current housing situation, and ability to maintain future payments determine eligibility.

3. To avoid utility disconnect, emergency assistance can be provided. The Deacon Benevolence Team will work with the utility company and the client to make arrangements for the minimum amount required for maintaining services.

4. Eligibility is determined by income, proof of impending disconnect and referral.

5. The procedure for member requests is as follows.

i. Individual requests are referred to the Chairperson of the Deacon Benevolence Team.

a. The Chairperson or his/her deacon designee will interview the applicant to assess the need and complete an Emergency Assistance Form.

i. The chairperson will then discuss and approve/deny the request with the deacon officers, and note the decision on the Form.

ii. If approved, the chairperson will also complete a Check Request Form.

b. The original Emergency Assistance Form and any Check Request Form(s) should be forwarded to the church administrator or his/her designee.

ii. All completed Emergency Assistance Forms will be kept in a confidential file by the Business Manager.

a. Any monetary gifts approved will be made in check form (no cash) and given to the Deacon Benevolence Team for disbursement to the requesting member.

b. All follow-up contacts will be made per Deacon guidelines, and all decisions will be kept completely confidential by the deacons and staff.

c. Monies for housing, utilities, and furnishings will be paid directly to the vendor/service provider and only after confirmation of the need is met and an official vendor has been identified and confirmed.

Section 5.04 Other areas of assistance

a. We will assist with special relief offerings for disasters and periodic mass distribution of needed items to those in need, such as, blankets, coat, shoes, and food drives.

b. Church wide participation in such projects will be determined by our pastor and staff.

Section 5.05 Dealing with potential fraud and abuse of the system

a. Needs shall be met by direct payment to confirmed vendors or providers only; no cash will be given to any party for benevolence

b. Families and individuals shall be helped once within a twelve-month period unless extenuating circumstances exist and can be verified.

c. References will be checked via phone, personal visit, or appropriate paper work (i.e. final notices for utilities, rent, etc.).

d. Proof of need must be provided and confirmed. For example, if there is a request for a “family”, family should be present or proof given to confirm that there is a '‘family”.

e. Non-members must present proper identification (i.e. driver’s license or social security card).

Article VI. Credit Card Policy

a. Church credit cards will not be issued to any staff member.

b. Personal credit cards may be used for necessary church expenses and receipts turned in to the financial office with a check request for reimbursement, in keeping with the church’s accountable reimbursement policy.

1. If a personal credit card cannot be used, a check request should be submitted in advance to pay for a church expense, allowing adequate time for the request to be processed.

c. The church may maintain a general credit card which is to be held by the Business Manager.

1. Only Church employees are authorized to use the card, and any use of the card must be pre-authorized up to a certain dollar limit by the staff member responsible for the planned expense.

2. The card must be returned to the Business Manager immediately after use along with receipts supporting the charges made on the credit card.

Article VII. Ministers’ Discretionary Funds

a. If discretionary funds are established in such a manner that an individual (i.e. Senior Minister) has sole discretion and control as to how the funds will be spent, such funds must be reported as taxable income to this individual once possession of the funds is taken, unless the following procedures have been established and are properly functioning:

1. The funds must be approved by the Finance Committee and properly documented.

2. These discretionary funds must have been set aside for the convenience of the employee in furthering the church’s ministry purposes as set forth in its bylaws.

b. The Finance Committee will maintain control over the disbursement and replenishment of these funds.

1. Requests for the use of these funds must comply with the normal cash disbursement policies and procedures of the church. A Check Request Form must be used to request expenditure of such funds and documentation of expenditures must always be obtained.

2. Under those isolated instances where the disbursement is of a confidential nature, (i.e. counseling session) the request and documentation can be submitted directly to the Finance Committee Chairman or church administrator.

c. The individual who has discretion over these funds is prohibited from requesting the disbursement of these funds for their personal benefit or any member of their family.

d. IRS regulations prohibit the inurement of any church funds to a private individual, including church employees. To protect the church's tax exemption status, these procedures must be strictly followed by all those involved. For additional information regarding inurement, refer to the IRS website.

Article VIII. Open Credit Accounts

a. Credit accounts should only be set up with companies who are used regularly by the church.

1. All such accounts must have prior approval and signature by the church administrator.

2. Distribution of information related to credit accounts shall be limited and controlled by the Business Manager.

3. Receipts should be turned in to the Business Manager supporting all charges made on the accounts.

Article IX. Scholarships for Church Activities

a. The church often offers assistance to members and attendees in the form of scholarships to events such as camps, retreats or conferences.

b. To serve as a single point of contact and to prevent staff from being in the difficult position of granting or rejecting applicants, the Personnel Committee will maintain a scholarship subcommittee of three church members, including at least one from the Personnel Committee, to make all decisions regarding whether to grant a scholarship.

c. Anyone who would like to be considered for a scholarship may complete a scholarship application and submit it to the Personnel Committee. Copies of the scholarship application shall be kept on hand in the church financial office.

Exhibit A

Finance Committee, a Standing Committee

Principal Function Plan, prepare, recommend, and maintain annual budget including encouragement to membership to grow as Christian stewards.

Responsibilities

Develop, implement and monitor financial policies and procedures. Receive budget requests, coordinate budget preparation and present it to the church

body. Review and analyze monthly financial statements and present them to the church body. Analyze and recommend for church approval any financial requests not in the budget. Chairman and one other committee member to be authorized check signers. Submit committee meeting minutes to church office for filing.

Staff Advisor Pastor or his/her designee

Size of Committee 6 members inclusive of chairperson, Treasurer is a non-voting ex-officio member.

Staffing Nomination by Nominating Committee and election by church (Including Chairperson)

Term of Service

Chairperson - 1 Year o They may serve successive terms, but not longer than the normal committee

term. Members - 3 Years

o On a rotation basis, 1/3 of membership elected each year.

Qualifications

Be a church member and have expressed a willingness to serve. Be a tither – not to be verified, only to be identified as an expectation.

Exhibit B

Counting Committee, a Standing Committee

Principal Function To handle tithes and offerings.

Responsibilities

Count Sunday monies received. Prepare deposit slips. Reconcile deposits to offering envelopes. Authorized members drop bank deposit at bank. Submit annual budget request to the financial secretary. Submit any committee meeting minutes to the staff advisor for filing.

Staff Advisor Associate Pastor of Education and Administration

Size of Committee Sunday AM Service: 16 members inclusive of chairperson

Staffing Nomination by Nominating Committee and election by church(Including Chairperson)

Term of Service

Chairperson – 1 Year o May serve successive terms, but no longer than the normal committee term.

Members – 3 Years o On a rotation basis, 1/3 of membership elected each year.

Qualifications

Be a church member and have expressed a willingness to serve

Team Restrictions

No individual team member should count alone. No married couple should count alone.

Exhibit C

Internal Audit Committee, a Standing Committee

Principal Function To perform an annual review of Church financial records and properties.

Responsibilities

Review church financial records at least annually to see that all financial procedures and policies are followed. The results of review are to be presented to the church at a business meeting upon completion of report.

Review and perform limited procedures to assess the accuracy and existence of the reported assets and liabilities at each fiscal year end.

Members of audit committee should not be involved in receipt or disbursement of funds, and should not be a custodian of any church property.

Submit annual budget request to finance committee as needed.

Submit committee meeting minutes to church office for filing.

Staff Advisor Pastor or his/her staff designee

Size of Committee 6 members inclusive of chairperson.

Staffing Nomination by Nominating Committee and election by church, including Chairperson.

Term of Service

Chairperson - 1 Yearo May serve successive terms, but not longer than the normal committee term.

Members - 3 Yearso On a rotation basis, 1/3 of membership elected each year.

Qualifications

Be a church member and have expressed a willingness to serve. Be a CPA, accountant, or be knowledgeable in accounting/auditing practices.

__________