Transparency In Ministry

Ministries that normally have no more than $25,000 of annual gross receipts are not required to file Form 990. This leaves the IRS with no records on these organizations. Therefore, for fiscal years beginning on or after January 1, 2007, these non-profit organizations must file a new annual report.

The report will be filed in electronic form and will contain information such as the organization's name, address, web site, identification number, principal officer name and address, and evidence of the continuing basis for the organization's exemption. The IRS will mail notification of the filing requirement to an organization if their name and address are on record. If an organization terminates its existence, it also must electronically notify the IRS.

What if you fail to file? There is no monetary penalty. However, if an organization fails to file for three consecutive years they may be subject to a revocation of their exempt status.

Churches that are not required to file a 990 are also not required to file this annual notice. The new rule is only for organizations not filing Form 990 due to the income limitation exceptions.

See Code Section 6033 and the 2006 Pension Act, or contact our office or e-mail us for further information.

Financial Accounting Standards Board (FASB) provides guidance on how Churches and Ministries should report information in their financial statements. FASB is the authoritative entity providing direction on how things should be accounted for and reported in accordance with generally accepted accounting principles (GAAP).

Over the last 10-15 years, the FASB has written and re-written several standards that specifically address non-profit (ie., which include Churches/Ministries) entities.

FASB Statement 116 Accounting for Contributions Received and Contributions Made
FASB Statement 117 Financial Statements of Not-for-Profit Organizations
FASB Statement 124 Accounting for Certain Investments Held by Not-for-Profit Organizations
FASB Statement 133 Accounting for Derivative Instruments and Hedging Activities
FASB Statement 136 Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others
FASB Statement 144 Accounting for the Impairment or Disposal of Long-Lived Assets

Over the next several posts, I am going to discuss the financial statement requirements and certain accounting issues for churches and ministries. The FASB standards should be followed, if the Church or Ministry wishes to report information in accordance with GAAP.

My next post will address the first statement included in the financials - a statement of financial position.

Stay POSTED! If this blog is informative and meets the needs of knowing what is required for your Church’s accounting and reporting needs…SUBSCRIBE to this blog. See instructions contained in the designated portion of the “home” page.

Straight off the press...

Stanfield & O'Dell, P.C.'s Blog Intergral Part of Niche-Building Campaign

Stanfield & O’Dell’s Christian ministry blog was honored by the Association of Accounting Marketing (AAM) with an award for a “Niche-Building Campaign.” At the recommendation and consultation of Golden Marketing, Stanfield & O’Dell became the first multi-partner CPA firm to launch an industry-specific blog (theministryblog.com).

Innovative approach—and demonstrated results—were noted by judges in selecting Stanfield & O’Dell’s entry from among several outstanding entrants for this “Association for Accounting Marketing-Marketing Achievement Award” (AAM-MAA) presented on June 7, 2007, at AAM’s 13th annual summit in Savannah, Georgia.

Golden, who works with accounting firms across the US and abroad, notes that there are only 23 blogs authored by licensed public accountants for the purpose of reaching current and prospective customers. Of these 23 blogs, only four are industry-specific rather than service focused (e.g. general accounting, tax or other services). The Ministry Blog was the second of the four to launch. “Transparency in Ministry,” includes over 20 categories specific to the tax and reporting issues for churches and ministries.

For additional information on this exciting announcement, see Golden Marketing's announcement at goldenpractices.com

Straight from the IRS Press…June 14, 2007

The IRS has released another proposed revision for Form 990, (the informational return required for non-profits, churches are exempt). The draft proposes significant changes to the ways in which public charities report information on finances, fundraising activities, governance, executive/board compensation, and program services.

Individuals, including practitioners and industry professionals are encouraged to review the proposed changes and provide written comment for a three-month period. Questions concerning the redesigned form and instructions should be e-mailed to the IRS at Form990Revision@irs.gov; or mailed to:
Form 990 Redesign,
ATTN: SE:T:EO,
1111 Constitution Ave., N.W.,
Washington, DC 20224.

The public comment period closes September 14, 2007.

These revisions, if finalized, will be effective for the 2008 Form which is due in 2009, four and half months after the entity's year-end.

Salute…another change coming from the IRS.

For additional information, see www.irs.gov or www.independentsector.org.

PS - I am currently attending the AICPA Not-for-Profit Industry Conference in Wash DC. I am gathering alot of technical updates that we will be discussing in the coming weeks. Issues addressing board governance, UBIT, Intermediate Sanctions and other reporting requirements.

Selected churches continue to be the target of IRS inquiries. It is important for management to continue to be vigilant in complying with the IRS requirements and provide controls for monitoring the entity's resources (tangible and intangible).

Today we are introducing a new category to the blog...Ministry Terminology.

Stewardship (ie, personal intellect/education) – is to manage, direct and influence the resources of the earth to manifest the will of God. *

* - as defined by Bishop Harold Ray, a Florida pastor, in an article written by Ken Walker, for MinistryToday, The Business of Ministry.

What do you think about stewardship? Is this a fair consideration?

Let's further define this important term used by many, as it relates to ministry.

If a Church receives advertising or sponsorship/promotional income, the activity related to the income may be considered unrelated to the exempt purpose of the church.

Receiving advertising income may be unrelated business taxable income (UBTI), if the activity does not relate to the exempt purpose of the 501(c)(3) organization.

The IRS defines UBTI activity as follows:
1) the activity involved constitutes a "trade or business";
2) an activity that is "regularly carried on" by the organization; and
3) the conduct of the business is "not substantially related" (other than through the production of funds) to the performance of the organization's exempt function.

If the activity meets the above criteria, then the organization/church is required to report the income and pay the related tax utilizing the required forms.

What kind of tax form is used to report UBTI? See the subsequent post or contact us.

Straight from the AICPA Not-for-Profit Industry Conference, held in Washington, DC:

Impaired Independence - defined as "auditing what I prepare".

"I can't audit...what I prepare" - Nancy Shelmon, Partner-in-Charge of the West Region's NPO/HE Services Group of PricewaterhouseCoopers, said during the In the Management vs Auditor Responsibilities - Whose Financial Statements are They Anyway? session. Nancy discussed the new risk assessments/auditor responsibilities for financial statement audits.

Independence continues to be a hot button for the AICPA and continues to be "refined" for auditors.

Auditors cannot audit financial statements they prepare, including significant working papers or supporting schedules or they become impaired. I know...you think some auditors are impaired anyway...ha!

The line of independence has been drawn! We cannot audit what we prepare!

Churches/Ministries must have an individual who can and will take responsibility for the preparation of the financial statements. Need help in preparing your financial statements or preparing for your audit? Contact me.

According to John Pomeranz, partner in the Washington D.C. law firm of Harmon, Curran, Spielberg & Elsenberg, LLP,

the IRS is beginning to agressively pursue 501(c)(3)s if there is any indication of electioneering.

What is electioneering?

Electionneering includes the following:
1. Participating in or intervening in any political campaign on behalf of (or in opposition to) any candidate for public office or
2. Supporting or opposing a candidate for publich office.

Summary...electionneering is participating/intervening in a policity campaign or supporting or opposing a candidate for public office. A 501(c)(3) can't be involved in electionnering or they may risk their exempt status.

This past weekend over 200 churches sponsored Harvest 2007, at the RBC in Raleigh, North Carolina. This event was co-sponsored by Harvest Christian Fellowship and featured Greg Laurie, senior pastor of Harvest.

At the invitation of several churches, I attended the youth night on Saturday night and I watched thousands of young people worship together, led by 3 great bands, including Toby Mac. I know that our society continues to talk about a generation gap. I understand that there are several "gaps" but I saw unity of believers worshipping together, without a "gap".

God was glorified and I truly had a feast at Harvest 2007. Thank you Dan and Ken for the personal invitation and Jon for more information about the event.

I read a number of articles and books by Christian authors and periodically I run across writings that peek my interest. I am launching a new category called “my favorites”. I hope you will find these excerpts interesting.

Recently, I read an article in MinistryToday which included an interview with Mark Beeson, senior pastor for Granger Community Church. I really like one of his responses on how the Granger church is innovative in reaching new members…

Most of the teaching that Jesus did came out of the culture of the time. Somehow we’ve taken Jesus and made worshiping him dull and irrelevant. When church is boring there’s a problem – and it’s not Jesus.*

*excerpt from A Found Generation article by Drew Dyck, published in the March/April 2007 issue of MinistryToday.