Good churches need good manuals – Finance Manual

2016-11-november-24-6

 

A finance manual is critical. Church finances require the utmost level of trust from the donors and members toward the pastors and finance staff. A finance manual establishes the policies by which the church’s money will be governed and used. Parts of this document are a legal requirement but most of it is designed to ensure confidence in the handling of funds.

 

If a church does not have a finance manual, it can create the appearance of lack of integrity and a haphazard attitude towards donated money. That is not the biblical standard. Paul tells the Corinthians to do all things in their church “decently and in order.”

 

A good finance manual will address accounting, banking, record-keeping, software and hardware, document retention, communication with donors, accounts payable, financial reporting, audits, gift acknowledgement, and too many other things to list here. These policies ensure that even though staff may come and go, the practices within the Finance Office remain constant and completely above-board.

 

A personnel manual is a living document – it must be reviewed every year and updated at least every other year. Not doing that minimal step is a failure by management. Most policies will remain the same such as contribution processing, payroll, or accounts payable. But as times change, new policies must be written and old policies changed to address changes in the law or accounting standards regarding overtime, designated funds, and PP&E (property, plant, & equipment).

 

The finance manual template at www.churchbestpractices.org has

  • A Gift Acceptance Policy to help the church know what gifts can be accepted without question versus those which require research
  • A policy for using church-issued credit cards and reporting the expenses charged on the card
  • Fundraising ethics standards to ensure the church abides by IRS rules

 

This manual is only $30. It is updated annually to ensure its compliance with the latest legal and tax changes.  This manual is a great starting point for churches needing to develop a manual scratch or to update their current one. It will save hours of research and writing. By using this manual, a church will need only to add sections that are specific to their situation and/or remove non-legal policies which don’t apply to them.

Good churches need good manuals

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All churches need policies. Some churches make policies in reaction to an event. That is backwards thinking. Churches must be proactive in their policies so that staff and members know what is expected and what lines cannot be crossed.

 

Every church needs a personnel manual and a finance manual to establish the legal and ethical boundaries within which the staff and members will operate. Violation of these policies often violates legal, ethical, or moral boundaries. Breaking a policy will always result in a conversation and sometimes in the termination of a staff member.

 

Some churches need guide manuals (not policy manuals) to establish the parameters for their budget, endowment, or internal operations. These manuals determine the boundaries within which the staff and committees will function. Straying outside those limits may be permitted but only after a conversation about why and how.

 

This site provides churches with templates they can use to create their own manuals. There is no need to “re-invent the wheel.” These manuals were developed by an administrator with over 25 years of experience in half a dozen churches. These policies comply with all current laws and are the best practices of healthy churches.

 

The manuals available are:

  • Budget
  • Finance
  • Finance Office
  • Endowment
  • Personnel
  • Financial Statements
  • Financial Planning for Ministers
  • Generosity Strategy
  • Written Communications

 

Overtime Laws

2016 03-March 29 (8)

On December 1, 2016 new overtime (OT) rules as approved by the US Department of Labor go into effect. Actually, most of the overtime laws are over 30 years old. In May 2016 the DoL altered one major component of the OT laws but almost everything else remained the same.

 

The major change is that salaried employees must make over $47,476 (just round that to $47,500) to be exempt from OT. Salaried workers who are below this dollar threshold and who do not make executive-level decisions should keep track of their work hours. While tracking hours worked each pay period is a pain, it is necessary in order to know if the employee should receive OT compensation.

 

Some other information about DoL laws:

  • Hourly workers are never exempt from OT
  • Contractors must truly be from an independent company that has several clients and not just an outsourced former employee or two

 

Lead On!

Steve

Workers’ Comp Insurance – a primer (part 1 of 3)

2016 05-May 24 (5)

Workers’ Compensation Insurance is legally mandated for employers. In Virginia (and probably in most US states) it is required for all employers with more than two employees. That means that ultra-small employers (like mom & pop companies) do not need WC insurance but everyone else does.

 

WC insurance covers the medical expenses of employees who are injured or killed while working. It pays for most work-related injury expenses. However, I have seen work-related accidents which were determined by the insurance company to be non-work-related.

 

When a person goes to the hospital with an injury, especially the emergency room, one of the questions is, “Was this caused by a workplace accident?” This question should always be answered truthfully – never try to protect an employer from claims or insurance price increases by lying about the nature of the accident. Employers must encourage their employees to claim WC insurance especially on injuries which could cause chronic pain or prolonged recovery. Those long-term consequences can be expensive if the employer or employee pay for them.

 

WC insurance is obtained from the insurance company which handles the employer’s property & liability insurance. It is typically not expensive and it is based on several factors:

  • The work performed by the employee
  • The employee’s actual wages
  • A discount or premium charged based on prior claim history

 

After the terrorist attacks on the US on September 11, 2001 the insurance industry lobbied Congress which permitted a non-negotiable terrorism fee which is assessed on all WC policies.

 

Lead On!

Steve

 

Stock Gifts (part 3 of 3)

2016 05-May (10)

Several times during the year it is a good idea to place in the Sunday bulletin, the quarterly donor gift statement, or other form of communication a reminder that people can give stock to the church. Below is the bulletin “blurb” which I use regularly.

 

Many members of (insert church name) donate appreciated stock. They give to the ministry budget, to missions’ offerings, the church’s endowment, or the building campaign. You can transfer your stock electronically to (insert church’s name)’s account by contacting (insert church’s broker) at (insert brokerage name and phone number) or (insert church contact) in the church office (insert church phone number). To give electronically, your broker will need a DTC number (insert number) and the church’s account number at (insert account number).

 

Lead On!

Steve

 

Stock Gifts (part 2 of 3)

2016 04-April 26 (9)

When stock is donated, it must be acknowledged by the church. It can be posted on the person’s giving record so that there is permanent record of the gift. It is also an excellent practice to send the donor a separate letter with the details of the transaction. Below is a sample letter which I use regularly.

 

Mr. and Mrs. John Smith

1234 Maple Ave.

Hometown, US 12345-6789

 

Dear Mr. and Mrs. Smith:

 

Thank you for your contribution to Grace Family Fellowship. Your gift of stock was:

 

Name of stock:……………………………………….. Apple, Inc. (AAPL)

Number of shares:………………………………….. 25 shares

Date of transfer:…………………………………….. January 3, 2018

Stock high on date of transfer:…………………………… $412.50

Stock low on date of transfer:……………………………. $409.00

Average value per share on date of transfer:………. $410.75

Total value of contribution:…………………………… $10,268.75

 

Fund contributed to:

  • 2018 Operating Ministry Budget

 

The date of transfer is the date on which the stock was transferred to Grace Family Fellowship. The IRS requires that stock gifts be valued at the average of the high and low of the stock on the date of transfer. Grace Family Fellowship sells all stock gifts immediately. The cost of the commission and fees related to the sale is netted from the value of your gift.

 

For IRS purposes, I must inform you that the gifts contained in this letter are based on intangible religious benefits. You did not receive any goods or services from Grace Family Fellowship for this contribution.

 

Thank you again for your gift. Your continued support of the ministries of Grace Family Fellowship is greatly appreciated. If I may be of further help please let me know.

 

Sincerely,

 

Church Administrator

 

Lead On!

Steve

 

Stock Gifts (part 1 of 3)

2016 05-May 10 (2)

Virtually all stock in the US is common stock. There are lots of other kinds of stock (preferred, private, etc.) but common stock is typically what is traded on the major stock exchanges. Almost all stock is now held in “street accounts” or an electronic account in a brokerage. Paper stock is available but it is cumbersome to transfer so most people use electronic stocks. For purposes of this post, stock gifts include mutual funds.

 

Stocks which have increased in value since their purchase are an excellent way for members to make gifts to their church without incurring tax consequences. Churches can accept paper stock gifts without having an account with a stock broker. However, only brokerage firms with selling rights in a stock exchange (think NYSE, New York Stock Exchange on Wall Street) can sell the stock. Churches without an account with a broker cannot accept electronically transferred stock from a member’s street account.

 

Churches which may get stock gifts should be pro-active and establish a brokerage account. This will require the authorized body of the church to approve a required corporate resolution (the wording is provided by the brokerage firm) which authorizes specific people in the church to sell stock. Typically the people who are named on the resolution are the church’s treasurer, chairperson of the Finance Committee, and the staff person responsible for the church’s finances.

 

Once the account is established and the resolution is approved, then the church can accept and sell donated stock without much trouble. All stock gifts must be acknowledged by the church and there is a specific way to value stock gifts.

 

Lead On!

Steve

IRA Gifts

2016 05-May 31 (9)

In December 2015, the US Congress made permanent a tax break that benefits older donors: the ability to gift to a charity funds directly from an IRA (Individual Retirement Account). There are several rules for this:

  • Donors must be 70.5 years or older
  • IRA gifts cannot exceed $100,000
  • Gifts must go to a 501(c)(3) – FYI: the IRS considers all churches in the US to be 501(c)(3)s.

 

There are some interesting nuances to IRA gifts:

  • The IRA transfer does not show up in the donor’s income but it does meet the mandatory RMD (required minimum distribution) of IRAs
  • The church must provide an acknowledgement letter to the donor but the IRA gift does not show up on the donor gift statement from the charity. The reason is that because this IRA amount doesn’t show up on the donor’s Form 1040 under income, it can’t show up on the Form 1040 as a contribution (this prevents double-dipping).
  • Checks sent to churches from an IRA sometimes do not have the name of the donor on it. The church will need to research who the donor is in order to send an acknowledgement.
  • This gift will benefit some donors more than others. Thus, it is in the interest of the donors to consult their tax or accounting professional to determine if this will help their individual situation.

 

Churches will be wise to encourage IRA gifts from eligible donors. The following text can be included in the Sunday bulletin during the year.

  • The IRS permits people to give from their IRA (Individual Retirement Account) directly to the church. This transfer can be a significant tax advantage. Please consult your tax or accounting professional to see if you should make a gift from your IRA to the church.

 

Lead On!

Steve