Transparency In Ministry

An update to the "2007 Brings Another Form to File" blog I posted in June.

The IRS has announced that it began mailing educational letters to more than 650,000 small tax-exempt organizations that may be required to submit a new annual notice. Non-profit organizations that normally have no more than $25,000 of annual gross receipts (but not churches) will be filing the new Form 990-N, "Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ.

The IRS expects to mail the letters over a period of several months, finishing in December. See the attached sample letter available at the IRS website. If the IRS does not have a current mailing address, your non-profit may not receive a letter. However, the filing requirements must still be met to avoid losing your tax-exempt status.

The new form will be for tax periods beginning on or after January 1, 2007 and will be due by the 15th day of the 5th month after the close of each tax period, (ie., May 15 for a calendar year).

This annual form will must be filed electronically, there will be no paper form.

For more information, please go to www.irs.gov/eo, or email me directly.

Hot of the AICPA wireservice...

The AICPA’s Accounting and Review Services Committee has issued Statement on Standards for Accounting and Review Services (SSARS) No. 15, Elimination of Certain References to Statements on Auditing Standards and Incorporation of Appropriate Guidance Into Statements on Standards for Accounting and Review Services (Product No. 060653).

The Accounting and Review Services Committee (ARSC) is aware that, in many instances, SSARSs referenced the practitioner to Statements on Auditing Standards. The ARSC is further aware that, for many practitioners, compilations and reviews represent the highest level of service performed and, therefore, those practitioners may be unfamiliar with the auditing literature. SSARS 15 eliminates certain references to the auditing literature from the SSARSs and, where deemed appropriate, incorporates guidance similar to that originally referenced.

To obtain copies of SSARS 15, contact the AICPA Store.

Questions about attestation rules/regulations, contact me. What are attestation services? Contact me or post a comment.

As we discussed in post 1 of this series, non-profits are required to consolidate other non-profit organizations if they meet certain criteria.

When and how do you consolidate another entity? Statement of Position (SOP 94-3) addresses when/how a Church or ministry should consolidate.

Many of our client's create additional non profit organization for designated purposes. Although founded by the same individuals or boards and funded by the original organization, the purposes and goals of the new organization are different.

When does an organization have majority interest?
1. If the organization has vetoing control of the new organization that is a signal that the original organization has a "voting control" of the new board. The original nonprofit has indirect control and must consolidate.
2. If the original organization has less then 50% of the new board member mix and does not approve board members, or appoint board members - then the original organization has to look at whether they have economic interest or "control" due to concentrations, through such items as contributions, sales, ect.

If the originating organization does not have direct voting control, but has indirect control the organization has the option to consolidate the entity, as long as the indirect control is not a temporary situation. If the indirect control is temporary they the organization is unable to consolidate.

Therefore, using knowledgeable attorneys and accountants in the planning and creation of separate entities is very important. By taking these issues into account at the time of creation provides management with importion tools in determining the appropriate results in achieving management's goals.

If you have any questions, contact me or Becky DaVee or call us at 918-628-0500.

Good luck in creating a new non-profit organization.

This morning I attended the worship services of Willow Creek Community Church. Teaching Pastor Mike Breaux is in a teaching series titled Coming up to Breathe. This morning the topic primarily centered on forgiveness and was titled "Amend my Relationships".

Breaux defined forgiveness in several ways, but here's one that caught my attention:

Forgiveness - Giving up your right to get even.

Often our personal world gets unbalanced and we attempt to "rebalance" and "recenter".

Amending relationships are imperative to spiritual health.

The sermon theme that was reviewed and spoken by the congregants: I must amend my relationships by forgiving those who have hurt me and seeking forgiveness from those I have hurt.

Spirit changing concepts.

The New Form 990, scheduled to be used for years ending on or after December 31, 2008, is available for viewing at the IRS web site. This form is still in draft form and subject to change.

The old Form 990 was nine pages long and had eleven separate parts to the form. In addition, Schedule A and Schedule B were available if required by the filing organization. The new Form 990 is ten pages long and has nine separate parts. In addition, fifteen new schedules (A through N and R) may be required for filing.

The number of questions required to be answered and the level of detail has significantly increased on the new form and schedules. This is especially true of political activity, foreign activity, fundraising activity, compensation, governance, and related entities.

My next several blogs will briefly explain what the new schedules are about. Contact me if you have any questions about the website or revisions that are anticipated.

We are in a time when everything is about “me” and how can I get what I want at the expense of others? I wonder what it would be like if we could really see the fruit in others. Some of you may be wondering what fruit (i.e. grape, orange or banana). No not that fruit, but the Fruit of the Spirit according to Galatians 5:22-23, which states:

“But the fruit of the Spirit is love, joy, peace, longsuffering, gentleness, goodness, faith, meekness, temperance: against such there is no law.” KJV

It is interesting that it says, “against this there is no law,” why would the Word of God say this? Maybe because each fruit represents a character that should be manifested in an individual life, no matter which religion or belief they are.

"What the world needs now...is love, sweet love". Remember this song from the "flower child" days? The song is true, today. I believe we all need more compassion and love. It helps not to be so self-centered. However, the type of love Paul referred, is interesting, because it does not keep count of wrongs, it quickly forgives or asks to be forgiven, it is not boastful, it has sincere concern for others, it is not easily angered and does not delight in evil. I think we all need a little more love.

Let’s look at joy. Joy keeps you in the midst of the storm. It is easy to be joyful when everything is going well. But when everything is crazy around you, can you be joyful? The word of God says the Joy of the Lord is my strength. (Nehemiah 8:10) Some times when things are crazy, I begin to laugh, because I have come to realize each obstacle is an opportunity for the Lord to move and it strengthens me.

Well in post – we quench your appetite with more fruit – Stay tuned.

If doing church is having 52 bulletins a year. This "doing" is not a success.

From Ministry Today, March/April 2007 The Business of Ministry.

In a financial statement audit performed in accordance with generally accepted auditing standards, the auditors are required to obtain a written letter from management that includes certain representations. In a July post, we discussed the reasons an external independent auditor would request their client to sign a management representation letter. In this posting, we discuss who should sign the letter.

The letter should be signed by those members of management with overall responsibility for financial and operating matters whom the auditor believes are responsible for and knowledgeable about, directly or through others in the organization, the matters covered by the representations in the letter. Such members of management normally include the chief executive officer and chief financial officer or others with equivalent positions in the entity.

If current management was not present during all periods covered by the auditor's report, the auditor should nevertheless obtain written representations from current management on all such periods.

In certain circumstances, the auditor may want to obtain written representations from other individuals. For example, he or she may want to obtain written representations about the completeness of the minutes of the meetings of stockholders, directors, and committees of directors from the person responsible for keeping such minutes. Also, if the independent auditor performs an audit of the financial statements of a subsidiary but does not audit those of the parent company, he or she may want to obtain representations from management of the parent company concerning matters that may affect the subsidiary, such as related-party transactions or the parent company's intention to provide continuing financial support to the subsidiary.

Please feel free to contact us if you have other questions.

In church a couple of weeks ago, I heard the following about the Good Shepherd...

God is the Good Shepherd. God does not come to seek and save those who have been found. God comes to seek and save that which is lost.

Quoted from sermon titled Community of Grace, by Dr. Jeff Barbeau.

Personal comment from Dr. Barbeau...

...who will save me?

Teaching and mentoring congregants is one of the important programs for churches. Outreach and mission work may proceed teaching/mentoring, however play an important part in church "programing". Church programming and the expenses incurred play an important part in defining or reporting the results of activities. The information reported in financial statements help managerment and other users determine if selected operational objectives have been achieved. These issues are part of transparency in ministry. Performing and reporting based on ministry objectives.

For several years non-profits have been trying to define the “tone at the top”. What is this and what is expected from those charged with governance?

Athletes are not the only people that have to worry about being called a role model. All of us are role models to some degree. Our children watch us intently and learn from our actions and words. Our actions and words also influence the ideas and actions of others outside the home. Our co-workers watch us react to our bosses and the company moral may be influenced by our behavior. Everyone should act ethically and those individuals that are charged with leading public, private and nonprofit organizations are held to an even higher standard and expectation. These individuals set the Tone at the Top and that tone may determine the success or failure of an organization.

Management must establish standards of conduct and procedures for monitoring the effectiveness of those standards. These standards contain the values, philosophy and mission of the organization. These rules should be clear, concise and communicated. Ultimately they must be understood and embraced by management and employees. These rules apply to all employees equally without exception. There should be no preferential treatment.

Many organizations or entities like to call a particular policy “fair,” but quickly learn that fairness is subjective and what is fair to one may not be “fair” to all. Determining and defining "fair standards" is a critical part of executive management and may require legal involvement.

The board (those charged with governance) and management must lead by example, (ie., walk the walk, talk the talk.) If they are complacent in their approach, their employees may assume complacency. If management has a poor attitude, behaves unethically and disregards the mission of the firm, then their employees may follow their lead. Management has the fiduciary responsibility to lead with expected accountability. The board and management must realize that, as leaders, they are role models (operationally and administratively) for their organization. This role is defined by a guiding influence on the mission of the organization. This includes a pervasive attitude for developing, monitoring, and evaluating internal and operating controls.

Employees (valuable organizational resource) are a key function of the internal control environment. Developing, monitoring and evaluating employees and their daily function will strengthen the internal control structure of an organization.

Setting the TONE at the TOP…it's the responsibility of those “charged with governance”. How does this impact the annual audit? See post #2 in this series.

According to HIRR Newsnotes…

New Book Release: Beyond Megachurch Myths by Scott Thumma and Dave Travis is now available for purchase.

According to hirr-newsnotes…Beyond Megachurch Myths explores the unique characteristics of today’s megachurches and their influence on American religion. Authors Scott Thumma, professor of sociology and religion at Hartford Seminary, and Dave Travis, managing director of Leadership Network, reveal what these churches are and are not, why they’re thriving and what they can teach smaller churches. Beyond Megachurch Myths is filled with practical insights for pastors and leaders of organizations of all sizes.

Typically, people focus on the really large megachurches (10,000, 20,000 and 30,000 member churches) however the story of the megachurch movement is defined by the 100’s of churches with members of 2,000 to 3,000 individuals.

The big idea from the book is that megachurches matter in the U.S. and Canada.

For more information, contact Hartford Institute for Religion Research.

My next four blogs will be a summary of the Schedules that may need to be attached to the new Form 990. Remember, these are still in draft form and the IRS is taking comments from the public until mid September. Draft schedules can be viewed at the IRS website .

New Schedule A will replace the current Schedule A, Part IV. All 501(c)(3) organizations that file a 990 must file a Schedule A. The redesigned schedule focuses on public charity status. This schedule will replace the 5-year advance ruling process currently required on Form 8734.

There are no proposed changes to Schedule B.

New Schedule C, Political and Lobbying Activity, will provide detail on the current questions on Schedule A, Part VI. Organizations that conduct lobbying or political activities will report political activity and inter-corporate fund transfers.

New Schedule D will be used to report the financial statement details. New items include reporting of any uncertain tax positions under FIN 48 and a 5-year endowment table.

New Schedule E will be used by private schools and replaces the current Schedule A, Part V.

Our next post relates to schedules F - I.

According to David Kinnaman and the MinistryToday magazine, every year, The Barna Group examines the state of the church, and most Americans align themselves with Christianity. The following are interesting elements of allegiance:

* More than 4 out of 5 adults identifies as a Christian, equating to about 185 million Americans.

* Vast majority of the nation's population has attended church regularly as some point during their life.

* 2/3s of the nation's adult population firmly embraces the idea that their most important purpose it to love God will all their heart, mind, soul and strength.

* Approximately seven out of 10 Americans claim to have a personal commitment to Jesus Christ (representing approximately 150 million adults).

* Approximately 90 million adults say they attend a worship service at a church at some point during the week.

How does this information affect your local congregation? Is the survey relative to your congregants?

For more information on this 2007 survey see the following link.

(The above information was included in the article by David Kinnaman, president of The Barna Group and included in the July/August issue of MinistryToday.)