Governance Issues

Ordinary and Necessary Expenses (2 of 2)

In our series of ordinary and necessary expenses, churches and ministries should document lodging and certain incidental expenses (such as cab fares) by receipt and/or other contemporaneous records that include the business purpose of the trip.

Are WE Closed Yet?

I hope our previous post revealed the importance of closing the books monthly/quarterly/yearly. In this post, I will address the closing of the cash accounts and the review of the coding of income and expenses for the closing period for accurateness and reasonableness.

Transparency - What is it?

With Senator Grassley's inquiry with six televangelists, the questions, as documented in press releases, seem to be directed at governance and reporting issues. These two operating areas, independent yet dependent in function, require two important factors, transparency and accountability.

How do you define these terms? In this post and following, we will briefly define and explore these important, vital characteristics for a church.

Transparency is defined well by Joyce Meyer Ministries. Upon walking into their ministry headquarters, the following words are embedded in the concrete:

Contributions - 6 General Requirements - (2 of 6)

In order for a contribution to be deductible for income tax purposes, the contribution must meet 6 general requirements. In our previous post we discussed the gift of cash or property. In our post today we will discuss what types of organizations can receive contributions and provide substantiation to the donor in order to deduct the donation for income tax purposes.

Requirement #2 for contributions is that the donation of cash or property must be made to or for the use of a qualified organization.

Ordinary and Necessary Expenses (1 of 2)

In light of the current spotlight on televangelists let's review appropriate expenses and required documentation/substantiation.

For an expense to be an appropriate expense for a ministry, the expense must be ordinary and necessary, which in general requires a showing that the expense was incurred principally for and has a reasonably close relationship to the tax-exempt purpose of the church or ministry.

Additionally, proper documentation must be made for the expenditure. For meals, the following should be recorded:

> the amount and a description of each separate expenditure;

Contributions/Event - (1 of 4)

The following was a recent question we received via e-mail and we want to share the common situation with you.

Introduction: Contributions may be the most gracious form of expression that a donor can provide a church/ministry to aid in its vision. Yet, with gracious offerings can come many challenges when attempting to account for the funds. Most ministries solicit contributions through a variety of avenues each offering it’s own set of challenges in how the revenues and expenditures should be treated.

The following example is a scenario that many ministries and churches encounter:

Designated Funds vs Restricted Funds

So what defines a designated fund/contribution? Shouldn't accounting be simple? Isn't it basic math (one plus one equals two)?

The difficulty lies in the terminology or meaning of words. The manner in which the word designated is used can cause significant differences in how churches account for a transaction.

Not all designated funds are accounted for as restricted funds. Accounting standards state only third party designated funds are to be accounted for as restricted funds. Internally designated funds, such as board-designated funds, are accounted for as unrestricted funds.

Are WE Closed Yet?? (1 of 5)

Many of us understand that once a month/quarter/year a business, ministry or church will need to do an assessment of its activity and the stewardship of that activity. This is considered a monthly/quarterly/yearly closing of the financial records, which is a review or overview of the books, to ensure that they are complete and all information is recorded correctly. In addition, it gives an analysis on how well an organization has done during the month/quarter/year. A similar assessment was performed in the Bible regarding the story of the talents as follows:

Bogus E-Mail

Straight from the IRS hotline:

The IRS has seen several variations of a refund-related bogus e-mail which falsely claims to come from the IRS, tells the recipient that he or she is eligible for a tax refund for a specific amount, and instructs the recipient to click on a link in the e-mail to access a refund claim form. The form asks the recipient to enter personal information that the scamsters can then use to access the e-mail recipient’s bank or credit card account.

Vehicles Contributed to a Church – (4 of 4)

If a church or ministry receives an auto or other vehicle and the claimed value is greater than $500, there are different filing requirements than discussed in the previous post. You still need all the donor and vehicle information listed previously, however the additional documentation is more complicated.