IRA Gifts

2016 05-May 31 (9)

In December 2015, the US Congress made permanent a tax break that benefits older donors: the ability to gift to a charity funds directly from an IRA (Individual Retirement Account). There are several rules for this:

  • Donors must be 70.5 years or older
  • IRA gifts cannot exceed $100,000
  • Gifts must go to a 501(c)(3) – FYI: the IRS considers all churches in the US to be 501(c)(3)s.

 

There are some interesting nuances to IRA gifts:

  • The IRA transfer does not show up in the donor’s income but it does meet the mandatory RMD (required minimum distribution) of IRAs
  • The church must provide an acknowledgement letter to the donor but the IRA gift does not show up on the donor gift statement from the charity. The reason is that because this IRA amount doesn’t show up on the donor’s Form 1040 under income, it can’t show up on the Form 1040 as a contribution (this prevents double-dipping).
  • Checks sent to churches from an IRA sometimes do not have the name of the donor on it. The church will need to research who the donor is in order to send an acknowledgement.
  • This gift will benefit some donors more than others. Thus, it is in the interest of the donors to consult their tax or accounting professional to determine if this will help their individual situation.

 

Churches will be wise to encourage IRA gifts from eligible donors. The following text can be included in the Sunday bulletin during the year.

  • The IRS permits people to give from their IRA (Individual Retirement Account) directly to the church. This transfer can be a significant tax advantage. Please consult your tax or accounting professional to see if you should make a gift from your IRA to the church.

 

Lead On!

Steve

Monthly Internal Audit Checks

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I encourage all my clients to have an annual audit. You can find reasonably priced audit firms who will also provide assistance throughout the year with tricky questions.

In addition, I encourage my clients to have an Internal Auditor, typically the church’s treasurer if they have a financial assistant doing the books (or the Finance Committee chairperson if the treasurer is doing the books).

The procedures the internal auditor does each month are quite simple:

  1. After the month ends, the internal auditor receives the general ledger detail for the checking account. That lists every payment and deposit.
  2. The internal auditor will review the list and select up to 10 deposits and/or withdrawals for which he would like to have more information.
  3. The Finance Assistant finds the source documents for the requested deposits or withdrawals and has them in a folder in the church office for the auditor to review. These documents should never leave the church; the auditor can review them onsite.
  4. The auditor make notes and, if necessary, talk with the staff person or supervisor if there is an expense or receipt for which he needs further clarification.

That’s it. It is very simple and it is done every month. Church staff will be informed that every one of their expenses is subject to a random inspection and that will ensure they attach appropriate documentation and in a timely way. It also provides a sense of lay member oversight so that the church can know that there is someone “guarding the guards.”

The monthly bank reconciliation summary should also be sent to the treasurer. This is done to provide more detail about checks and deposits that cleared or haven’t cleared.

 

Lead On!

Steve

Financial Office Contact Info

What is the email address for your Finance Office? Too many times churches use the name(s) of staff. It’s good and necessary for your Finance Office staff to have an email address for their professional needs. However, your Finance Office needs a generic email address for companies use for sending invoices or acknowledgements or other financial docs.

I recommend that every church create a fictional person which will be the point of contact for all routine Finance Office correspondence, snail or email. This “person” is:

  • First Name: Finance
  • Last Name: Office
  • Email finance@church.org (where “@church.org” is your church’s email server)
  • Address: your church’s main mail address

Creating this will ensure that whenever there is staff turnover in the Finance Office, you won’t have to change email addresses on all the various accounts the church has with vendors. This also creates a standard by which everyone in the office (and even the membership) use with vendors to get bills sent to the church. This keeps things simple – simple is good!

 

Lead On!

Steve

Monthly Employee Meetings

Every employee must know on a monthly basis how she or he is performing according to the supervisor. Saving all the info and “dumping” on the employee at the annual meeting is unfair to the employee, the supervisor, and the organization. Monthly meetings are a must for the health and well-being of all. These monthly conversations will also help the organization progress faster and farther.

Some managers are fearful of what to do and say in a monthly meeting. The following is a “Staff Development Conversation Guide” from North Point Ministries in Alpharetta, GA. All rights to this material belong to them. This is a tool they use to help their supervisors know how to craft these meetings. I appreciate that church sharing their resources.

Goal: Ensure that every employee has routine conversations with his/her boss allowing for a full bilateral dialog about all aspects of the job and permits discussion about the current situation and his/her personal and professional development.

Method:

  1. Every staff member should have a one-on-one meeting with his or her boss on a monthly basis. Those conversations should be designed to discuss one or more of the items mention in the goal above.
  2. The following five questions are examples that can be used to capture information, emotion, and foster conversation.
    1. What are you most excited about right now?
    2. What’s most challenging?
    3. What’s bugging you?
    4. What do you wish you could spend more time one?
    5. What can I do to help?
  3. Additionally, here are five questions/statements which can be used periodically to allow conversation around the work environment, personal growth, and the staff member’s future desires.
    1. What changes, in areas outside of your control, could be made to improve your job?
    2. Let’s identify specific growth area and develop a plan for improvement.
    3. Do you feel ready for more responsibility? If so, what type?
    4. Let’s discuss your priorities for your job for the next 6 months.
    5. What changes would you suggest to help make our team function better overall?
  4. Managers should have some written method to capturing critical elements of the conversations and actions that come from each one-on-one meeting.

 

Lead On!

Steve

Email Address Format

The format for email addresses for most companies is firstname.lastname@company.com

However, many churches use the firstinitiallastname@church.org format and that leads to some interesting combinations. Here are some that I’ve collected over the years:

I strongly encourage churches to use the standard format used by most companies and organizations. There are several advantages (you’ve already seen the disadvantages above!).

  • The email contains the full name of the employee which makes it easier for people new to the church to remember the staff person’s name
  • It differentiates between people with the similar names: James Smith and John Smith would have different email addresses (under the older format the church would have to come up with something to differentiate between the two and that can cause confusion to people trying to contact them if they presume they know the church’s email format).
  • Writing an announcement becomes as easy as: “Contact john.smith@church.org for info on the deacon retreat.” You don’t have to write out the contact person’s name because it’s in the email address.
  • You can still have email aliases for the other email addresses that people might use while you train them to use the new email format.

 

Lead On!

Steve

The Executive Pastor’s Ministry

Does an executive pastor do any ministry or that position completely subsumed in financial, personnel, and facilities management? Good question and here’s my answer:

  1. “Back office” work is ministry, but at a creative and different level. It is not “just” paperwork. I can’t tell you the number of vendors I’ve talked to about church – and those are doors that are not open to other staff persons. When I’ve called a customer service line and got a call center in India, I knew that they could see they were dealing with a church and that I might be the only Christian that person EVER speaks to in his/her life. Paying bills on time is a HUGE witness to vendors who are sour on church. I used all those things to educate other ministers to help them think outside the box and understand that the minutia they detested really did have a Kingdom impact. Think about this as not “just paperwork” but as opportunities for creative ministry. For instance, every year I shred old financial docs – I leverage that by telling members that they can bring in their stuff to shred (because I really don’t much for the shredder). The senior adults LOVE that they can bring in all their old files from the 1960s. So, what I was doing any way I could use to help others and everyone wins.
  2. The XP ministry is higher and more focused in scope. XPs continue to do the ministry they were doing before but now use those opportunities to train the campus and other pastors so they can learn from the XP. Every XP must seek every chance to teach the next rising generation how to do avoid mistakes and to stand taller on the XP’s shoulders. XPs get to work with a high level of volunteers and members – leaders in their community and businesses who can open doors for the church that most ministers can’t imagine. That can give an XP an opportunity to reach people who would never come to the church, all because the XP is working with high-net worth members or upper management members. Most churches neglect high capacity donors but that needs to a focal point for the Senior & Executive Pastors for both the sake of those people and of the church.
  3. The XP ministry is at a broader level. Not just on a campus but on a larger basis and even, through professional contacts, the XP reaches people across the state and region. People will come to the XP’s church to learn the way that church does things and the XP can teach them so they can replicate what the XP is doing in their own context. Just as the XP needs to follow in the footsteps of others, every XP is also responsible for pulling those behind him or her up to his or her level. This is a leadership position – one that people look up to and want to emulate. This position needs to be worth following, not “just another minister.”

The ministry of the XP is more creative, deeper, higher, and broader than other ministers. It requires more excellent ministers to do this work for the Kingdom.

Lead On!

Steve

Rubber Stamps on invoices instead of paper forms

I don’t like unnecessary paperwork. Years ago I came up with a rubber stamp to cut down on paperwork in the church’s finance office. Every invoice paid by a church should have information attached to it so that there is a clear description of all the info that is needed to process the payment accurately.

 

Most churches have a “payment request” form that is filled out and attached to each invoice. A form is fine but sometimes the attached form is detached from the original invoice. Instead of a form, I created a rubber stamp (see below) which I stamp on many (but not all) invoices from vendors.

 

Payment Approval & Coding Info

Payee______________________________

Description _________________________

Account #                              Amount

_________________        _____________

______________               ___         _____________

Approval ___________________________

Ck# _______________     Date _________

 

Using this rubber stamp ensures that it won’t be separated from the invoice, it saves money by not having to make copies of the payment request form, and it saves time by having a smaller “form” to complete than most large paper forms. I even buy a rubber stamp for each person in the office who completes the paper forms to make it more convenient for them.

 

Consider having this (or a similar) rubber stamp to make your finance office more efficient.

 

Lead On!

Steve

Designated Funds and UPMIFA (part 2)

Every church I’ve worked with has designated funds which are dormant. The long-standing rule of thumb was that to re-purpose the money in these funds was that each donor needed to be contacted to request permission to alter the use of their gifts. That is a good rule to use but in many cases, this is not practical or even possible. Fortunately, there is a legal alternative.  It is called UPMIFA: Uniform Prudent Management of Institutional Funds Act.

 

UPMIFA has been passed by almost every state legislature (there are a couple of holdouts) and it is virtually the same in each state. Look at your state’s legal code for the specific language – I’ll use the one from Virginia (where I live) for this post. In all instances the church must consult with a court or the attorney general. If the request is reasonable, they courts will agree to the church’s desires.

 

Below is the actual law from the Code of Virginia. Here are the salient points:

  1. Donors can change the purpose of their gift but it still must be used for a charitable purpose
  2. Judges and Attorneys General can change the purpose of a fund but it still must be used for a charitable purpose
  3. An institution can change the purpose of a fund by working with the Attorney General if the fund is less than $250,000
  4. An institution can change the purpose of a fund by notifying the Attorney General if the fund is less than $50,000, is over 20 years old, and it will be used for a similar purpose

 

  • 55-268.16. Release or modification of restrictions on management, investment, or purpose.
  1. If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
  2. The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard. To the extent practicable, any modification shall be made in accordance with the donor’s probable intention.
  3. If a particular charitable purpose or restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard.
  4. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, without application to the court but with the consent of the Attorney General, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument if the fund subject to the restriction has a total value of less than $250,000.
  5. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, 60 days after notification to the Attorney General, may release or modify the restriction, in whole or part, if:
    1. The institutional fund subject to the restriction has a total value of less than $50,000;
    2. More than 20 years have elapsed since the fund was established; and
    3. The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

 

Lead On!

Steve