Transparency In Ministry

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;
> the time and place the meal was provided;
> the business purpose of the activity, including a description of any business benefit derived or expected, and the nature of any business discussion with the person entertained; and
> the business relationship to the person or persons entertained, which may be indicated by reference to name, title, occupation, or other designation sufficient to establish the relationship.

The above documentation should be contemporaneous.

See post #2 for substantiation requirements for lodging and incidental expenses.

Intermediate Sanctions allow the Internal Revenue Service (IRS) to assess excise taxes on excess benefit transactions that occur between a disqualified person and a 501(c)(3) or 501(c)(4) tax-exempt organization.

What is an excess benefit transaction?

An excess benefit transaction occurs when the value of the benefit to the disqualified person exceeds the fair market value of the services rendered. Examples of potential excess benefit transactions include, but are not limited to:
o Unreasonable compensation,
o Personal use of church property,
o Expense reimbursements that are not part of an accountable plan,
o Sale of an organization’s assets for less than fair market value, and
o Payment of personal expenses.

Do you need help in identifying taxable fringe benefits or excess benefit transactions? Contact us.

The NRB national convention is scheduled for March 8-11, 2008, in Nashville, Tennessee. Significant educational workshops, networking with industry specialist and exhibitors, guest speakers and wonderful music are on the agenda. Today, President Bush will be a keynote speaker as he addresses issues affecting the broadcast industry. Stay tuned for a recap of his address...

For more information about the NRB, go to www.nrb.org.

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.

What is a qualified organization? Section 170 of the Internal Revenue Code defines these organizations, meeting the following definitions:

a corporation, trust or community chest, fund or foundation that is or has been:
>created/organized in the U.S. or U.S. possession; State or District of Columbia

>organized and created exclusively for religious, charitable, scientific, literary or educational purposes, and which

>no part of the net earnings of the organization inure to the benefit of any private shareholder or individual, and

>which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation and which does not intervene in any political campaign on behalf of any candidate for public office.

Contributions are allowed if made to or for the use of a church or other 501(c)(3) organizations.

See our next post relating to a personal benefit received by the donor.

In an effort to boost the U.S. economy, Congress passed the 152 billion-dollar Economic Stimulus Act of 2008 on February 7, 2008. The legislation will provide tax rebate checks to about 130 million households, starting sometime in May.

* Single individuals may be entitled to receive a one-time tax rebate of up to $600; joint filers may qualify for up to $1,200.

* The rebate amount begins to phase out for higher-income taxpayers, beginning at $75,000 of adjusted gross income for single filers and $150,000 for joint filers (based on 2007 tax returns).

* The rebate is limited to the net income tax liability. People who don’t pay income taxes may qualify for $300 rebates if they had at least $3,000 of earned income or tax liability of at least $1 in 2007. Social security income and federal payments to disabled veterans and their widows count as earned income for rebate purposes.

* Those who qualify for the basic rebates are also eligible for an additional $300 for each dependent child under age 17.

* Rebates will be subject to offsets for items like past-due child support and debts owed to the federal government.

The check is literally "in the mail".

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:

Principle Loyalty
Vision Truth
Honesty Compassion
Integrity Justice
Courage Faithfulness
Honor Virtue
Excellence Responsibility

I believe these words corporately define transparency. Accoutability, how do you define? See our next post.

It is Easter morning...and ed young television is broadcasting on the USA network. Ed Young, Jr., is the senior pastor of Fellowship Church in Grapevine. This morning, he launched his series "The Doors" and the sermon text came from John 14:6:

I am the way and the truth and the life. No one comes to the father except through me. NIV

According to Ed, at Fellowship Church, "We celebrate every Sunday, the resurrection of Jesus Christ".

So for this Easter morning, I applaud all of our churches and ministries as they lead gatherers in worship experiences...as we all celebrate the resurrection of Jesus Christ.

Happy Easter

Inherent Risk is defined as "what could go wrong, in the absence of internal controls".

Internal Controls are defined as...systems in place that identify errors and irregularities on a timely basis.

Posted by Craig Legener

A friend of mine took her four-year-old daughter to a baptismal service at her church. Later that night, her daughter took all of her dolls into the bathtub with her and held her own "baptism."
As she dunked each doll under the water, she repeated, "Now I baptize you in the name of the Father, the Son, and hold your nose."

Received from DOC'S DAILY CHUCKLE.

Today is a "hold your nose" day...God Bless!

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.

Each month, a reconciliation of the bank accounts should be performed. This will allow you to be aware of any errors in entries made or items on the bank statement that are there in error. Also, it will allow you to record the monthly interest income, if funds are in an interest bearing accounts or any bank charges to expenses. See Exhibit A

Investments should be reconciled each month. All the information, you will need to record investment properly will be included in the statement. See Exhibit B
for investment reconciliation. Investment should be recorded at cost; however, at the end of the month, the following items should be recorded:

·Interest Income
·Realized gains/losses
·Fees paid
·Dividend Income
·Interest Expense
·Unrealized gain/loss
·Capital Gains
·Purchases of Investments
·Sales of Investments

Besides the cash account, if the organization has petty cash accounts, that should also be closed each month. See Exhibit C for monthly closing procedures. All petty cash should be supported by receipts, so the funds are accounted for properly, each month.

Each month, it would be good to review the coding of income and expenses for accurateness and reasonableness. If all expenditures are approved by a purchase order/requisition, then the person reviewing should be familiar with all charges. Some ministries and churches may have income that has been designated for a particular use, building program or endowment. Thus, the organization should record these funds in a temporary or permanently restricted income account. This is discussed further in our December 7, 2007 blog called “Designated Contribution.”

In our next post we will discuss property, plant and equipment.

Are you ready? - Keep blogging...Michelle Francis