World Wide Missions

1. World Wide Missions

2. 36,756,666 (estimated) Population

3. Guiding Churches Through the Money Maze Rod Wiltrout Church Finance Specialist Missions Advancement Group California Southern Baptist Convention Fresno, CA

4. Table of Contents • Church Treasurer • Church Record-Keeping • Better Budgeting • Charitable Contributions • IRS Issues • Financial Procedure and Review • Income

5. Table of Contents • Professional Expenses • Housing – Parsonage Allowances • Church Reporting Requirements • Who is a Minister? • Other

6. Church as a Business Things every church needs to know

7. Here is What the IRS Says • You are a 501 (c) 3 business • http://www.t-tlaw.com/lr-04.htm • Focus of organization's purpose must be to benefit the community or society as a whole, not just the organization's members and their families or other select individuals. • A §501(c)(3) organization may not devote a substantial part of its activities for lobbying(try to influence) purposes. (section 2A.1)

8. Here is What the IRS Says • If substantial lobbying activities exist, tax exempt status is forfeited. Lobbying activities may be found to be substantial in the ten to twenty percent (10-20%) range of total nonprofit activities. (section 2A.2) • Any organization exempt from tax under §501(a) must nonetheless pay income tax on its unrelated business income. This refers to income derived from any unrelated trade or business regularly carried on. (section 3A) (990T income)

9. The Treasurer Qualifications and Duties

10. First, the Basics • Funds must be properly managed • IRS does not tell the church how much to pay staff, but it does require that it be done in a certain and timely manner • Church members want to know that the money they give is being handled properly • They demand a greater accountability and have higher expectations of business operations

11. The Treasurer: • One of the most time consuming jobs in the church • Needs to produce timely and reliable information • Bills must be paid on time • Tax requirements must be met • May be responsible for financial decisions

12. Qualifications • Willingness to work cordially with people and the ability to be fair minded • Have knowledge of the working organization of the church • Should reflect the highest Christian ideals • Should have knowledge of accounting procedures or the willingness to learn accounting procedures • Person selected to be church treasurer, tithes

13. Qualifications • Possess a sense of calling from God • Be open and willing to receive training • Be capable of managing details of financial matters • Be persons of integrity (trustworthy) • Be good stewards (managers) • Be capable of maintaining confidentiality • Have a good reputation

14. Duties • Keep accurate records in appropriate financial journals of all monies received and disbursed. • Reconcile monthly bank statements and correct ledgers as needed. • Sign checks in accordance with church policies and procedures and verify the supporting data for each check request. (Policies & Procedures should be written)

15. Duties • Make monthly and annual reports to the church. If the church has a committee to oversee the financial matters of the church the treasurer should also make regular reports to the committee. • Keep church staff and appropriate committees informed of any trends or changes in fiscal matters. • Instill and preserve a high financial confidence throughout the congregation.

16. Duties • Submit accurate financial records for annual audit according to church policy • REMEMBER : the money belongs to the CHURCH not the treasurer.

17. Trustee Duties

18. The Basics Accountabletothe Pastor or Executive Pastor Ministry Target: the Church Minimum Maturity Level: Stable, Mature Christian Spiritual Gifts: Administration, Giving, Service Talents/Abilities: Business and/or Finance

19. The Basics Personality Traits: Trustworthy, Honest, Sincere, Discreet, Levelheaded, Mature, Analyst, Dependable Passion for: Good Stewardship Length of Service in Office: 3-5 Years Time Commitment: 1-2 Hours per Week or Month as Needed Commitment: Participate in Meetings or Training – 1-2 Hours per Month

20. Responsibilities/Duties Establish and Review Procedures for Church’s Financial Management Serve as Legal Guardians for All Church Property Represent the Church in Legal Matters Give Input/Financial Advice to Stewardship Committee and Pastoral Staff as Needed

21. Responsibilities/Duties Execute Bank Notes, Deeds, and other Legal Documents After Receiving Approval from the Church Decision-making Body Examine Quarterly Financial Reports to Monitor Financial Expenditures of the Church Fulfill the Laws of this State while Serving as a Trustee of the Church

22. Responsibilities/Duties 2001 Gospel Light. Permission to Photocopy granted. The Big Book of Job Descriptions for Ministry Assist in the Process of Awarding Contracts for Work that Must be done to Improve or Repair Church Buildings and Property

23. Church Record - Keeping

24. Just Part of the Job… Someone must be responsible for the stewardship of the church's funds. • Keeping accurate financial records • Preparing accurate and meaningful financial statements • Budgeting and anticipating financial problems • Safeguarding and managing the organization's financial assets • Complying with federal and state reporting requirements

25. Preparation of Financial Reports • Comprehensible so that anyone taking the time to study them will understand the financial situation. • Concise so that the person reading them will not get lost in detail. • Inclusive so that all activities of the church are reported. • Comparative with year to date spent or budget amounts. • Timely, as soon after the end of the month as possible.

26. Accounting Methods • Single Entry • Double Entry

27. Counting the Money • At least two counters in a secure room • Necessary tools-calculators w/ paper, red pencils, coin rollers, locking money bag • Keep envelopes, or computerized record, for three years • Loose offerings counted and verified • Envelopes opened, amounts enclosed verified and marked on each envelope

28. Total amounts taken out of envelopes should agree with total of all envelopes • Notations of designated offerings noted on count sheet • Deposit of all monies is prepared • Total deposit must be equal to coins, bills and checks, notes on count sheet • Totals of envelopes, special gifts, and the loose offerings must also equal total deposit • All money received should be deposited and have counters sign count sheet

29. Internal Control Detect error or fraud Check accuracy and dependability of financial records Encourages adherence to regulations and policies – should be in writing Keeps honest members honest by removing the temptation of dishonesty Basic Control Do not assign the same person responsibility for more than one of the following tasks: Counting the offering Writing checks Reconciling the bank statements Recording individual contributions No payments for services from offerings Cash Management

30. What are Contributions? • A charitable contribution is the voluntary transfer of cash or property motivated by something other than "consideration". • Consideration is something being received in return for a payment.

31. Gift Options: see page 15-16 • Cash • Securities • Real Estate • Life Insurance • Bargain Sale • Personal Property • Charitable Gifts of Partial Interest

32. Gift Options • Charity Auction-gift is only amount spent above fair market value • Gifts made by an individual directly to a missionary are not deductible as charitable contributions. To be tax deductible contribution must be to or for the use of an IRS approved tax-exempt organization. If the gift meets the true definition of a gift, the missionary would not have to claim it as income. See page 21.

33. What is Not a Tax Deductible Gift page 16 • Service • Use of Property • Gifts made to Individuals – may not designate the recipient of the gift • Private School tuition • There can be no strings attached and the gift must be used for tax purposes in the year it was given • The gift is given at the point of “irrevocable giving over” (Wave Offering)

34. Conditions for Gift Giving • Gifts in excess of $5,000 must be appraised by an accredited appraiser and IRS form 8283 must be used to document the gift. Donation is the sale price. • Receipt should not list value of the gift • Receipt should list items on page 22 • Donee (church) must keep sufficient records to validate gift • Receipt must be given no later than January 31 of the year following donation

35. IR-2005-149, Dec. 22, 2005 • WASHINGTON — Internal Revenue Service officials today reminded taxpayers that they must obtain a charity’s written acknowledgment of their vehicle donation before they claim a deduction for the donation. For deductions of more than $500, the taxpayer is required to attach the acknowledgment to the taxpayer’s return for the year of the donation. • Effective for vehicles donated to charity on or after January 1, 2005, the American Jobs Creation Act of 2004 provides that, generally, a taxpayer’s deduction is limited to the gross proceeds from the sale of the vehicle by the charity. The charity must provide a written acknowledgment within 30 days after the vehicle is sold that notifies the taxpayer of the amount of the gross sales proceeds.    • The IRS is aware that questions have arisen as to whether the charity must sell the vehicle in 2005 in order for the donor who donated a vehicle in 2005 to receive a deduction for 2005. The charity does not need to sell the vehicle in 2005. A taxpayer can take a charitable contribution deduction only for the year the vehicle is transferred to the charity, even if the vehicle is not sold by the charity until a later year. (Only taxpayers who itemize their deductions can take a charitable contribution deduction.) • However, a taxpayer cannot take a charitable contribution deduction of $500 or more for a vehicle donation unless the taxpayer has received a written acknowledgment of the donation from the charity and attached the acknowledgment to the return.  • If the taxpayer receives the written acknowledgment after filing the tax return for the year of the donation, the taxpayer may, after receiving the acknowledgment, file an amended return for that year and claim the deduction on the amended return. The taxpayer must attach the acknowledgment to the amended return.

36. Restricted Funds • These funds are used to account for resources received from donors or outside agencies, but are restricted to a specific purpose. (building fund, youth fund) • The restrictions or guidelines for the fund should be in writing. • Takes a church vote or letter from donor to un-designate or re-designate funds

37. Restricted Funds • HOWEVER, donors cannot force church to adhere to their designation • Violates irrevocable giving over of funds • However, DA can and often does • “Enforcing Donor Restrictions on Gifts to Charity” by Richard Hammer gives full treatment of this issue.

38. Discretionary Funds • Used at the discretion of the party (s) who oversee it • List of (written) restrictions on use of funds is required to keep funds from becoming income to recipient – monthly • Adequate accounting of funds is required • Ask for IRS Publication 1828. Or, you can download a copy on the IRS website, www.irs.gov/eo. Page 54

39. Discretionary Funds • (2) private benefit • In addition to the prohibition on inurementto “insiders,” a section 501(c)(3) organization’s activities may not serve private interests. The tax guide explains this limitation as follows: • An [exempt] organization's activities must be directed exclusively toward charitable, educational, religious, or other exempt purposes. Such an organization's activities may not serve the private interests of any individual or organization. Rather, beneficiaries of an organization's activities must be recognized objects of charity (such as the poor or the distressed) or the community at large (for example, through the conduct of religious services or the promotion of religion). Private benefit is different from inurement to insiders. Private benefit may occur even if the persons benefited are not insiders. Also, private benefit must be substantial in order to jeopardize exempt status.

40. Outrageous salaries and benefits • All salaries and compensation amounts need to be "reasonable." The church should determine whether its salaries are in line with other churches and purchase salary surveys. Excessive benefits can include expensive cars, cellular phones, and the use of a limousine or airplane. The church should secure board approval for all compensation and benefits.

41. IRS Issues

42. Be Compliant with CA and IRS • Articles of Incorporation • Bylaws • Exemption from Franchise Tax • Statement of Information • Yearend IRS Regulations that Effect the Church http://www.csbc.com/financialmatters/article184086c2118867.htm

43. Forms You Need to File..\..\ABC's of Church Budgeting\CLT Conference\2010\Church Reporting Requirements.pptx

44. Church Reporting Requirements

45. Willful or Intentional Disregard Sec. 6672 - 100% penalty “Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof,shall in addition to other penalties provided by law, be liable to a penalty equal to thetotal amount of the tax evaded, or not collected, or not collected for and paid over”

47. Code Section:  7201Action:  Willful attempt to evade or defeat tax.Penalty:  A felony, with a criminal penalty of up to $100,000 (up to $500,000 for a corporation), and imprisonment of up to 5 years (or both).

48. Code Section:  7204Action: Willful failure to provide a W-2 to employees, or willfully including false information in a W-2.Penalty:  A misdemeanor, with a criminal penalty of up to $1,000, and imprisonment or up to 1 year (or both).

49. Form W-2Wage and Tax StatementW-2C if you make a mistake on the W-2 Form W-3Transmittal of WageAnd Tax StatementW-3C if you make a mistake on the W-3

50. Form W-2GCertain Gaming Winnings(Example Raffles)For more information on reporting requirements for gaming activities, see IRS Publication 3079,Gaming Publication for Tax-Exempt OrganizationsState of CA - http://ag.ca.gov/charities/raffles.php