Ethics Seminar

1. Ethics Seminar Rev. Dr. Todd Adams, Associate General Minister and Vice President

2. Time Together • Ministerial Code of Ethics • Pastors, compensation and retirement • Financial Ethics for Congregations • Internal Controls and Auditing • Budgeting and Accounting 101 • Giving and Pastoral Care • Should the pastors know what people give? • Fundraising and stewardship

3. Time Together • Financial Ethics for Congregations • Internal Controls and Auditing • Budgeting and Accounting 101 • Giving and Pastoral Care • Should the pastors know what people give? • Fundraising and stewardship

4. Introduction • Who is the room? • Who are you? • Where are you from? • Name a challenge you face as a local church pastor related to finance? • What kind of financial training did you receive in undergrad or seminary?

5. Internal Controls for Handling Offering / Money • Trust and Accountability • Trust: assured reliance on the character, ability, strength, or truth of someone or something b: one in which confidence is placed • Accountability: an obligation or willingness to accept responsibility

6. Trust… • Trust in people and the systems that protect people • Transactions • Decision making • Paperwork processes • Human contact with the system • Opportunity to catch and correct errors • Trust is not an internal control

7. Basic Principles of Giving • People give to people, not to organizations. • They give to support a mission. • They give to organizations where there are high levels of trust and accountability.

8. Word Problem #1 • Take about 10-15 minutes and discuss the issue(s) you see in the word problem. • How typical is this of your congregation? • What are the internal control issues that need to be addressed?

9. Role of the Finance Committee • Monitors receipts, commitments and expenses. • Budget development and implementation • Reviews monthly financial reports and statements.

10. Finance Committee • Interprets spending in missional language • Manages banking relations and recommends policies • Check signers • Spending limits

11. Finance Committee • Facilitates the transition of Treasurers and financial officers • Ensures consistency in practices, policies and procedures (internal controls) • Advises the pastor, Board, planning/visioning teams

12. Basic Internal Controls • Gifts are always in dual control • Counters collect, escort and process contributions • Standardized form and process • Photocopy checks • Clear separation of duties

13. Basic Rules of Handling Money • No husband / wife teams • Money is counted at the church • Deposit is made immediately after church • Treasurer and employees don’t count the offering • Forms are filled out

14. Counting Duties

15. Financial Secretary • Records the gifts • Uses the photocopies of checks and envelopes with cash indicating donor • Generates a report for the treasurer • Treasurer uses the report to match to bank deposit slip and tapes.

16. Gift Acknowledgment • Send quarterly statements of giving • Add personal note from pastor • Add a letter updating on mission • What has happened • What is coming up • Tax statement • No goods or services were received in exchange for the contributions

17. Auditing and Reviews • Ensures that established policies and procedures are being followed • Reviews expenses and reimbursements • Recommends additional policies and procedures • Provides donors with confidence in the policies and procedures • Audit includes an opinion; review does not

18. Recommended Levels • $1 million plus = audit • $250/500k – $1 million = review • $1-250/500K = internal review

19. Internal Review • 2 months of deposits • 2 months of checks • 2 months of bank statements • A group of 3-5

20. Basic Questions To Ask • Do the deposit slips, bank statements and receipts match? • Did the counters sign the deposit information? • Are the checks signed within appropriate limits?

21. Basic Questions To Ask • Is there documentation and authorization for payment? • Are receipts properly noted? • Have the bank accounts been reconciled by someone other than the treasurer?

22. Summary Report To The Congregation • Process • What was checked and who did it? • Findings • Errors and corrections • Accuracy regarding policy implementation • Recommendations

23. Budgets • Standard numerical budget • Income categories • Expenses by department • Narrative budget • Explains the missional components of the budget • Connects the why to the what

24. Categorizing Expenses • Mission beyond the Congregation • Administration • Personnel • Building Expenses • Program by Department • New Mission Initiatives

25. Expense and Reimbursement of Expenses for Employees • Word Problem #2 • Accountable Expense and reimbursement policy • Review of Expenses

26. What Are Appropriate Expenses? • Travel: • IRS guidelines • Employee rate .565 • Charitable / volunteer rate .14 • General Assembly expenses

27. What Are Appropriate Expenses? • Meals • IRS per diem for travel • Staff? Members? • Alcohol? • Budget for staff lunches / celebrations?

28. Expenses • Cell phones • Shared expense or new IRS guidelines • Paid by the church or reimbursed to the employee? • Shared family plans? • Cash • Receipt requirements • Lost receipt documentation?

29. Accounting • Basic means by which we track and report income and expenses • Complexity depends on the amount of money • Quicken for simple • Quick Books well suited • Good membership program, do not include accounting software

30. UBIT • Unrelated Business Income Tax • Non-profits that have income from non-charitable sources. • Amway or Pre-Paid Legal • Rental of your parking lot • Advertising in church bulletin • Rental of facility @ fair market value

31. 501c3 Status • Blanket 501c3 • Held by the denomination • YearBook • Determination letter • Exempts you from IRS • Creates eligibility for state tax exemption

32. Unique Situations for Pastors

33. Gifts and Honorariums • IRS guidelines • Taxable income when received in exchange for services (wedding, funeral etc.) • Not a charitable deduction

34. Guidelines • Have the board set the parameters for honorariums • Wedding policy • Funerals – consult with the local funeral home for recommended amounts

35. Situational Ethics • Use of a vacation home • Employing my spouse • Personal loan • Member • Congregation • Paying for additional education • Serving as an executor

36. Guidelines • Transparency and accountability • Written plan • Sunshine Test • Every situation must have an exit strategy identified up front • Amount of time consumed by one family or individual

37. Discussion • What are the challenges you have faced that you would like to discuss?

38. Should the Pastor Know?? • It is a spiritual discipline • How can you help people grow in the discipline? • How can you effectively guide their spiritual practices? • Opposition • Lowest proportionate givers

39. Giving stops with or without explanation Giving pattern shifts - monthly, annually, etc. The giving patterns become completely erratic. Pastoral Care

40. Regular weekly giver suddenly stops giving Regular offering decreases and special giving increases If envelopes are used and are consistently confused in order Pastoral Care

41. What the Pastor Knows • Who attends worship • Who attends Sunday school • Who is involved in a prayer ministry • Who comes to bible study

42. What the Pastor Knows • Pastoral care issues: • Surgery • Divorce • Problems in the bedroom • Mental health issues • Difficult children

43. What We Do With What We Know… • Leads the congregation • Sets a Stewardship vision for the church • Tells the stewardship story • Encourages others in their giving

44. What We Do With What We Know… • Leads the congregation • Models the way • Celebrates the victories • Effectively leads the congregation

45. What We Avoid Doing… • Play favorites • Pick people for important positions for their giving • Kyle’s story • Blackmail folks • Think poorly of folks

46. Change in presentation of instrument Consistent errors in numerical and written amount Portion of the check left blank Handwriting changes significant or appears to be written by someone else e.g. adult child Checklist for the Financial Secretary

47. Gifts versus estimate of giving Gift is significantly less or suddenly decrease versus indicated gift Gift is significantly more than indicated gift CONTINUED…

48. Estimate versus estimate year to year Dramatic change in estimate of giving (increase or decrease) Forward any comments included with instrument of giving Estimate of giving is revoked Continued…

49. Financial Evangelism

50. Financial Evangelism • Define evangelism • Define finances / financial • Power of story • Personal story • Gospel story • Donor’s story • Connection