Transparency In Ministry

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".

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.

Personnel continue to be one of the greatest resources of a organization. Hiring the right person for the right position is important, however retaining that individual continues to be a strong challenge for a number of organizations.

The following are examples of policies directed for training, development and retention:

·Provide personnel with clear, current job descriptions and the resources they need to produce quality work.
·Support the education, development of and opportunities for growth and advancement of personnel.
·Balance internal equity with market-based, livable compensation for all employees.
·Provide personnel with adequate benefits and the opportunity to financially contribute to retirement plans.
·Be open to input from personnel regarding the organization’s activities and results on a continual basis.
·Prepare performance evaluations at least on an annual basis.

For additional information or resources, see the following organizations:
The Alliance for Nonprofit Management
National Center for Nonprofit Boards (NCNB)
Minnesota Council of Nonprofits
Internal Revenue Service

Retain and develop one of the church’s most valuable resources…her employees.

Maintaining and motivating staff is a challenge for most organizations, including churches. Having proper employment policies, staff training/development and retention plans are critical areas for churches.

The following are examples of employment policies that should be considered and implemented by non-profit organizations:

·Comply with all federal, state and local employment laws when hiring and employing personnel, including withholding and payment of payroll taxes. See IRS Publications 505 and 517 relating to payroll issues for employees and ministers.
·Employ skilled individuals who are suitable for the positions they occupy and are committed to the goals, values and objectives of the organization.
·Have people on staff that compliment and support the mission of the organization.
·Continually work to provide a safe and healthy work environment.
·Adopt a set of specific policies and procedures for managing employees and volunteers.
·Establish a clear conflict of interest policy for employees that includes disclosure of relationships, nepotism and interested party transactions.
·Have specific grievance procedures for personnel with protections for reports of violations of organizational policy or applicable laws.
·Have a succession plans, to handle transitions in leadership and other key positions.
·Conduct background checks on employees and volunteers, particularly if their positions involve working with children or vulnerable adults, performing financial duties or serving in other sensitive areas.

See our next post on training, development and retention.

As a pastor, imagine walking into your church and having an executive assistance that is proficient in typing, writing letters, using the phone system and keeping you on schedule with all appointments. This would be fantastic, but as you know for most churches it is hard to hire highly skilled administrative staff with starting salaries that are may be below the industry average.

As a result, the human resource administrator/pastor is left with the task of inspiring individuals to connect with the church’s mission. Nonprofit organizations should place a high priority on exercising fair and equitable practices that attract and retain qualified volunteers and employees. In addition, nonprofits (including churches) have an obligation to adhere to all applicable employment laws and to provide a safe and productive work environment. Churches/Ministries should establish specific policies and practices that promote cooperation and open communication among employees, volunteers and other constituents so that they can effectively work together to advance the organization’s mission.

Over the next several posts we will discuss example of employee policies, training/development, and retention.

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.

Best practices for ministries includes a conflict of interest policy. The IRS form 990 (required for some ministries) includes the question "Does the organization have a written conflict of interest policy?"

The IRS has helped organizations, by including a sample policy in Appendix A to the instructions to the form 1023, go to www.irs.gov. Alternatively, a ministry can find other sample conflict of interest policies that may be more in tune with their policies by doing an internet search using keywords sample conflict of interest policy.

If you need help in defining conflict and developing a conflict of interest policy, contact me via e-mail or call us.

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

There are several ways to earn income on investments, but compounding may be your most reliable path to wealth. Compound interest is computed on both the principal and the interest earned.

Time matters - An additional $6.83 doesn’t sound like much, but things change over time. After 10 years at 12% simple interest, your $1,000 would be worth $2,200, which is the original $1,000 plus 12%, or $120, multiplied by 10 years. At 12% interest compounded monthly for 10 years, your $1,000 would be worth $3,300, or half again as much as it would without monthly compounding. After 30 years, your $1,000 would be worth $35,950!

Rate of return is also important. Since after 10 years your $1,000 would be worth $3,300 at 12% interest compounded monthly, it would have earned $2,300. At 6%, after 10 years the $1,000 would be worth $1,819, earning only $819 rather than $2,300.

Another example...Now suppose the $1,000 came from your net wages. If you’re in a 25% income tax bracket, you earned $1,333 to get $1,000 after taxes were withheld. But what if you could have invested the entire $1,333 for 10 years? Then you will have an additional $1,100.

Compound benefits - The above examples suggest the following ways to use compounding to increase your earnings:

$- Start saving and investing now. Time is your most powerful multiplier.

$- Shop for the best rates of return, consistent with your risk tolerance.
Set up your investments to automatically reinvest interest and dividends earned.

$- Use tax-deferred programs like IRAs and 401(k) plans to the fullest possible extent.

If you’d like to learn more about compounding, just give us a call. We’ll be happy to review the numbers that apply to your business and investment decisions.

Questions...contact us.

There are several ways to earn income on investments, but compounding may be your most reliable path to wealth. If you put $1,000 under your mattress, it will still be $1,000 a year later, but it probably will buy you a little less due to inflation. If you lend the money to a friend at 12% simple interest, at the end of the year you’ll receive $1,000 plus $120 of interest, since simple interest is computed only on the principal.

Compound interest is computed on both the principal and the interest earned. If you invest the $1,000 in a bond that earns 12% interest compounded monthly, in the first month it will earn 1% (1/12 of 12%), or $10. Now you have $1,010, which will earn 1% interest in the following month, only now the earnings will be $10.10. At the end of the third month, you’ll earn 1% interest on $1,020.10 ($1,000 plus $10 plus $10.10), and so on. By the end of the year, you’ll have $1,126.83, or $6.83 more than you would earn if you loaned out the money at the same rate but at simple interest.

See post #2 as we discuss "time" and "benefits".

Many times churches and ministries incurr transactions or operational issues that they need help in recording. Our blogs may not have previously addressed the issue, or your transaction was slightly different.

Do you have a question? Post a comment or e-mail us.

If you want your comment to remain anonymous, we can post a blog discussing the issue.

No question is dumb.

As discussed in our previous posts for maximizing the effects of investing spare cash…If you have extra cash lying around:
·first max out your 401(k) or 403(b) contributions for 2006,
·second, liquidate high interest rate credit card debt,
·third, participate in a college savings plan if it provides state income tax savings. and now…

according to Gregory Geisler’s article in the September 2006 Journal of Accountancy, The Best Use of Spare Cash, Make Other Retirement Investments. The next move is to contribute to a traditional IRA (if you are eligible to take a deduction on the contribution) or a Roth IRA. At this point, individuals should contribute to any available 401(k) account – even if there is no employer match – and to any other employer-sponsored retirement plan that allows pretax contributions. The rules on on who can contribute and how much to deduct and Roth IRAs can be found in IRS Publication 50- at http://www.irs.gov/publication/p590/index.html
This concludes our postings on the “use of extra cash”. For more information, contact your tax or financial advisor for more information in determining what is the best use of Extra Cash.

Let it work the best for you.

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As discussed in our previous posts for maximizing the effects of investing spare cash…If you have extra cash lying around first max out your 401(k) or 403(b) contributions for 2006, second, liquidate high interest rate credit card debt and now…#3 according to Gregory Geisler’s article in the September 2006 Journal of Accountancy, The Best Use of Spare Cash, Participate in a College Savings Plan If it Provides State Income Tax Savings. With the ever increasing costs of higher education, individuals with spare cash should investigate state=sponsored tax-advantaged college savings plans. What is “tax-advantaged” college savings plans…if you (taxpayer) can make a contribution to a state 529 plan and receive a “deduction” on your state tax return…that it is a “tax advantaged” college savings plan. In qualified plans covered by section 520 of the Internal Revenue Code, withdrawals generally are not subject to federal income tax if the money is used to pay for qualified educational expenses. If a child decides not to go to college, the funds generally can be used to pay for another family member. For more on college planning, see “Financial Aid 101, ‘ Journal of Accountancy, July 2005 article.

According to Geisler, if a contribution to a 529 plan provides state income tax savings, then the client receives an immediate return on investment equal to that savings divided by the investment net of the state income tax savings. Individuals who invest in a 529 plan that produces state income tax savings always enjoy a better after-tax return than they would receiv on the same investment for the same length of time in a Roth IRA or a traditional IRA or a 401(k) plan.
Still have “extra – cash”…see the next post on making other retirement investments…

As discussed in our previous posts for maximizing the effects of investing spare cash…If you have extra cash lying around first max out your 401(k) or 403(b) contributions for 2006, then…according to Gregory Geisler’s article in the September 2006 Journal of Accountancy, The Best Use of Spare Cash, the next most effective strategy is to pay down high-interest-rate debts, particularly credit card balances. Pay off debts in order of their after-tax interest rates, beginning with the highest. Paying the balance on a credit card with a 12% annual interest rate is the same as receiving an annual after-tax rate of return of 12% on a risk-free investment
Cha ching…cha ching.

Watch for the post #4 on participating in college savings plans…

If you have extra cash lying around…consider that one of the most important uses is to increase retirement account contributions to the maximum employer match. According to Gregory Geisler’s article in the September 2006 Journal of Accountancy, The Best Use of Spare Cash, contributions to 401(k) or 403(b) retirement accounts that are fully matched by the employer yield an immediate return equal to the employers’ matching percentage. These matching percentages usually range from 24 cents to $1 on each $1 contributed by the employee….thus this extra contribution of “spare cash” equals…25% to 100% return on the employee’s investment.
WOW….what a return on your investment!
See posting # 3…on paying off high or moderate interest rate debts as the next item in using spare cash.

According to Gregory Geisler in the September 2006 Journal of Accountancy article, The best use of Spare Cash
When individuals receive an income tax refund, a bonus, an inheritance or another windfall, or even have some extra cash on hand after paying off their bills – they have a number of options. The most prudent choices are investing, putting money in college savings or retirement accounts, or paying off debts.
CPAs can help in determining the “best use” of these extra funds, by assessing the the following three criteria:
1. the after tax rate of return,
2. risk
3. effect on asset diversification
#2 and #3 are unique to individual taxpayers, however #1 are relevant to all Americans.
Watch for the next posting…to see how to apply extra cash, using the a”after tax rate of return”…

Let that extra cash…help you the most…

Despite increases in gasoline prices and other necessities, Americans found a way to give 2.7 percent more to charitable causes last year than in 2004, according to a report by the American Association of Fundraising Counsel. Experts say the increase was propelled by a series of significant natural disasters including Hurricane Katrina and the tsunami in Southeast Asia, The New York Times reported in June

How are these types of contributions to be recorded, in accordance with generally accepted accounting principles?

When contributions are soliciated for designated projects or events, FAS #116 requires that these contributions be reported as either:

1.Restricted contributions and then “released to unrestricted” with the donor restriction has been satisfied or

2.Unrestricted contribution if the restriction was satisifed in the same period as receipt and if the account policy disclosed this fact.

For additional information, see FAS116.