Financial Information
ACCOUNTING SYSTEM
Computerized Accounting Program
St. Paul uses a computerized software program (Shepherd’s Staff) for accounting, membership records and other record keeping. The financial accounting module is a double entry program and is fully integrated with the Contribution module. Thus, deposits and disbursements are automatically recorded to accounting records as contributions are posted to the detailed records and as checks are printed. This improves the efficiency of accounting record keeping and the ability to create reports of financial activity and status.
Methods of accounting
The cash basis of accounting is used to recognize and record income and expenses. This means income is recognized and recorded when money is received and expenses are recognized and recorded when money is spent.
St. Paul, as most non-profit organizations, uses the fund method of accounting to separate resources that are restricted or designated and to insure that monies are used for the purpose they were given. Each fund is a self-balancing group of accounts that records assets, liabilities, and fund balance as well as revenues and expenses.
The following two funds have been established:
General – This fund is where all of the business activity of operating the congregation takes place. It accounts for and accumulates anything except restricted gifts and payments.
Building on Blessings – This fund is used to account for gifts that come from donors with the specification that the gift be used for reducing the church mortgage and capital improvements to the building and grounds.
Dedicated accounts (a special feature of Shepherd’s Staff) are used when a separate fund is not called for. They are used for clearing accounts for fee-supported activities (including money collected and forwarded to other church agencies, material fees for adult classes and special offerings dedicated for a special purpose), memorials, reserves for future expenses and various forms of designated savings.
Deposits and checks are posted to dedicated accounts just as if they are income or expense accounts, although technically they are neither. The income and expenses are accumulated separately for the current month and year-to-date. Beginning balance, income-to-date, and current balances are reported on the Dedicated Accounts Report.
Current balances of the various dedicated accounts also are reported on the balance sheet of the General Fund as a liability. At the end of the year, the income and expenses are zeroed, but the remaining balance is carried over to the next year for the dedicated accounts.
Dedicated accounts are usually small and short-lived enough for the money to be kept in the bank account belonging to the General Fund. However, they do not belong to the fund and are eventually paid out for a specific purpose.
Internal Controls – To safeguard the assets of the church, St. Paul has implemented a system of internal controls that includes:
Separation of responsibilities between those handling the income of the congregation and those handling the disbursements;
Assuring that no one person handles a cash transaction from beginning to end;
Written approval for the payment of bills;
Periodic financial reporting to the Church Council, and
An annual audit of the financial records.
RECEIPTS/INCOME
Contributions can be made in three ways: 1) cash or check, 2) electronic transfer of funds, and 3) shares of stock.
Cash or Check – Immediately after the last service each Sunday, collections are counted and deposited at the local bank (Community Bank) that day. Detailed counting procedures are attached.
Count teams of three people are responsible on a rotating basis (a team for each week of the month) for:
Counting the offering on a weekly basis,
Reconciling amounts per envelope to receipts,
Making copies of all loose checks
Preparing, balancing, and signing the Deposit Summary form,
Depositing the checks and cash,
Forwarding the original Deposit Summary form to the Treasurer (with copy of bank deposit slip) and copies to the Senior Pastor, Church Council president, Operations members of the Council and the Financial Administrative Assistant (along with envelopes, copies of the loose checks and other materials to reconcile the Deposit Summary.
Electronic Transfers – Members may elect to make periodic contributions electronically by completing the Simply Giving authorization form. As electronic transfers are made, the Financial Administrative Assistant receives Fund Accounting Reports – Electronic from Thrivent.
Shares of Stock – The church office provides details to individuals who inquire about the procedure for donating stock and refers them to the Finance member of the Church Council for further details and follow-up. Currently St. Paul’s policy is that stock is to be sold as soon as possible after it is donated.
A brokerage firm acts (Community Investment Center – Community Bank) acts the church’s agent in accepting the transfer of stock, selling the shares and mails the check for the proceeds to St. Paul. When the check is received, it is endorsed with the church stamp and put in the folder in the safe to be included in the weekly deposit (see above procedure).
Valuing of Stock Contribution – The stock value of the individual donation is shown on the statement of contribution from St. Paul. This is determined by the value of the stock on the day the stock is signed over to St. Paul. In accordance with IRS rules, donated stock is valued at the average of the high price and the low price for the stock on the date the stock is received by St. Paul or their brokerage firm.
Since the processing of the sale takes some time, the actual proceeds shat St. Paul receives is likely to be different from the value of the stock on the day of transfer to St. Paul (or their agent). The difference between the value of the stock donation to the contributor and the actual cash received is reported as gain or loss to St. Paul in the financial statements (Brokerage Account, Gain/Loss of Stock Donation)
Recording and Reporting of Contributions – Using the contribution module of Shepherd’s Staff, the Financial Administrative Assistant records the contributions to the individual’s contribution records, recording the contribution to the proper fund based on the contributor’s envelopes or other instructions and maintains the Offering Posting Detail Reports. She also matches the total on the Deposit Summary form to the confirmation of the deposit when received from the bank.
She also provides quarterly statements to contributors showing contributions and pledge amounts and balances. In order for taxpayers to obtain a tax deduction for single charitable contributions of $250 or more, St. Paul provides a written acknowledgment to contributors identifying the contribution (stock or check/cash) and stating that no goods or services have been provided to the donor in exchange for the donation other than intangible religious benefits.
Disbursements/Expenses
Bills are approved for payment in writing by the liaison of the appropriate board or the Senior Pastor. A purchase approval form is used to document approval for payment of the invoice (except for utilities) and to identify the account to be charged. Pre-numbered checks are used with different sequences for payroll and vendor disbursements.
The Financial Administrative Assistant records the invoice in Shepherd’s Staff. On a weekly basis, the checks for payment are printed and given (with supporting invoices and payment approval) the Treasurer. The Treasurer reviews the support and signs the checks. The Financial Administrative Assistant places the check (and remittance copy of the invoice, as appropriate) in the payment envelopes, and mails the envelopes. Two signatures are required for checks over $10,000.
Signatories: There are four persons that are authorized to sign checks and withdrawal slips. They are the Treasurer, Senior Pastor, President of the Council and Financial Member of the Council. New signature cards need to be signed with the appropriate institution anytime these positions are changed.
PAYROLL
The payroll processing is handled by ADP. They maintain the payroll records, print the payroll checks semi-monthly, and prepare the quarterly federal and state payroll tax reports, year-end tax reports and W-2s.
As personal are hired, the Financial Administrative Assistant obtains signed federal and state W-4 forms and a copy of the letter outlining the employment arrangements and advises ADP of the new employee’s salary, hourly rate, exemptions, and any withholdings (other than the usual payroll taxes).
The Financial Administrative Assistant reviews the payroll checks for accuracy. ADP has been authorized to sign the payroll checks submit the quarterly tax reports, mail the state tax form (and payment), delivers the federal tax form (and payment) to the local bank and obtains a receipt for the federal taxes. The Financial Administrative Assistant distributes or mails the payroll checks.
As a religious profit organization according to Section 501(c) (3) of the Internal Revenue Code, St. Paul is exempt from the taxing provisions of the Federal Unemployment Tax Act and Illinois Unemployment Compensation Act.
FINANCIAL REPORTING
The Financial Administrative Assistant performs the bookkeeping function and posts journal entries each month to record interest income, allocate a portion of utilities for Benevolence use of the building, report Building on Blessing fund, and adjust mortgage interest /principal.
The Financial Administrative Assistant creates the Balance Sheets, The Statement of Income and Expense and a report of the Dedicated Accounts. The Treasurer (along with the Operations Board) reviews the financial statements, records any further needed adjustments, provides the Church Council with a monthly Treasurer’s Report, and attends monthly Council meetings.
RECONCILIATION OF BANK ACCOUNTS
Each month the Financial Administrative Assistant reconciles the balances from the bank statements to the balances in the general ledger. She indicates in the computer system the checks and deposits that cleared the bank according to the monthly bank statement, records the journal entry for interest income, prints the reports of cleared and outstanding items, and prepares the bank reconciliation using the report of outstanding items.
TREASURER RESPONSIBILITIES
The Treasurer, in addition to having the above accounting and financial reporting responsibilities, monitors the cash position of the congregation, invests available funds as directed by the Council, assists in the preparation of the annual budget for the Church Council, and is empowered to borrow funds as directed by the Church Council.
AUDIT COMMITTEE
An audit committee (comprised of three members of St. Paul with staggered three-year terms) performs an internal audit annually to determine the validity of the financial statements and recommend improvements in internal control and accounting procedures. (Sample guidelines are available from the ELCA website.)
ASSETS
Besides the church building and property, all of the assets are accounted for through the Shepherd’s Staff accounting system. While there are multiple investment accounts as indicated, there is only one checking account through which all payments are made. Transfers from the various accounts are made to the checking account and recorded when payments are necessary. While the various accounts are named in the financial reports, the monies that they belong to (i.e. Building on Blessings, General, etc.) are not separate but are maintained by ledger by the Financial Administrative Assistant
FINANCIAL REPORTS
The Church Council is provided with a series of financial reports once a month prior to the Council meeting. This consist of the Balance Sheet by Account (3 pages), Statement of Income and Expense by Account/General Fund (8 pages), Statement of Income and Expense by Account/Building on Blessings (1 page), and Dedicated Accounts (2 pages).
BALANCE SHEET / FUND 01 GENERAL
This report is used to show primarily the beginning, current balance, and changes in the various investments, saving and checking accounts.
BALANCE SHEET / FUND 02 BUILDING ON BLESSING
The report is viewed to primarily show what the balance is on the mortgage (LOAN – THRIVENT FINANCIAL)
STATEMENT OF INCOME AND EXPENSE BY ACCOUNT / FUND: 01 -GENERAL
This report is the primary report of what is happening with the general fund and how it is being used. The first section is the income side of the ledger and is broken down by the various categories that income is collected under. The first part of the income section is income realized from member contributions while the second part is income derived from investments, gifts and other sources. (Note: a negative number in the remaining column means the INCOME HAS EXCEEDED the budgeted income projection.)
The rest of the report show the expenses incurred. It is organized on a major, minor, sub-class basis where the major indicates the general area of interest and primarily reflects the various boards. The minor reflex a further breakdown of the major area and the sub-class or individual line items are the actual expense line categories. It is on these line items that the expense budget is created each year. Each line shows the budgeted amount for the month, the actual amount and the % of actual vs. budget and similar for the year-to-date status of the line item. Each minor classification is summarized. (Note: a negative number in the remaining column means that SPENDING HAS EXCEEDED what was budgeted for that line item.)
Each council Liaison and Board should review their expenses each month. Generally, there is flexibility within the major, minor and line items but they should closely watch that the amount for the major is not exceeded without discussion by the entire Council. Each Liaison should be prepared to explain differences between what was budgeted and was actually spent.
As mentioned earlier, each Liaison is asked to approve expenditures for their area. They are also responsible for assigning what line item the expense should be assigned to via the Check Request Form using the fund, major, minor and subclass for the expense. In some cases, the expense may be ‘split’ among several .line items. (Example: a $25.00 bill from the hardware store might be allocated in part to maintenance (016-09-01-05) - $15.00 and repairs (016-09-01-06) - $10.00 where 016 represents the general fund, 09 represent property, 01 represents General and 05/06 represents the particular line item.) See the attached Check Request Form and Chart of Accounts.
Generally, the Financial Administrative Assistant will fill out the top section of the Check Request Form and place them in your mailbox when bills come in. If you are submitting a request, you should fill out the top section at the time of the request. Note: you may not approve a payment to yourself.
STATEMENT OF INCOME AND EXPENSE BY ACCOUNT/FUNE 02 -BUILDING ON BLESSINGS
This report is similar to the General Fund. One item to note is that while the INT-THRIVENT is shown, this represents only the interest charged on the mortgage. To see what principal has been applied, you need to look at the difference in this months balance vs. last months balance. To determine what the mortgage payment is each month, add the interest expense plus the principal,
e.g. $4653 + $ 696 = 5349
DEDICATED ACCOUNTS
As mentioned before, Shepherd’s Staff allows us to ‘set aside’ monies for special uses or to act as clearing accounts. This report describes the various such classifications and reflexes their current balances. Some of these ‘accounts’ are quite active (IN/OUT) while others are not (REMEMBERANCE).
BUDGETING
The budget is established each year prior to the January Congregational meeting. The budget is established on a calendar year basis. Starting about October, each Board should review the past year’s activity and look forward to the next year to establish their financial needs. The Financial Council person will be asking for the input for your area. To start, you may only be asked for the annual amount. However you will later be asked for the month-by-month distribution so some have found it easier to start by planning on a monthly basis.
Once all of the areas have been submitted, they will be consolidated, the income will be estimated and initial budget will be presented to the council. At this point, negotiations will begin in the council in order to arrive at a proposed budget for the congregational meeting.
Once a final budget has been established, each Council Liaison will be asked to indicate the distribution of their area’s expenses through the year in order to give the Financial Administrative Assistant data for us to be able to accurately monitor our expenses.