Governance Issues

FDIC Coverage Now $250,000

On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009.

See additional information at http://www.fdic.gov/news/news/financial/2008/fil08102a.html

Control Risk - #3 Risk Definition Series

Control Risk (CR) - is the level of risk that a misstatement will occur and not be detected by the entity's internal controls.

IR (inherent risk - defined in previous post) x CR (defined above) = Risk of Material Misstatement

#3 of 3 Filing for Exempt Status

In our previous posts we have discussed the criteria or the "14 point test" for churches. Churches are not required to file a Form 1023, however religious organizations with annual gross receipts greater than $5,000 must file.

In order for an organization to be tax-exempt, IRC 501(c)(3) requires the entity meet the following requirements:

1. organized and operated exclusively for religious, educational, scientific or other charitable purposes
2. net earnings may not inur to the benefit of any private individuals or shareholders

Get FDIC coverage over $100K through one bank

Through a program called the Certificate of Deposit Account Registry Service, or CDARS (pronounced like “Cedars”) you can get full FDIC insurance for your deposit amounts larger than $100,000. Basically, your large deposit made at your bank is broken into smaller amounts and placed with other banks that belong to a special network, who then issue CD’s in amounts less than $100,000, ensuring that your entire investment is covered by the FDIC.

Benefits:
1. The convenience of dealing with one bank
2. Earn one rate on your entire investment

Phase-in filing of new Form 990

To allow organizations time to adjust to the redesigned 990 series returns, the IRS is phasing in the new returns during a three-year transition period. Many more non-profits will be allowed to file Form 990-EZ during the phase-in period, according to irs.gov.

#5 Contributions - Deductible Amounts

Over the past several weeks we have described the requirements for deducting and recording charitable contributions.

In this post we will discuss calculating the deduction...

The amount of charitable contributions that may be deducted by a taxpayer is limited based on adjusted gross income, the type of property contributed or the nature of the charity.

Limitations:

#6 Contributions - Substantiation Requirements

Over the past several months we have discussed the requirements for reporting/deducting charitable contributions. In our final post, we will discuss the substantiation rules...

The Pension Protection Act of 2006 (PPA of 2006) changed the substantiation requirements for deducting charitable contributions. Prior to 2007, donors could deduct charitable contributions using a cancelled check, a receipt from the charity or another reliable written document.

Defining “Those In Charge”

The new auditing standards require certain communications to “those charged with governance”. These individuals are responsible for overseeing the strategic direction of the church or ministry. These same individuals have accountability for and to the entity, including the financial reporting process.

Those charged with governance may include a board of directors, a supervisory board, or trustees. Subgroups (such as an audit committee) may be charged with specific tasks to assist a governing body in meeting its responsibilities.

#4 Contributions - General Requirements

Since the beginning of the year, we have been discussing the general requirements for reporting contributions. In this post we will discuss when to record a contribution.

When is the unconditional transfer considered a contribution? When does the church record a contribution? The timing or delivery of the unconditional transfer is very important in determining how/when to record a contribution.

Let’s review the following:
a. Checks that are mailed to a church are considered “delivered” on the date the donor mails it or the date of postmark.

Are WE Closed Yet? (5 of 5)

As we learned in post #4 of 5, organizations must determine how to properly record leases, either as an operating or as a capital lease. In this post we will now assess how to determine prepaid expenses and unrecorded liabilities. To assist you in this determination print out the Church’s disbursement ledger for at least the last two months of the year. Review items that represent payments made before year end; but services or goods will not be received until after year end.

Prepaid/Other Assets Generally Consist of:

Prepaid Insurance
Prepaid TV/Radio Airtime
Prepaid Postage