Communication & Accountability In The Eyes of God, and also of Man

Communication & AccountabilityCommunication & Accountability

In The Eyes of God, and also of Man

Church Communication and Church Communication and Church AccountabilityChurch Accountability

• Communication• Not How Much but HOW?

• Creative• Inspiring• Challenging

• To higher Levels• Celebratory

• Consistent• Ministry Related

• Accountability• Accuracy & Truthfulness• Disclosure of all important data• Tell it like it is!

• Fiduciary Responsibility• Trust, responsibility• Actual or Perceived

Church Communication and Church Communication and Church AccountabilityChurch Accountability

This is a Manual of Procedures This is a Manual of Procedures for Communication and for Communication and

Accountability Accountability Also covering Church Accounting, Church Payroll Taxes, Expense

Allowances and Ministerial Compensation

Church AccountingChurch Accounting

• Receiving

• Counting Tithes and Offerings

• Depositing

• Disbursing

• Recording

• Auditing

Managing Your Churches MoneyManaging Your Churches Money

• God’s Money—Not the Church’s• Fiduciary Responsibility

• Policies and Procedures are Mandatory!!• Givers Perceptions• Public Perceptions• IRS Record Keeping• Errors and Omissions---THEFT

Money Management ControlsMoney Management Controls

• Budgets—See Separate Booklets• Policy Manuals—Written • Committees vs Individuals—Dual

Custody• Rotation of Duties, Vacations,

Separation, Training Ushers• Report Reconciliation's • Overseeing or Audit Committee

Money Management Components Money Management Components

• Receiving Procedures• Written In a Manual• Train Usher,

Counting Teams• Dual Custody• Check Cashing- NO!• Designated Giving-

Be Cautious• Security

• Counting Committee• See Separate

Booklet• Written Manual• Envelope Verification• Error Verification• Counting Report, Pg

17• Control Totals• Security

Money Management ComponentsMoney Management Components

• Depositing Procedures• Written Manual• Separation of Duties• Security• Bank Procedures• Florida Baptist Credit

Union

• Disbursement Procedures• Written Manual• Authorization• Documentation• Controls• Reconciliation• Security

• Petty Cash

Money Management ComponentsMoney Management Components

• Recording Church Finances• Written Manual• Accounting System

• Manual• Computerized

• Budget Controls• Audit Trails and

Procedures

• Reporting Church Finances--Individuals• Church Financial

Secretary Booklet• End of Year Giving

Reports• If Errors Present please

notify ???

• IRS• Reconciliation

Money Management ComponentsMoney Management Components

• Church Reports—Congregational • Financial Statements

• Income Statement• Balance Sheets• Designated Fund

Analysis

• Disbursements• Receipts• Special Reports

• Audits• External

• Expensive• Helps Develop

Procedures

• Internal• Audit Committee—

See Booklet• Co-op With Sister

Church?

Deductible Gift

Nondeductible Gift

Church Members

Pastor & Wife

• The Designated Gift

Other ConsiderationsOther Considerations

• Unrelated Business Income

• IRS 501c3

• Sunday School Classes with Separate Funds?

• Cash Money Management Accounts

• Political Action Committees?

• Real Estate Taxes?

Resource Material - The ChurchResource Material - The Church

• Managing The Churches Money

• Vital Signs

• Florida Baptist Convention Catalog

• Church Ministry Budgeting

• Solving The Church Budget Puzzle

• Communication & Accountability

Resource Materials- The ChurchResource Materials- The Church

• Financial Records For Churches

• Accounting Procedures

• Church Stewardship Ministry Team

• Values of a Financial Audit and/or Internal Auditing for the Small Church

• Building for The Future

External ResourcesExternal Resources

• Church Tax and Law Report• Call 800-222-1840 for a Sample Copy.• Every Church and Assoc should subscribe

• Christian Ministry Resources—Part of CTLR

• General Business Books and Resources

The Church is a huge

target for the criminal!

Church Payroll TaxesChurch Payroll Taxes

• Requirements

• Procedures

• Common Errors

EMPLOYER RESPONSIBILITIESEMPLOYER RESPONSIBILITIES

Obtain Form W-4(Submit Copy to State)

Obtain Form I-9File New Hire Report in Florida Withhold Income TaxesWithhold FICA and Medicare Taxes Issue Form W-2 by January 31

Kinds of Employee CompensationKinds of Employee Compensation

Current Compensation

Taxable Fringe Benefits

Nontaxable Fringe Benefits

Deferred Compensation

20 Factory Employee Test20 Factory Employee Test• Instructions• Training • Integration• Personal Service• Hiring, Supervising, and Paying

Assistants• Continuing Relationship• Set Hours• Full-time Work• Work on Premises• Set Work Order• Reports • Pay by the Hour, Week, or

Month

• Business and Travel Expenses• Tools and Materials• Investment• Profit or Loss• Work for More Than One Company at

a Time• Serving the Public• Right to Fire• Right to Quit

CONTROL

Top Ten MistakesTop Ten Mistakes1. Improperly classifying employees

as self-employed (independent contractors)

2. Failing to send a Form W-2 to each employee, minister and/or a Form 1099-Misc to certain nonemployees

3. Failing to include taxable fringe benefits (such as nonaccountable expense reimbursements, social security supplements, and “special occasion" gifts) in wages on Forms W-2

4. Including the minister’s housing allowance in wages on Form W-2

5. Failing to offer church employees available nontaxable fringe benefits

6. Failing to provide church employees with an accountable expense reimbursement plan

7. Funding an accountable reimbursement plan from employees compensation

8. Providing contribution receipts to members who donate their services to the church

9. Providing contribution receipts for donations designated to other individuals without proper organizational control

10. Failure by churches that operate, supervise, or control a private school to timely file an annual Certificate of Racial Nondiscrimination (Form 5578)

Expense AllowancesExpense Allowances

• Accountable Reimbursement Plans

• Tax Implications

• How To Do it Right

ADVANTAGES OF AN ACCOUNTABLE ADVANTAGES OF AN ACCOUNTABLE REIMBURSEMENT PLANREIMBURSEMENT PLAN

Avoids including the reimbursement in the taxable income of the employee

Avoids the possibility that the employee will be unable to deduct expenses because of the standard deduction

Avoids the reduction for Schedule A miscellaneous expenses caused by the 2% of AGI floor

Avoids the expense reduction caused by the Deason expense allocation rule

Avoids the statutory 50% reduction for meal and entertainment expenses

DISADVANTAGES OF AN ACCOUNTABLE DISADVANTAGES OF AN ACCOUNTABLE REIMBURSEMENT PLANREIMBURSEMENT PLAN

Employees must keep detailed expense records

The reimbursement plan cannot be considered as a part of an employee’s compensation package

The budgeted amount is not payable unless the expense amount is incurred and substantiated to the church

The church designated administrator of the plan must have full authority to deny reimbursement for any claimed (but unsubstantiated) expense

ACCOUNTABLE REIMBURSEMENT PLAN ACCOUNTABLE REIMBURSEMENT PLAN REQUIREMENTSREQUIREMENTS

Written Plan—see page 32 in Managing Church Money Booklet

Limited to Deductible Business Expenses Substantiate to Employer Within 60 Days the Following Items:

– Date Expense Incurred– Place Expense Incurred– Amount of Expense (may substitute standard

allowances and per diems)– Business Purpose of Expense

Return to Employer any Excess Advance

Within 120 Days

Ministerial CompensationMinisterial Compensation Current Compensation

Taxable Fringe Benefits

Nontaxable Fringe Benefits

Deferred Compensation

“Gifts”

THE CREDENTIAL HOOP• Licensed,• Commissioned, or• Ordained

THE PERFORMANCE HOOP• Ministration of Sacerdotal Functions• Conduct of Religious Worship• Administration of Religious Organizations• Teaching at Theological Seminaries

Ordained, Licensed MinistersOrdained, Licensed Ministers

• Are ALWAYS treated as Self-Employed for Social Security purposes

• Church salary is NEVER subject to income tax withholding

• Are MOST LIKELY, employees for Federal withholding of income taxes

Special Tax ConsiderationsSpecial Tax Considerations

Housing Allowance Exclusion - Sec 107 Self-Employed Status for Social Security - Sec

1402(c) Possible Exemption from Social Security Coverage -

Sec 1402(e) Exemption from Mandatory Income Tax Withholding -

Sec 3401(a)(9) Eligibility for Voluntary Income Tax Withholding -

Reg.. 1.3402(p)-1 Potential “Double Deduction” of Mortgage Interest and

Real Estate Taxes and as Housing Expenses for Housing Allowance - Sec 265(a)(6)

Minister’s Tax FormsMinister’s Tax Forms

• Schedule SE for Social Security Taxes

• Schedule A, not C for “business” expenses

• W-2 for Salary and not a 1099

• Estimated Tax payment forms 1040 ES, unless you have a voluntary withholding arrangement with the church

Gold Medal ResourcesGold Medal Resources

• Dr. Clarence Hackett, Director

• Bill Montgomery, Assistant Director

• FBC Stewardship Dept.• 1-800-226-8584 ext 3025

• Association Office and D.O.M

• Florida Baptist Convention Area Stewardship Specialist

My Stewardship MinistryMy Stewardship Ministry

• Christian Money Management Seminars• Church Accounting Consulting• Stewardship Sermons and Revivals

• Web page

• Biblicalstewardship.com

• Cmm@biblicalstewardship.com• Building for The Future Consultant