Local Church TreasurerFinance Training

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Local Church Treasurer/Finance Training

• 2008

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Welcome!!

• Christine Dodson, Treasurer
• Ivanna L. Cole, Controller
• Jennifer Walls, Assistant Controller
• Alison Smith, Payroll Accountant
• JoAnna Cafferty, Program Administrator
• Chrisy Powell, Property Management Insurance
• Katherine Bell, Accounts Payable
• Diana Hunter, Accounts Receivable
• Kelly Young, Pension and Insurance

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Resources

• Conference Treasurers Office
• Internet and Other Resources

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• Role of the Local Church Treasurer and Financial
  Secretary
• Tab B
• 2004 Discipline, Paragraph 259
• New 259.4 from 2008 General Conference!

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Conference Budgeting and Apportionment Process
Plan Budget Based on Ministry Needs-2008
CFA uses investment earnings to supplement
budget and ministry needs.
Table I II sent to Conference Statistician.
Approve Budget-2009
Spend Budget-2011
Actual Apportionment Receipts are allocated to
individual budget lines.
Table II Data is Received from Statistician and
Apportionments are calculated.
Funds are invested for future use.
Raise Budget-2010
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General and Jurisdictional Apportioned
Ministries 2008 19.93,919,654

• World Service
• Ministerial Education Fund
• General Administration
• Jurisdictional Administration

• Episcopal Fund
• Africa University Fd
• Black College Fund
• Interdenominational Cooperation Fund

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Connecting in Our Conference Mission Development
2008 - 5.87 - 1,156,720
Help Children in Need Provide Benevolent Care For
Retired Pastors Provide Program Grants to Local
Churches
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Connecting in Our Conference Spiritual
Formation 2008 11.04 - 2,174,621
Train and Ordain Clergy Train Laity of all
ages Support UM Camps and 7 NC Colleges Support 7
NC Campus Ministries
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• Connecting in Our Conference
• Episcopal Circle
• 2008 16.9 - 3,329,652

Provide Episcopal and District Leadership Produce
Annual Conference Fund New Church
Development Encourage Christian Unity
and Inclusiveness
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Connecting in Our Conference
Communications 2008 0.8 - 158,000

• Publishes
• Mission and Service Commitments
• Annual Conference Saddlebag
• Advocate
• Conference website NCCUMC.ORG
• Maintains Email Service
• Equipment
• Funds Archives and History

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Connecting in Our Conference Resource Ministries
2008 27.76 - 5,467,847
Clergy Benefits 18.33 3,611,172 Business
and Property Management 9.43 1,856,675
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• Connecting in Our Conference
• Connectional Ministries
• 2008 6.0 - 1,181,252

Office Administration And Salary And Benefits 13
Positions For All Program Boards
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Connecting in Our Conference Past Service
Liability 2008 16.75 - 3,300,000
Pension Support for tired and worn out
preachers Funding for the Pre-1982 pension plan
liability
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Calculating Apportionments

• Tab D
• Statistical Tables I, II, and III
• Apportionment Report
• Apportionment Calculation
• Statistical Tables On-line Tutorial available in
  mid-December!

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Church Remittances

• Tab E
• Remittance Forms www.nccumc.org/treasurer
• Cutoff for 2008 Wednesday, January 21, 2009
• After January 13, mail to Raleigh office
• Check apportionment balances
• Treasurers Office Website
• On-line Data Collection System
• EFT Enrollment for remittances

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Pension Insurance Payment Pointers

• Write SEPARATE checks for Pension and Insurance
  and Apportionment Payments
• Pension GREEN Envelope Insurance BROWN
  Envelope
• Note on memo line that payment is for Pension or
  Insurance and if possible include the pastors
  name or ID found on bill
• Verify that all the info on your statement
  (amount, church billing address, pastor name,
  etc.) is correct
• The Conference Pension bill includes amounts for
  CRSP and CPP. It may also include an amount for
  MTF, if your pastor has made this election. UMPIP
  will be billed from and remitted to the GBOP in
  Evanston, IL.
• Easiest way to ensure proper payment is to enroll
  in EFT program

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Internal Controls

• Tab F

Policies And Procedures That We Use To Ensure
Completeness, Accuracy, Authorization And
Validity Of Data.
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Internal Controls Are Necessary to

• Protect Innocent Workers
• Prevent And Detect Error
• Deter Fraud

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Fraud

• Websters Dictionary
• Fraud is a generic term, and embraces all the
  multifarious means which human ingenuity can
  devise, which are resorted to by one individual,
  to get an advantage over another by false
  representations. No definite and invariable rule
  can be laid down as a general proposition in
  defining fraud, as it includes surprise,
  trickery, cunning, and unfair ways by which
  another is cheated. The only boundaries defining
  it are those which limit human knavery.

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Fraud Triangle

• Incentive / Pressure
• Management or other employees may have an
  incentive or be under pressure, which provides a
  motivation to commit fraud.

Rationalization/Attitude Those involved in a
fraud are able to rationalize a fraudulent act as
being consistent with their personal code of
ethics. Some individuals possess an attitude,
character or set of ethical values that allows
them to knowingly and intentionally commit a
dishonest act.
Opportunity Circumstances the absence of
controls, ineffective controls, or the ability to
override controls- that provide an opportunity
for fraud to be perpetrated.
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Internal Control Policy

• Tab F
• DRAFT Template for Internal Control Policy
• Required for local churches from 2008 General
  Conference

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Local Church Audit Guide

• Tab G
• What is an audit? (pg 4)
• an independent evaluation of the financial
  reports and records and the internal controls of
  the local church
• Not a symbol of distrust!

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Local Church Audit Guide

• Why do an audit? (pg 5-6)
• Protection for you!
• Build trust and confidence
• Set habits of responsibility
• Reassure donors
• Provide checks and balances

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Local Church Audit Guide

• Who can do an audit? (pg 7-8)
• Independent
• Qualified
• Not necessarily a CPA

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Local Church Audit Guide

• Restricted Gifts (pg 9)
• Temporarily Restricted
• Permanently Restricted
• Designated Fund (pg 11)

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Local Church Audit Guide

• What does an audit do? (pg 11)
• Verify reports
• Document restrictions
• Evaluate processes
• What is included in an audit? (pg 13)
• ALL funds
• (Except UMW which must be audited but may be
• audited separately)

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Local Church Audit Guide

• What do auditors need? (pg 14)
• Policies
• Minutes
• Statements
• Invoices
• Income Reports
• And more!!

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Local Church Audit Guide

• How is an audit done? (pg 15-22)
• Confirmations (Addendum III example)
• Bank reconciliations
• Deposit records
• Procedure review internal controls

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Local Church Audit Guide

• Internal Controls
• Segregation of duties (pg 23)
• Fin. Secretary Treasurer not same person and
  not related
• Auditor not Fin. Secretary or Treasurer and not
  related to either
• Receipts Disbursements by different people
  (when possible)
• Authorizations (pg 24)
• Reporting

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Local Church Audit Guide

• Auditors Report (pg 27)
• Audit Report to Church Audit Committee
• Annual Audit Report by Church (Addendum II)
• Audit Check-off List (Addendum I)

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Accountable Reimbursement Plans

• Tab H - QA from www.gcfa.org/TaxPacket.html
• What is an Accountable Reimbursement Plan (ARP)?
  (Q 1)
• a method for claiming and reimbursing
  professional or business expenses

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Accountable Reimbursement Plans

• Advantages
• Convenience
• Data
• No complex rules
• Fewer limits
• Tax savings
• Disadvantages
• More church review of expenditures
• Use it or lose it (cant be paid as salary if not
  used)

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Accountable Reimbursement Plans

• What is in an ARP? (Q 5)
• Sample policies available at www.gcfa.org/TaxPacke
  t.html
• When should an ARP be set up? (Q 6)
• In advance of budget year
• Can be changed with new agreement

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Accountable Reimbursement Plans

• What can be included in an ARP? (Q 11)
• Office supplies
• Office equipment
• Office postage
• Software
• Professional books
• Continuing education
• Etc.

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Accountable Reimbursement Plans

• What is not included?
• Mileage to church from home
• Mileage to home and back to church for lunch
• Vacations
• Trips to visit sick relatives
• Computer used by family
• More examples in appendix to QA

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Accountable Reimbursement Plans

• Who should be paid? (Q 12)
• Pay directly to vendor
• Reimburse staff member
• Either method is OK!
• Are there required documents? (Q 13)
• Actual receipts
• Documentation of business purpose
• Listed property cell phones, vehicles, etc.

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Accountable Reimbursement Plans

• What is a business expense? (Q 21)
• Related to purpose and goals of church
• Same requirements for churches as for other
  businesses
• Can church not pay related business expense?
• Yes! Payments approved by church. (Q 22)
• Who owns what is bought with ARP?
• The church (Q 24)

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Accountable Reimbursement Plans

• IRS Standard Business Mileage Rate
• 2008 Rate 0.505 per mile (Jan-Jun)
• 2008 Rate 0.585 per mile (Jul-Dec)
• 2009 Rate 0.55 per mile
• Charitable Mileage Rate - 0.14 per mile

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Housing Allowances

• Tab I - QA from www.gcfa.org/TaxPacket.html
• What is a housing allowance? (Q 1-2)
• An exclusion from taxable income for federal
  income tax purposes

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Housing Allowances

• How much can an allowance be? (Q 4)
• The lesser of
• The amount designated as the housing allowance,
• The amount of actual expenses, or
• The fair rental value of the property (furnished
  plus utilities)
• How is an allowance set up? (Q 9)
• In advance and changed prospectively if needed
• Charge Conference resolution
• Attachments A B provide examples

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Housing Allowances

• What can be included in actual expenses? (Q10)
• Attachment C provides a worksheet
• Examples include
• Utilities
• Furniture and appliances
• Building repairs and remodeling
• Insurance and taxes
• Maintenance items

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Housing Allowances

• What if allowance is more than actual? (Q 12)
• Can be paid to pastor as taxable income
• How is the allowance reported? (Q 13)
• Can include in box 14 on W-2
• Not reported in box 1 if not more than actual
• Is allowance excluded from social security?
• No! Included for social security purposes. (Q 16)

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Employment Status?

• Tab J www.irs.gov, Publication 1779
• Employee vs. Independent Contractor
• Behavioral Control
• Financial Control
• Relationship
• Employee? Withhold tax and W-2
• Ind. Contractor? No withholding and 1099

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Tax Guide for Churches

• Tab K Publication 1828
• www.irs.gov
• Tax Exempt Status (pg 3)
• What does that mean?
• Group ruling

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Tax Guide for Churches

• Jeopardizing Tax Exempt Status (pg 5)
• Inurement
• Substantial Lobbying
• Political Campaign
• Unrelated Business Income Tax (pg 16)
• Income
• Examples
• Tax

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Tax Guide for Churches

• Employment Tax (pg 18)
• FICA
• FUTA
• Clergy Compensation (pg 19)
• Discussed in detail in W-2 slides later
• Business Expenses (pg 20)
• Accountable Reimbursement Plans
• Non-accountable Reimbursements

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Tax Guide for Churches

• Filing Requirements (pg 22)
• Charitable Contributions (pg 24)
• Substantiation
• Quid Pro Quo
• Disclosure Exception
• IRS Audits of Churches (pg 26)
• Audit process

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Record Retention

• Tab L www.gcfa.org Local Church link
• Auditor recommendations at
• www.nccumc.org/treasurer - Downloads link

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Group Tax Exemption Ruling

• Tab M www.gcfa.org
• Each church should have own Employer
  Identification Number (EIN)
• General IRS information
• http//www.irs.gov/businesses/small/article/0,,id
  98350,00.html
• Apply for EIN Online
• http//www.irs.gov/businesses/small/article/0,,id
  102767,00.html
• Questions on group ruling?
• Email legal_at_gcfa.org

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Clergy Pension

• Tab N www.nccumc.org/treasurer - Downloads Link
• Pension Worksheet and Instructions
• Clergy Retirement Security Program (CRSP)
• Pension Calculations
• CRSP Defined Benefit 10.4 of Plan Comp
• CRSP Defined Contribution 3 of Plan Comp
• CPP Church 2 of Plan Comp
• CPP Pastor 1 of Plan Comp
• Church portion for FT clergy 15.4
• Pension and Insurance Arrearages

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Clergy Income Reporting

• Tab O Completing a Clergy W-2
• www.gcfa.org, Pastor link, Tax Packet link
• Box B Employer Identification Number
• Each church should have its own
• Boxes C, D, E, F Name and Address Information

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Clergy Income Reporting W2

• Box 1 Compensation includes
• Salary
• Gifts
• Allowances (other than housing)
• Per diem or mileage in excess of IRS rates
• Taxable Fringe Benefits
• Non-qualified moving expense

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Clergy Income Reporting W2

• Box 1 Compensation does not include
• Pension withholdings
• Housing and utilities allowances
• Health premiums
• Accountable reimbursement plan payments
• MRA or DCA
• Excludable fringe benefits

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Clergy Income Reporting W2

• Box 2 Tax Withholdings
• Any voluntary withholdings for clergy
• Boxes 3, 4, 5, 6 Blank for clergy
• Because clergy are considered self-employed for
  social security purposes
• Boxes 7, 8, 9 Not applicable

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Clergy Income Reporting W2

• Box 10 Dependent Care Benefits Paid
• Box 11 - Not Applicable for Most Clergy
• Applies to non-qualified pension plans
• Box 12 Clergy Contributions most used
• C Life insurance benefits gt 50,000
• E 403(b) employee salary reduction
  contributions
• P Qualified moving expense payments

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Clergy Income Reporting W2

• Box 13 Check if on retirement plan
• Box 14 May report housing and utilities
  allowances here
• If do not list, must tell clergy separately
• Boxes 16-20 State and local wages and tax
  withholdings

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Clergy Income Reporting W2

• Example information and W2 in Tab O

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Clergy Income Reporting - 941

• Tab P IRS Form 941 Employers Quarterly
  Federal Tax Return
• Part 1
• Line 1 Number of employees
• Line 2 Wages subject to federal income tax
• Line 3 Tax withholdings
• Line 4 Check if not subject to social security
  or medicare

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Clergy Income Reporting 941

• Part 1
• Line 5 if 4 is not checked, enter wages subject
  to social security and multiply by percentages
• Line 7 Adjustments
• Line 8 Calculation
• Line 9 Advance Earned Income Credit payments
• Line 10 Calculation
• Line 11 Tax deposits made for the quarter

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Clergy Income Reporting - 941

• Part 1
• Line 12 Balance due
• Line 13 Overpayment
• Parts 2-5 Information and signature
• Tab P IRS letter
• If one minister and no other staff, 941 not
  required

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Clergy Income Reporting

• Other Reporting
• State Reporting
• Withholding Forms (W-4, NC-4)
• I-9 Compliance
• State Reporting of New Hires for Child Support
  Enforcement
• www.ncnewhires.com

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Church Incorporation

• Tab Q
• Some guidance and sample forms available at
  www.gcfa.org Local Church link
• Memo Incorporating a Day Care

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Local Church Insurance

• Tab R
• Property Insurance
• PACT - Captive Insurance Trust
• Recommended minimum coverage
• Workers Compensation Coverage

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Sales Tax

• Tab S
• State Taxation and NonProfit Organizations
• www.dor.state.nc.us/publications/nonprofit.html
• Sales and Use Tax (pg 5)
• Sample Form E-585 and instructions
• Frequently asked questions (pg 21)
• Forms and Legislative Changes
• www.dor.state.nc.us/downloads/sales.html
• Application for Employer Identification Number
• www.4.irs.gov

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Escheat Property

• Tab T - www.nccash.com
• Annual Reporting of Unclaimed Property
• Guide to Unclaimed Property Outstanding/Unpresente
  d Checks
• Guide to Unclaimed Property Due Diligence

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Local Church Accounting

• Tab U www.gcfa.org, Local Church link
• Selection of Church Accounting Systems

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United Methodist Foundation

• Investment opportunities for local churches
• Planned giving opportunities for individuals

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Thank you for coming!

• Questions?