Fixed Assets

I take these off every balance sheet I possibly can. There is no reason for a church (or any other non-profit) to track their fixed assets (land, buildings, and furnishings). CPAs will tell you these must be included on a balance sheet and that is simply not necessary for a non-profit.

Fixed assets are usually listed on a balance sheet for the price they cost. If a building costs $1 million, that is the figure it is listed on the balance sheet. Same for furnishings, building improvements, etc. This figure is what it cost at the time of purchase and that is my hang up. Church pews that cost $100 each 50 years ago now have a replacement price of $2,500 or whatever. Yet, on the balance sheet it is listed as $100 less a full-depreciation of $100. That doesn’t mean anything to the average church member reading a balance sheet. Fixed assets never reflect the current amount of money you need to replace that tangible asset and that is the short-coming a fixed asset and depreciation policy and why it can actually harm a church. People will presume it costs $1 million to replace the church’s fixed assets (which were bought 18 years ago) when the true cost is closer to $5 million.

 

Instead, do this. Remove all fixed assets from your balance sheet. Then, when you do your annual audit or present the annual financial report to the church, have a footnote in the document in which you list the insured value of the physical plant and the furnishings and add in the tax value of the property (land/soil is not insurable because it can’t be destroyed). This footnote tells the reader the current value of what you own (presuming you keep your insurance value updated).

Finally, take a camera (such as your phone) and record every room, every cabinet, every drawer, and every space in your building. It is so easy to do with modern smartphones. Two people can do an entire church in a morning (or a day if it is a very large church). Then, store that recording in different locations or in the cloud so it can be used if need for insurance purposes. Keep multiple years’ recordings, too – don’t discard one after you get a new one.

Please keep your balance sheet simple – no fixed assets, cash only, and keep restricted funds to as few as possible. Thanks!

Lead On!

Steve

Cash Balance Sheet

Cash is King. Especially in non-profits. I’ve spent too many hours trying to get CPAs to understand that in non-profit accounting, there is no need for the balance sheet to list fixed assets, pre-paid expenses, depreciation (in any of its myriad forms), and other forms of for-profit accounting. Sometimes the CPAs get it and follow my lead. Other times they are so entrenched in their methods that they can’t think outside the AICPA lines.

 

A cash balance sheet means that the only thing on the asset side is your cash and where it is located (E.g., “Main Checking-1st National Bank….$47,738.83”). This is known has “how much money do you actually have available to you as of the date of the balance sheet.

 

And, please, please, please include ALL your accounts at ALL your financial institutions. I’ve worked with too many churches who tell me they’ve listed everything only to learn later that there is a discretionary fund, an endowment fund, a benevolence fund, etc. that someone doesn’t want others to know about. That is being dishonest – plain and simple. You’re not revealing the whole truth because someone doesn’t trust others. That is wrong.

 

The other side of the balance sheet is divided in two:

  • How much of the cash you have is encumbered for others?
    • What are your payroll liabilities (money you’ve withheld from employees which you’re going to send to the Federal and State tax authorities, to the employees’ retirement, health or life insurance, or other benefits. That money isn’t yours; you’re just holding it for a little while.
    • The other “liability” is commonly known as restricted funds. Again, this money isn’t yours, you’re just holding it until it is used for the purpose that the donor gave it for. That may be for the music program, for a building campaign, or for benevolence. Whatever it is for, you MUST use it for that purpose and nothing else unless the donor gives you written permission.
  • How much of the cash you have is “left over?”
    • That leftover is known as retained earnings or net assets. That money is truly under the full authority and control of the governing body of the church whether that is elders or the congregation.

A cash balance is simple and that’s the way it should be for churches. You want a document that is clear enough so that a non-accountant can understand it after a 5-10 minute explanation. If you have to go longer, then people are going to think you’re hiding something – and you just might be. Keeping it simple keeps it honest.

Lead On!

Steve

End of Calendar Year Gifts

When it comes to end of year, you need to have careful attention to some details:

  • What is the date on the check?
  • When did it come into the possession of the church?
  • When did it cease to be in the possession of the donor?
  • If it was mailed, what is the postmarked date (and keep the envelope for future reference)?

The IRS says that you can give tax credit for gifts that are not in the possession of the donor as of 1/1 @ 12.01 a.m. So, if someone makes an online donation at 11:59 p.m. or earlier on 12/31, then the gift can go toward that year.

If someone puts a check in the mail on 12/31, then it is no longer in the possession of the donor. The IRS considers it valid for the prior year. It may be postmarked in the new year but it should go toward the prior year, unless the check is dated for the new year. If the postmarked date is January 3, 4, or 5, use your best judgment to decide if it was still in the donor’s possession in 2019 or if it was mailed in 2018. You may even need to call the donor.

For depositing money received in the new year but credited to the prior year: make the deposit to the bank as early in January as possible; in your accounting software put a deposit date of 12/31 so it will show up on the income statement for the prior year. It will show up in the bank reconciliation as a “deposit in transit.”

The date that the money is in the bank is not important; the date that it ceases to be under the control of the donor is. Dealing with stock gifts at this time of year is especially tricky in determining what year to credit it to because you have to factor in when the donor gave instructions to the broker to sell the stock. Talk with the donor and the broker to ensure you have accurate info regarding last minute stock gifts. 

Lead On!

Steve

www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of

Special Offerings for Specific Needs

Churches can have up to four special offerings for missions and other causes in a year – any more than that and it begins to affect the contributions to the ministry/operating budget of the church. Here are some ways to have special offerings that won’t affect your budget offerings

  1. Announce that “On Sunday, Month Day, there will be a special offering to help our XYZ Ministry. While there is money in the budget for XYZ, we need additional monies to pay for additional supplies and events that are planned. The first $XX,000 given will go to the regular budget but all monies given over $XX,000 will go for XYZ. Thank you for your generosity for this wonderful ministry.”
  2. The $XX,000 figure needs to be whatever the treasurer feels is a regular Sunday offering – the amount that would normally come in that Sunday for basic operations.
  3. Promote that special offering for 3-4 Sundays before the date using the offering time to show slides of last year’s event, interviewing people about their experience, etc. Any money received over the threshold helps lower the budget cost of XYZ. And any special offering funds not used for XYZ this year can carry over to the next year.  Alternate what is done each year so there is variety and so these offerings don’t get old.
  4. After the event, tell people how much was raised toward this ministry. If you don’t reach that goal, tell people that, too. You may get some designated gifts for the XYZ Ministry.

Lead On!

Steve

www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of

Send Donor Statements More Frequently

Startup Stock Photos
  1. Let your donors know regularly how much they’ve given. Send contribution statements five times: the first week after each quarter ends plus an extra one the first week of December. A statement in early December reminds people of how much they’ve given (or not given) to the church so far that year and provides a reminder to make a contribution. Emailing statements is feasible with most church database systems at no or low cost.
  2. Every time you send out donor contribution statements, include a cover letter which tells 2 or 3 very short stories (tweets size) about the ministries of the church. This keeps people informed about what is going on. Also, the cover letter tells the donors who to contact the church office to correct erroneous data.
  3. For churches that mail offering envelopes to donors, send those out four times year.  Handing out or mailing offering envelopes just once a year means most people are aware of giving just once a year. Also, some people lose their packet of envelopes in a month so getting packets four times a year helps those people.
  4. Five contribution statements plus four mailings of offering envelopes = 9 times a year that members are being reminded to give.

Lead On!

Steve

www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of

Giving Cards in Pews

People who come to church often want to give but they don’t have cash or checks on them. With digital donations now available, giving to the church can be done anytime. Churches can provide a “giving card” that informs people of the various ways they can support their church.

  1. Inform your worshippers of the various ways they can support the church financially with “Giving Cards.” Create a card (about the size of an offering envelope) with all the ways that people can give to your ministry budget: cash, checks, website (include link), church app, text to give, a QR code link, etc. Put this card in the pew with the offering envelopes for people to take and have a reminder to give.
  2. In most churches, people can only give if they have cash or checks at the moment the offering plate is passed. A giving card shows people the other ways they can give from their home computer or smartphone after worship is over.
  3. On the flip side of the card you can include a verse (1 Timothy 6:17-18 is good) and/or ways for people to get involved in the church: small groups, mission trips, volunteering, etc.
  4. Use the card to educate people about how they can help their church and themselves.

Lead On!

Steve

www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of

Keep Your Database in the Cloud

  1. A file server is the main computer in an office which stores the central files/database and software that an organization uses. These servers cost several thousand dollars and last about five years. You no longer need a file server.
  2. Instead, you can use software such as Dropbox, Google Drive, and Microsoft One to keep your files in a cloud-based storage center. Most of your programs (word processing, spreadsheets, accounting, and church management systems) can be run online eliminating the need to buy software and update it regularly.
  3. These files are pretty safe from hackers and ransomware since you’re using the resources of major companies such as Microsoft and Google. They want to keep the trust of their clients so they go to great lengths to protect all their files.
  4. Work with your IT guru to see how you can save money by centralizing your database and programs online. Many of these programs can be accessed through your smartphone or tablet from which you can forward the document or take a screenshot and share the image.
  5. If you need to buy software, use a company called TechSoup. They sell name brand software to nonprofits for 10% to 25% of the original cost.

Lead On!

Steve


www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of

Bid Contracts Regularly

  1. Once you get to know a vendor, it is comfortable to stay with that company indefinitely. They know the building and the equipment and the church knows the service tech. However, best practices are to bid out your contracts every 3 to 5 years. This includes EVERYTHING from the food supplier, elevator maintenance, electrician, plumber, dumpster, commercial property insurance, copiers, postage meter, phone service, financial audit, custodian supplies, etc.
  2. Some companies are so hungry they’ll cut prices to get enough business to keep their employees busy (so they don’t have to lay off anyone). They know they won’t make a profit but they will also retain good talent and they know they’ll still make a profit. Some companies are willing to do anything just to keep good customers which could mean even revamping a contract halfway through the term. In every instance, insist that the savings not affect the quality of service.
  3. One case in particular: building insurance
    1. First, ensure that you have the proper valuation on your building and contents. Never be over or under insured or you’ll be paying too much or not have sufficient coverage. An appraisal may cost a few thousand dollars every ten years or so but it can save you tens of thousands in premiums.
    2. Get the right kind of coverage for your operations specifically for child abuse, owned & non-owned vehicles, umbrella coverage, and employment practices. When looking at how much coverage to get, think about what you would do if you were starting anew today versus recreating a building that was built by a prior generation for the needs of that era.
    3. Get rid of coverages that you don’t need including terrorism insurance which is automatically charged but is unnecessary due to the limitations Congress imposed on it. Seriously, remove the terrorism insurance coverage and save money.
    4. Get at least three bids from companies that specialize in church insurance. Some national insurance companies do not understand the particular needs of churches.

Lead On!

Steve


www.churchbestpractices.org – all kinds of FREE church manuals and sample documents
www.financeforchurches.org – 400 plus blogs on every church administration topic you can think of